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Market for EPL competitive but disciplined

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Employers seeking employment practices liability insurance will find a market that is highly competitive, but still restrained, observers say.

Securing coverage is a process that demands careful consideration because of the different policy forms offered by insurers, experts say.

Meanwhile, observers disagree whether a class action suit certified last month against Wal-Mart Stores Inc. is likely to increase interest in EPL coverage (see story, page 28).

"I think that the EPL market currently is a very competitive market," said Cara Lovering, Hartford, Conn.-based employment practices liability product manager for Travelers Cos. Inc., an EPL insurer. "We've seen over the past number of years a lot of carriers that are re-entering the market."

Particularly for large-account business, the market is stable but competitive, said Jim Gray, executive vp at Hamilton, Bermuda-based Max Re Capital Ltd.

EPL coverage has been in existence since about 1991 following passage of the Civil Rights Act of 1991, which strengthened laws against employment discrimination, according to Mr. Gray. It has since evolved into a mature and experienced underwriting market, he said.

"I would say it's competitive in a healthy way," in the sense that it has knowledgeable underwriters who are "competing on a basis of informed decisions" instead of being "a market characterized by more naive capacity," Mr. Gray said.

Observers say rates have been stable.

"You're not seeing a lot of swings," or significant rate increases or decreases, said Catherine Padalino, Warren, N.J.-based EPL product manager for Chubb Specialty Insurance, a unit of Chubb Corp.

Richard S. Betterley, president of Sterling, Mass.-based Betterley Risk Consultants Inc. said that while the EPL market is not as soft as some other lines, it is still "fairly soft" and attractive business "would expect to see rate reduction opportunities on the order of 5 or 10%" upon renewal.

According to the Betterley Report's Employment Practices Liability Insurance Market Survey 2006 released in December, typical premiums for a 250-employee firm with a $1 million limit, a $25,000 deductible and prior acts coverage can range from $7,500 to $30,000 for first-year insureds. Capacity of up to $25 million is available.

Coverage is available as part of a package that may include fiduciary and directors and officers liability, and as a standalone policy. Some observers say large employers are more likely to purchase standalone policies.

"We continue to see a higher takeup rate of monoline EPL insurance as opposed to being bundled with something else, and that is indicative of the recognition that it has value to offer a large corporation," Mr. Gray said.

However, observers say EPL polices require particularly close scrutiny by risk managers.

There's no standard EPL form, said Mr. Gray. "They all revolve around the three major coverage items of discrimination coverage, harassment coverage and wrongful termination coverage, but the scope of coverage and how the policies operate do differ by insurer."

Investigate EPL forms

Robert Cap, Deerfield, Ill.-based associate product manager for employment practices liability for Shand Morahan & Co., a surplus lines unit of Markel Corp., said, "The forms vary widely and often you see the lowest-priced premiums offering very restrictive coverage, so it's very much 'buyer beware.' You can truly be lulled into thinking you're getting a good deal on premium when, in fact...the coverage is very limited."

"It's never been easier to secure coverage, but it's never been more difficult to compare coverage forms," said Mr. Cap. "It's necessary for the insured to take the time and really investigate the forms."

Trudy Hardin, Denver-based vp and product manager for Aon Financial Services Group Inc., said, though, comparing policies is not that difficult.

"There are elements of each policy that are the same," Ms. Hardin said. Every policy, for instance, will have a definition of wrongful acts. "You can compare one wrongful act definition vs. another, and that's where we bring our expertise" in helping clients, she said.