Tag Archive for: EPLI

use our three tips to avoid an employee practice issue

three tips to avoid employment practices issues

The most common risk businesses face are employment practice issues. Research found that businesses are five times more likely to be sued over employee-related issues than for any other issue. With a rapidly evolving workforce, let’s discuss the three strategies businesses can effectively implement to avoid running into any employment practice issues. 

1. Communication 

The age-old saying “communication is key” has stuck around for a reason- because it’s true. Effective communication helps keep businesses running smoothly and helps teams feel engaged, and included.  

 

If your business doesn’t communicate upcoming changes to the business model or structure, it may build distrust among your workforce. People don’t like change, especially in the workplace.  Regardless of the reasons why change is met with resistance, when your business makes decisions, communicate those changes to your teams quickly and clearly.  

 

Insurance journal says it best, “Policies and procedures that aren’t communicated don’t exist.” 

 

Communicate company policies clearly and often to your entire team. As policies change, let your entire business know:

 

  • What changes you are implementing
  • The expectations of each employee
  • The expectations of the business 
  • Precautions for violation of new changes 
  • The duration of the changes (i.e. until further notice, permanently, for two months, etc.)

 

As your leadership implements new business policies, continue communicating each step throughout your business. While you, as a business owner, are aware of conversations surrounding changes, this is still new to your workforce. 

 

Tell your teams when policies are begin considered, when they are changed, and continue talking about the change well after its implementation. The goal here is to lead with transparency to avoid confused and discontented employees. 

 

What are the benefits of clear, consistent communication? It encourages team buy-in, increases productivity, boosts employee engagement and belonging, reduces conflict, and increases retention. 

 

Use Asana’s tips on effective communication in the workplace:

  1. Know when and how to best communicate change 
  2. Stick to the facts 
  3. Prioritize collaboration 2. Consistency  

 

2. Consistency

Change can be a challenge in and of itself. Consistent communication of the changes can help the team feel engaged and excited about what’s to come. The more your team hears about upcoming changes, new requirements, and expectations, the easier it is for your team to execute on them. 

 

Consistency also means that your business makes decisions based on a specific criteria across the organization, typically this criteria includes:

  • What’s best for the team 
  • What’s best for the business 
  • What’s best for the customers 

3. Compassion

Finally, understand that implementing change in your business requires compassion. Your team is made up of individuals who are impacted by the new decisions you make. 

 

Remember that required changes may require individual evaluation to consider include:

 

Not every request for exemption can be granted, but it’s important to review requests and allow the opportunity for discussion.  

A final note

Businesses that support their workforce through communication, consistency, and compassion set themselves up for success. These change management strategies also help mitigate the risk of employment practice issues. 

 

When it comes to protecting your company from employee-related claims, an employment practices liability insurance (EPLI) policy is essential.  This policy covers the costs if an employee claims wrongful action during their employment. Learn more about EPLI and why your business may need it in our article here

 

communicate with your staff

reduce your liability by covering your business with the right insurance

how to reduce your management liability exposure

When determining the type of management liability coverage your business needs, first look at what you have. Is your current insurance covering the aspects of your business that are vulnerable to claims against you and your business? Odds are, you may be missing something. Let’s unpack the different types of management liability insurance options available that help protect private companies from financial loss. 

directors and officers (D&O) liability

According to Chubb, “costs to defend and settle D&O claims have increased by 90% since 2010.” 

Directors, officers, C-suite, and other key executives make decisions every day that leave them vulnerable to legal liability risk. Directors & Officers (D&O) Liability insurance is designed to protect the people who serve as directors or officers of a company from personal losses if they are sued by the organization’s employees, vendors, customers, or other parties. 

With this coverage, the executive’s personal assets are safe from a lawsuit. Their homes and accounts cannot be targeted during a lawsuit. This form of insurance is designed to cover any losses associated with the lawsuit, including legal defense fees.

employment practices liability insurance (EPLI)

EPLI coverage is designed to protect a business in cases of employee-related claims or lawsuits. Some examples of lawsuits EPLI protects against are claims such as:

  • Discrimination 
  • Wrongful termination 
  • Sexual harassment 
  • Mismanagement of benefits 
  • Breach of employee contract
  • Retaliation 

For instance, if you hire an employee who quits and then decides to sue your business for something during their time as your employee, EPLI will cover the claim costs. 

fiduciary liability 

Those with fiduciary responsibilities are committed to putting another person’s best interest first. When an incident occurs where the administrator with a fiduciary responsibility to an individual does not act in accordance with that responsibility, a lawsuit may arise.

