Employment Practices Insurance Sales Rise

NU Online News Service, March 4, 3:14 p.m.EST?More employers purchased stand-alone employmentpractices liability insurance in 2003 despite steep increases, abrokerage said.[@@]

Marsh Inc., in a report titled "Employment Practice Liability2004," said the average cost for stand-alone EPLI rose 49 percentin 2003, but more employers?20 percent or more, depending uponcompany size classification?purchased the insurance than in prioryears.

Among firms with more than 4,000 employees, the purchasing rategrew by 32 percent, while 23 percent more firms with 1,000-to-3,999employees purchased the coverage in 2003. Purchases increased by 20percent among firms with fewer than 1,000 employees.

Additionally, while employers sought higher levels of protectionfor this risk on average, those with fewer than 1,000 employees orwith more than 4,000 experienced a drop in coverage limits duringthis period, Marsh said.

The results came from a survey of 1,898 companies and are basedon insurance-buying decisions made during the 12-month periodending Dec. 31, 2003.

"The growth of stand-alone employment practices liabilityinsurance can be tied to the facts that employment-relatedlitigation is on the rise and more employers are aware of that aswell as the deterioration of coverage for these exposures in othertypes of insurance policies," said Gina Higgins, a managingdirector of Marsh and head of the firm's EPLI practice, in astatement.

Further, a preliminary review by Marsh of insurance purchasingtrends during the first half of 2004 reveals a continuation of thegrowth in this coverage line.

Ms. Higgins observed that at the start of 2003, casualty andumbrella liability underwriters decided not to make EPLI coverageavailable under these standard insurance policies.

In addition, as businesses increasingly sought to provideoptimum levels of protection for their directors and officers, agrowing number have chosen not to obtain EPLI coverage as part oftheir D&O insurance policies to avoid eroding the limitsbecause of employment-related claims.

The study also found that the largest employers purchased thehighest limits and had the largest retentions. Employers with 4,000or more employees had average limits of $30.75 million andretentions of $3.05 million. On average, the firms paid annualpremiums above $550,000 for this coverage.

Meanwhile, employers with 1,000-to-3,999 employees obtainedlimits of $7.4 million on average, had retentions of nearly$347,000, and paid an average of more than $116,000 in annualpremiums.

Employers with fewer than 1,000 employees had average limits of$3.8 million, retentions of nearly $121,000, and annual premiums ofapproximately $46,000, Marsh said.

Marsh's study examined businesses in 17 industry sectors. Thosein the food and beverage sector had the highest average limitsamong all industries in the study. They were followed by financialinstitutions and retailers.

Copies of Marsh's report, "Employment Practices Liability 2004,"are available through local Marsh offices.