A sharp rise in UK employment tribunal claims is piling pressure on SME directors and raising questions for brokers and insurers about how well smaller clients are protected against management and employment-related risks.
Official Ministry of Justice (MoJ) figures showed that single Employment Tribunal (ET) claims have risen sharply year-on-year, while disposals have not kept pace, contributing to a growing backlog and longer case durations. Employment lawyers reported that more claims are running for a year or longer, driving up legal costs and management time.
This translates into higher frequency of employment-related disputes, extended claim lifecycles and increased defence costs – all core drivers of directors’ and officers’ (D&O) and employment practices liability (EPL) losses.
The employment law landscape is also shifting. The Employment Rights Act 2025 will extend the limitation period for bringing most employment tribunal claims from three months to six months, bringing many rights into line with equal pay and statutory redundancy time limits. The reforms are intended to improve access to justice but are widely expected to increase claim volumes.
During the passage of the Employment Rights Bill, commentators warned that longer time limits and broader protection for workers could add further strain to a tribunal system already dealing with a sizable backlog. For insurers, a longer "runway" for claims and evolving case law around dismissal, discrimination and worker status add uncertainty to ultimate loss costs.
At the same time, many SMEs remain under-insured for management and employment-related exposures. Industry research on SME underinsurance has consistently found that smaller firms tend to prioritise compulsory or contractually required covers while often overlooking non-compulsory protections like D&O and more comprehensive legal expenses cover.
Employers’ liability itself is not universal. Survey data suggest a meaningful minority of UK SMEs operate without it, despite the legal requirement for most employers.
In that context, it is unsurprising that penetration of D&O and EPL among micro and small businesses remains low, particularly where they buy insurance through commoditised package products.
The result is that many management teams are effectively self-insuring their exposure to unfair dismissal, discrimination, harassment and whistleblowing claims – the very categories that frequently drive EPL losses.
UK market participants have said SMEs may be underestimating the breadth of their management risk.
According to Mark Plews (pictured), director of underwriting at Markel UK, said that rising tribunal activity is a sign that management teams are operating in a "more demanding environment."
“Businesses may believe they are sufficiently protected without covers like D&O and EPL, but management risk can be quite wide in practice," he said. "As we see risks in this area rise, it’s important for buyers to understand the potential effect of these issues on their organisation as a whole and buy a package of protection with that in mind.”
The pressure on the tribunal system is directly influencing the claims environment that management liability carriers must price and reserve for. New ET receipts have been consistently outpacing disposals, pushing up the open caseload and extending the time taken to conclude disputes.
As cases drag on, legal bills increase, settlement positions can harden and more senior management time is diverted into litigation management. That means higher defence costs and a greater risk of policy limits being eroded even on mid-sized matters, particularly where claims involve multiple allegations.
These trends are feeding into underwriting approaches. Market sources report closer scrutiny of wage bills, HR processes and prior claims histories on SME business, alongside ongoing review of pricing and sub-limits for employment-related sections within management liability wordings.
As access to tribunals expands and employees have more time to bring claims, smaller firms may face a noticeable uptick in complex disputes. Where those businesses do not carry D&O or EPL, a single claim can result in significant defence costs and operational disruption.
Some legal expenses and specialist management liability providers report increasing SME demand for employment protection products that bundle cover with advisory helplines. That trend supports a shift in broker conversations from treating D&O and EPL as discretionary add-ons to positioning them as core components of SME risk management.
The latest tribunal trends and forthcoming legal changes underline that management liability can no longer be treated as peripheral by SMEs or by the insurance market that serves them.
As employment-related risks rise and disputes become more protracted, directors and officers face an increasingly demanding environment.