Fiduciary liability coverage deals specifically with employee benefit plan fiduciaries, and claims that they mismanaged plans or assets. This policy helps cover any legal defense or losses incurred when a fiduciary makes poor investment decisions, mishandles records, or is negligent in hiring plan service providers. 

This coverage aims to protect plan administrators from being held personally liable for losses plan participants experience in regard to their retirement or health and welfare plans. 

employed lawyers liability 

Employers with in-house lawyers are open to potential lawsuits for legal malpractice from creditors, customers, competitors, shareholders, employees, and more. In a case where someone pursues a suit against your in-house lawyers, this liability insurance 

protects your attorneys from claims of error or omission. It helps cover and protect those who legally cover and protect your business. 

errors and omissions liability (E&O)

E&O liability insurance protects businesses against lawsuits claiming inadequate work, negligence, errors, or omissions. If your business has a client claiming you failed to explain a branch of their services correctly and they decide to sue, your E&O liability insurance would cover court and settlement costs. 

Those who may consider E&O insurance include:

  • Contractors 
  • Lawyers 
  • Doctors 
  • Real Estate Professionals 
  • Any business that delivers any type of service, as part of a product or stand-alone service

crime liability 

Crime is unfortunately something business owners must be aware of and prepared for. Theft doesn’t happen on a schedule, so having processes in place that safeguard your company’s assets adds an additional layer of protection from this unpredictable circumstance. 

Having coverage in place that safeguards your assets in case of fraud or embezzlement can cover the losses experienced and make recovering from those losses easier.

what coverage is right for you? 

There are various options when it comes to liability insurance coverage options for your business. The insurance coverage you need depends on your unique business.  All businesses do not need every type of insurance coverage, but having the right coverage can save your business from financial stress.

If you don’t know the right insurance coverage for your business and how much it will cost, take a look at one of our recent articles on how much you should pay to insure your business.

have the right management liability exposure to keep your business covered

epli helps protect lawsuit costs for employers

employment practices liability insurance — do you need it?

There are various policies a business may decide to carry when reviewing their risk profile.  The type of coverage your business invests in, depends on a few different factors. Almost all businesses with employees will want some kind of Employment Practices Liability Insurance (EPLI). Peter Katkov, benchmark’s Commercial Lines Broker explains what EPLI is, and why it’s important for businesses in the video below.

what is EPLI?

EPLI is an insurance policy that covers the costs of wrong actions performed during a person’s employment period. 

These policies cover an array of wrong actions regarding:

  • Wrongful termination
  • Discrimination
  • Sexual Harassment
  • Hostile work environment
  • Deprivation of career opportunity  

Allegations can come from an ex-employee, a current employee, or a prospective employee that you didn’t hire. Typically, with an EPLI policy in place, legal costs and settlements are covered.

do you need EPLI?

All businesses with employees are vulnerable to the risk of an employee submitting a claim against your company. Small businesses, especially, are more susceptible to employment claims because they do not have the same legal support larger companies do. 

When considering if your business should invest in EPLI, ask yourself, “can I afford not having insurance if a lawsuit arises?”

reducing your risk of an employee claim

In addition to investing in EPLI coverage, businesses should have standard practices and educational opportunities for managers and employees in place to reduce the risk associated with employment practices. A few examples of educational materials to provide your staff include: 

  • Effective hiring and screening programs to avoid discriminatory hiring. 
  • Create handbooks and make corporate policies clear to everyone. 
  • Clearly explain acceptable and unacceptable workplace behavior. 
  • Have steps in place for employees to report unacceptable behavior. 
  • Ensure all communication and actions taken are documented

why use EPLI?

