The financial crisis of 2008 is considered by many economists as the worst economic disaster since the Great Depression of the 1930s. It caused the collapse of many large financial firms and resulted in an uptick in job terminations. Some of these terminations were considered wrongful or unfair, thus leading to a significant increase in employment practices liability claims and a hyperactive period of employment-related litigation, especially in America’s big cities and economic hubs.
Businesses can purchase employment practices liability insurance (EPLI) to protect themselves against accusations made by employees of wrongful dismissal, discrimination, harassment and other employment related issues. EPLI claims have a tendency to follow economic trends. When the economy is depressed, and workers are unhappy, there tends to be more claims than when the economy is strong.
Desiree Khoury, vice president of specialty reinsurance at NAS Insurance Services, explained: “When the economy is good, the EPLI market is generally quite strong and loss trends are positive. But when there’s a downsizing or a depression in the economy, as we experienced in 2008, we tend to see a significant increase of EPLI claims. It’s definitely a product that’s reactive to broader economic trends.
“Between 2008 and 2010, a lot of EPLI insurance markets decided to exit the high-risk US cities like Los Angeles, New York and Chicago where many large companies are headquartered and therefore where the terminations and subsequent lawsuits were occurring.”
Fast-forward a decade from the financial crisis and lots of insurance markets are looking at EPLI with a different eye, according to Khoury. NAS Insurance Services, which has been writing the product for close to 30-years, is currently focused on offering EPLI for businesses with 50 employees or fewer.
The firm’s signature EPLI support services include a unique risk management program called NAS eManager, which provides employment law resources, training, and HR seminars for policyholders. Khoury commented: “Oftentimes, there’s no malice in some of these business decisions. Rather there’s a lack of basic understanding among employers about federal and state requirements.
“Business owners are focused on their product, their distribution partners, their cost of goods. They may not be as familiar with all of the HR guidelines, nor how to comply with the latest regulations. This is where EPLI can provide support and protection for those business owners.”
As well as being influenced by economic trends, EPLI is also an emotional and culturally-driven product. Right now, the business world is influenced by the #MeToo movement, with greater attention being paid to concerns of sexual harassment, assault and discrimination. Employees are more aware of their rights and more confident to exercise them than ever before, even if that means taking an employer to court. This trend has re-opened many employers’ eyes to the need for and benefits of EPLI coverage.
“The MeToo movement has driven an increase in demand for EPLI coverage among business owners in every category. Allegations of misconduct are on the rise and companies want protection and access to expert advisors to avoid costly litigation,” Khoury told Insurance Business. “It’s an area of great sensitivity for employees and employers, and while EPL insurance is only the part of the solution, it can be a great resource to help business owners navigate these emotional challenges.”