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EPLI for Private Companies: Firm Market, COVID Usher in Underwriting Changes

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The firm market continued into Q4 for Employment Practices Liability Insurance (EPLI), with expectations that we will see much of the same going into 2021. Manny Cho, RPS EVP, Executive Lines, shares his insight on the EPLI market for private companies and how it’s changing.

“The rate increases are impacting all companies.  Depending on the state and the class of business, some private firms are seeing greater rate increases for EPLI than others,” says Cho.

“California, for example, which has historically been a tough market for EPLI due to its litigious environment, is seeing continued higher rates. Illinois (Chicago) and New York are also seeing higher spikes in rates as a result of COVID. In addition, industries, such as hotels, restaurants and travel, all hard hit due to COVID, are experiencing a tough EPLI landscape.”

Cho explains that in order to obtain and maintain profitability, carriers are not only looking for rate adequacy but also, limiting their exposure through reductions in capacity.

“There are very few $10 million blocks of coverage available today. If a client’s EPLI policy limit was $10 million, carriers are now looking to purchase $5 million; if the policy limit was $5 million the carrier is asking for $3 million.”

EPLI Underwriting Focuses on Stability of Business

These days, there is greater underwriting scrutiny in EPLI with underwriters focused on the workforce impact of COVID and the financial health and stability of employers.

“At the onset of COVID, underwriting questions were related to a business’s reopening plans and the safety protocols in place to ensure employee safety,” explains Cho.

“Now, carriers are inquiring about furloughs and reductions in workforce, including the number of employees companies expect to employ next year. Questions also focus on the financial condition of private companies and whether they will have the ability to continue operations in 2021 and beyond.”

Impact of EEOC’s Guidelines on Employer-Mandated COVID Vaccine Unknown

In December 2020, the U.S. Equal Employment Opportunity Commission (EEOC) released brief guidelines for how businesses can approach COVID-19 vaccinations with their employees. Employers may require employee vaccinations with certain exceptions related to disabilities or religious beliefs.

Related Article: A Time of Transition: The State of the Public D&O Market

Specifically, businesses are entitled and required to ensure a safe environment in which “an individual shall not pose a direct threat to the health or safety of individuals in the workplace.” Employers who wish to exclude employees who refuse the vaccine from the workplace will have to show that these individuals pose a direct threat, which may be difficult to do.

In addition, an employer must attempt to make a reasonable accommodation for workers with a disability or sincere religious beliefs that oppose vaccinations, like allowing them to work from home, for example.

“It’s too early to tell what the potential fallout regarding workplace disputes will be as a result of a vaccine mandate,” says Cho.  “This is definitely something we will continue to monitor.”

“Many individuals have yet to go back to work at physical locations. In addition, employers in some industries like healthcare, travel and retail whose employees potentially pose a risk to others may have more of a standing in requiring a vaccine than those businesses who employees work from home.”

For EPLI Renewals, Tell the Client’s Story

In working on upcoming EPLI renewals, Cho stresses that it’s important for agents to help clients frame a good narrative for underwriters to truly understand what differentiates a client in the market.   

“Talk about the client’s financial status and the factors that make the business a good or better than average risk. For example, the business may be located in California but its employees are located all around the country, in places with less exposure. An account that may seem on its face difficult to write could, in fact, fit the carrier’s underwriting criteria.”

Although capacity has diminished in certain classes of business, there are insurers still looking to expand in EPLI in industries with growth potential, such as financial services and tech. The underwriting focus may have changed, but the opportunity for new business exists.

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