EPLI is beneficial for businesses to cover the financial costs associated with legal action. Attorney fees and settlement costs are reimbursed by the policy, which means your business does not have the unexpected financial burden of paying off legal fees that could arguably cause a business to close down.

how much does EPLI cost? 

The cost of EPLI depends on a few different factors:

  • Company size 
  • Type of business 
  • Number of employees
  • History of lawsuits 
  • Employee turnover percent 
  • What rules and regulations you have in place

This specific line of coverage has been experiencing increasing costs, tighter underwriting guidelines, and increasing deductible structures driven primarily by:

  • Class actions
  • Large class action suits
  • The fact that legal precedent and case law support an employee over an employer. 

In turn, this puts a lot of pressure on the policyholder that’s trying to manage their insurance costs.

EPLI isn’t the only coverage that is experiencing this pressure. In one of our most recent articles, we discuss what you should expect from your commercial insurance in the coming year, including where your premiums may increase and where they may remain stable.

Employment Practices Liability Insurance (EPLI) is a type of policy that covers the cost of any wrong actions during the employment process.
a day in the life of a benchmark broker

a day in the life of a benchmark broker

 

What does your insurance broker actually do for you? 

The daily tasks that a Benchmark insurance broker performs fall into the categories of:

  • Coverage analysis
  • Risk control
  • Hr services
  • Insure-tech

Here’s a deeper look into what the role looks like when it comes to commercial and personal insurance.

Client Communication

Like the old American proverb says, “To keep a customer demands as much skill as to win one.” 

Client communication is essential as an insurance broker in continuing a trust-filled relationship. One of the first steps a Benchmark insurance broker takes on during the day is taking client calls and emails and answering any concerns in a timely manner. 

This included us following up with any open items we need to complete underwriting or claim files. 

There are smaller questions that are easier to respond to, but sometimes a client emergency comes up, then industry advice is needed ASAP.

Client Emergencies

Benchmark insurance experienced this recently with Lyon & Associates Creative Services, Inc, who reported on their experience in a recent email describing their unfortunate “Pandemic Burglary.” 

Lyon & Associates Creative Services, Inc was out of office for three weeks during the pandemic back in March 2020. Then they fell under the healthcare communicators category and returned back to the office. 

“Our editing computers are largely empty shells, running the software alone. As a result of this structure, an early morning thief snatched all of our editing workstations.

When we reached out to our insurance broker, Carlsbad-based Benchmark Commercial Insurance, they took care of getting a claim opened with our insurer, Travelers.

Due to Benchmark’s previous good counsel, we had excellent replacement value and business interruption coverage. When the Travelers claim adjuster got in touch the same day, they had a significant starter check on the way before the weekend. 

Replacement value means exactly what it says, and then some, by the way. They covered things like the dozen new USC-C (Thunderbolt 3) to Thunderbolt 2 adapters we needed to keep our considerable investment in unstolen hard drives connected to the new computers. Of course, the claim was so well-covered that we exceeded their allowable percentage loss limit and they declined to renew our policy. (Chubb had our workers comp policy and they scooped us up with no increase in rates).” 

In any field of business, unpredictable events occur, so this can often take up time during the insurance broker’s day.  

Negotiation 

One task that generally occurs daily is negotiating with underwriters for best terms on new and renewal business quotes. 

Team Communication

Babe Ruth said “The way a team plays as a whole determines its a success. You may have the greatest bunch of individual stars in the world, but if they don’t play together, the club won’t be worth a dime.”

Even though insurance is a tiny bit different from baseball, the same concept applies in the workforce. 

Communication within the Benchmark team is also crucial throughout the day. This can look like answering internal questions related to claims, billing, certificates, and underwriting. 

Coffee Breaks

Yes, a Benchmark insurance broker does require multiple coffee stops throughout the day— cappuccinos are preferred. 

Client Contracts

Another daily task is reviewing client contracts. The insurance world is constantly changing, so staying up-to-date is important for client communication. When reviewing client contracts, our broker will check to make sure that any insurance or indemnity-related contractual stipulations are consistent with the client’s coverage. 

This also included following up with claim adjusters on open claims on behalf of the broker’s clients and advocating on behalf of our clients to claim adjusters on difficult claims issues. 

