Insurance Marketplace Realities 2023 - Employment practices liability

Rate predictions: Employment practices liability (EPL)

	Trend	Range
Primary (domestic markets)		Flat to +10%
Bermuda markets		+2.5% to +10%

Competition is helping to stabilize the EPL market.

• The extent of rate increases will be determined by many factors, particularly industry, loss history and location of employees. Assuming no change in risk profile and no losses, rate increases are more likely to be close to or at flat. California continues to be the most problematic jurisdiction. New Jersey, New York and Florida continue to be challenging as well.
• Retentions: Expect continued pressure on primary retentions, as well as separate retentions for class actions, especially in California. Expect separate retentions for California claims and for highly compensated employees (particularly in healthcare and financial institutions). Some domestic markets are adding separate retentions for NY, NJ and IL as well.
• Limits: Many domestic markets continue to provide lower limits — $5 million to $10 million.
• Excess: As in other lines, excess EPL markets are following primary increases in addition to looking to correct increased limit factors (ILFs).
• Capacity: Overall capacity in the EPL market is stable. New Bermuda market (AIG) adds additional capacity in the Bermuda market.
• Underwriting: Expect some questions regarding vaccine/return to office, ESG (specifically, diversity, equity and inclusion initiatives), pay equity audits, labor shortages and supply chain challenges (depending on the industry).
• Coverage: Coverage remains intact; carriers continue to add privacy/biometrics exclusions and include limited COVID-19 exclusions on a case-by-case basis.

COVID-19 employment-related litigation has mostly slowed down.

• Some litigation and COVID-19-related claims continue mostly in healthcare.
• More than 6,000 cases have been filed thus far, with employment discrimination the leading claim.
• California has seen the most claims with New York, New Jersey and Florida following.
• COVID-19 class action claims are most prevalent in healthcare, with wage and hour being the leading claim.

Socially driven movements, Supreme Court decisions and changes in the economy continue to produce claims that impact employment practices liability litigation and legislation.

• With heightened focus on company ESG initiatives insureds should continue to expect questions from underwriters regarding their diversity, equity and inclusion initiatives, particularly racial equity and pay equity.
• In relation to pay equity, there has been a push to require employers to offer pay transparency for applicants and employees. Many states are implementing laws wherein employers must disclose the pay range for applicants.
• The U.S. Supreme Court decision in Dobbs v. Jackson Women’s Health Organization, overturning Roe v. Wade, has created a patchwork of laws across the country, making it extremely difficult for employers, particularly multi-state employers, to navigate. The decision creates a potential for an increase in certain types of claims, such as discrimination, harassment and invasion of privacy.
• Inflation, rising litigation costs and potential recession may lead to more employment claims.

Biometrics and artificial intelligence in the workplace continue to concern carriers.

• The Illinois Biometric Privacy Act (BIPA) has been the subject of many class action claims against organizations with employees in the state of Illinois. We have since seen other states implement their own biometric laws, including Texas and Washington (although neither of these laws creates a private cause of action). New York City and Portland, Oregon have similar laws which do include a private cause of action.
• We continue to see many EPL policies include an exclusion for BIPA claims; however, buyers can look to other coverage lines, such as general liability and cyber, for potential coverage for this exposure.
• Many companies are using software, including artificial intelligence and other technologies in hiring and in other employment decisions. The use of these technologies may be helpful for employers in saving time, etc., but they may also discriminate.
• In May 2022 the EEOC issued guidance for employers to help ensure that the use of artificial intelligence does not violate the Americans with Disabilities Act.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).