Prospect Clients

Finding new clients that will be a match with Benchmark Commercial Insurance, and that we are a match for takes effort. Throughout the day a broker will field calls and emails from new business referrals and prospect call-ins. 

Policy Review

An insurance broker will perform policy reviews to make sure policies have been issued correctly. This includes policy reviews for prospects so they can understand how their current program integrates with the scope of their current operations, which exposes any gaps in coverage. 

A Benchmark insurance broker will also initiate, and continue to follow up on the underwriting status for all renewals 90-days in advance of the policy expiration date. 

Third-Party Communication

Keeping relationships with other companies is important to our brokers. This includes Zoom meetings with our marketing agency and promoting our excellent relationships with the underwriters who support us. 

Wondering why your insurance has skyrocketed this year? Find out the factors that might be directly impacting you on the Benchmark blog. 

Why Is My Insurance So Expensive This Year?

why is my insurance so expensive this year?

 

Download the whitepaper [pdf]

why is my insurance so expensive?


If you’re like most people, your insurance has recently gone up with no explanation. Although we can list factors that might play a part in these increases,  the reason your insurance is going up is a combination of all of these factors.

D&O, EPLI, Property, General Liability, and Umbrella policies are all going up 15% to 30% year over year.

Below are some factors causing increased insurance costs:

Factors Causing Increased Insurance

  1. Increased Risk Factors. The rezoning of certain open areas as high-risk fire zones has increased carriers’ perception of risk and therefore, is driving up prices.
  2. Re-insurance. Insurance carriers purchase insurance similar to a policyholder. However, due to consistent years of catastrophic losses, the availability has been restricted and costs to insurers has increased. 
  3. Labor Shortages. Changes in immigration law, in combination with stricter criteria for classifying 1099 vs. W-2 workers, have added to the labor shortage post-pandemic markets are experiencing.
  4. Supply Chain Disruption. Shipping routes are overrun, ports are backlogged, shipping containers are in short supply, and trains are delayed causing domino-like effects to businesses. With increases in cost and time to deliver goods comes an increased risk of in-transit losses and loss of business market share.
  5. The Pandemic. With all of the increased insurance claims from COVID-related closures, insurance companies have paid out millions in unanticipatable claims.
  6. Inflation. Property values are soaring and insurance premiums are along for the ride. Insurers have become picky about whom they will insure, causing an increase in policy movement from broker to broker and carrier to carrier. 
  7. Increase Cyber Threats. Office-level security firewalls are not present with people working from home. This, in combination with the widespread usage of online payment options in more businesses, has raised the cost of cyber liability coverage.

These seven cost increases are complicated, global, and not going anywhere. Want to know what you can do to get your costs down? 

Next, we wanted to take this opportunity to provide insight into the ever-changing landscape in the insurance sector. You may have noticed strange behavior from insurers, whether you purchase coverage for your home, business, or both.

Below are the forces exerting themselves on the insurance industry today, which have caused the insurance companies to push rates as well as exit certain geographic areas. We hope this information will provide clarity as well as recommendations on how to take control of insurance costs during this time.

Low Bond Rates

It is interesting to know that in a normal economic market, insurance companies use insurance premiums as a loss leader. The premium loss ratio (total annual Gross Written Premiums valued against total Incurred Losses) typically runs from 105% to 108%. 

This means that for every dollar collected, the insurance company expects to pay out over a dollar in claims. The insurance companies offset this loss, however, with much higher returns in their investment income. A significant source of safe return has always resided in the bond market.

Since today’s bond market has much lower than normal yields, with no relief in sight, insurance companies are seeing lower than normal investment returns.

Unmodel-able Losses

For lack of a better word, we give you “un-model-able losses.”

Insurance companies rely on accurate actuarial “modeling“ to predict losses and help set proper rates based on predictable loss scenarios. For the last ten years, however, the global insurance industry (including the re-insurance segment, but more on that later) has been hit with a regular stream of wildfires, earthquakes, mudslides, hurricanes, abnormal freezes to name just a few.

These are classified in insurance-speak as “un-model-able losses.” Actuarial models have not yet been perfected to incorporate these types of losses. When the industry is faced with these events, profitability plummets, and insurance carriers are challenged to find rates that can accommodate the un-model-able.

Reduced Reinsurance Capacity and Increased Cost

Insurance companies “lay off” much of the value of their loss exposure on the “secondary” or reinsurance market. This considered, the reinsurance market is much more sensitive to how losses will affect their rates, as global reinsurers are the backstop for the industry.

As you may expect, reinsurance rates have spiked steadily over the past five to seven years due to consistent catastrophic losses. In some cases, actual insurance writing capacity is depleted to the point that coverage is no longer available in certain industry segments.

The reinsurer’s response to claim severity and frequency is to restrict the availability of coverage and raise the rates to your insurance company. Year over year, insurance carriers have been paying significantly higher rates for the cost of insurance and that cost is passed to the policyholders.

Remapping of “Fire Zones”

To a carrier, all insurance companies have become keenly aware of what they now consider fire zones, as well as the concentration of insured value that resides within these zones.

Both commercial and residential insures have undergone varying degrees of re-evaluating what they now consider to be locations residing in, or adjacent to, a newly established fire zone. You may have had friends, or even neighbors, complain of non-renewal notices they received from their current insurer.

Again, to a carrier, underwriters refuse to discuss any type of exception we may want to make regarding their “fire-zone” evaluation. Each carrier has determined, through their re-insurance treaty with their re-insurance carrier, what they are allowed or not allowed to write.

They will not make exceptions for any policyholder, which means remapping for fire zones has forced many policyholders back into the market due to the non-renewal of many policies. This is a market with a limited supply.

Why Should This Matter to Me?

The simple answer is to remember that insurance companies are for-profit enterprises. Because of the fiduciary responsibility to its policyholders, insurance companies must stay vigilant on profitability.

As we discussed above, the industry typically operates at a premium loss ratio of over 100%. With the forces pressing down on the industry discussed above, carriers have now focused their efforts on becoming profitable on written premium.

So, how much do rates have to rise to take a carrier from a 5% to 10% loss on each dollar collected to a profit of 10% or 15%? Rates have to rise 10% to 20% on average (this contemplates loss-minimal and loss-free accounts) in order for the carrier to be profitable on collected premiums.

Policies with anything approaching, or exceeding a 50% loss ratio for the last three years combined can see premium increases from 50% to 125%.

What Power Do I Have to Control My Premiums?

Believe it or not, policyholders have the ability to take control over policy costs. The insurance underwriters key in on two areas: property age and maintenance/upkeep. Any property approaching 20 to 25 years old or older will require the underwriter to dig into how well the property has been maintained.

They will want to know about tenants (for commercial properties) and updates, or placement, of the following building systems (home or business). For example, electrical, plumbing, HVAC, and roof systems.

If the age of your property is older, many underwriters are simply choosing not to provide quotes for buildings that have not had these systems updated in the past 10 to 15 years. Please create a budget to update these older systems. It will pay dividends for many years to come in the lowest premiums obtainable in the marketplace.

A Final Word

The most impactful measure used by underwriters to measure account quality is historical losses. Underwriters typically look back three to five years depending on the account.

Homeowners’ losses, both home, and auto, are aggregated to a central database used by all insurers. Commercial accounts, however, are not tracked to a central database.

Losses that cause the most heartburn to an underwriter are water losses. Water perplexes the savviest of insurance actuaries. Policies with consistent water damage claims over time are prime for carrier non-renewal. The lowest hanging fruit for property owners is the proactive replacement of all interior plumbing fixtures. Angle stops, water hoses, and toilet fixtures (float and flap) are the most guilty of causing expensive water damage claims. Next up, would be sewer and drain backups. Please snake all drain lines on a regular basis. Simple, cheap, and effective.

As you’d anticipate, older properties require more information as underwriters evaluate the quality of electrical, plumbing, heating/cooling, and roof systems. 

Remember the insurance policy is not designed to be a “warranty” against less than regular maintenance and upkeep. Property owners can go a long way in stabilizing insurance costs over time by creating and implementing pro-active regular maintenance protocols. If you can create an efficient program, you are doing all you can do to protect your insurance costs for the future.