Carrier Competition Benefits Large Employers EPLI Coverage

NU Online News Service, March 7, 1:41 p.m. EST

Larger companies benefited from carrier competition on their employment practices liability risk receiving more rate decreases than small and midsize businesses, according to a report from insurance broker Marsh.

In Marsh’s latest benchmarking trends report on EPLI, 58 percent of large organizations (4,000 or more employees) received rate decreases in their coverage in 2011. That translated into close to 4 percent average rate decrease for the year. While the majority of large organizations enjoyed decreases, 14 percent saw rate increases while 28 percent saw no change.

For all businesses, decreases still outweighed increases with 44 percent seeing their EPLI insurance decrease by an average of close to 2 percent. Twenty-one percent saw their rates increase while 35 percent saw no change.

Marsh notes that “double-digit decreases were typically reserved for clients with positive claim history, minimal reduction-in-force or mergers and acquisition activities, and best-in-class policies and procedures, particularly with respect to anti-discrimination, diversity, and training senior management around those issues.”

Marsh says in response to the soft market conditions insurers placed upward pressure on rates, notably for small and midsize companies.

Companies purchased on average more than $10 million in limits in 2011, with the larger companies purchasing higher limits that averaged in excess of $28 million.

The highest limits were purchased by financial institutions, health care and the retail and wholesale sector “commensurate with the higher exposures in those industries.”

Financial institutions with more than 4,000 employees purchased the highest total of EPLI limits at average of close to $48 million.

Marsh went on to say that increased enforcement action by the Equal Employment Opportunity Commission (EEOC) and increased claims and exposure on EPL, contributed to the purchasing trends.

Increased staffing at EEOC and commitment of more resources helped the agency reduce its pending files by 10 percent. That activity pushed recovery on behalf of employees to more than $365 million.

Adeola Adele, Marsh’s senior vice president, national EPLI product leader, told National Underwriter that it is too early to tell precisely what direction rates are going in, but generally they are holding flat and the range of increase or decrease, “if any” is consistent with the fourth quarter of 2011 with a range of increase or decrease of 5 percent.

She says that as far as companies getting rate increases last year, carriers had more success with small companies by justifying their actions because of increased losses and claims from individuals.

It was more difficult with midsize clients, says Adele, because of pushback from the broker who demanded justification for rate increases. Carriers were successful with accounts where claims exposure increased due to lay-offs and M&A activity.

Because of the increase in EEOC enforcement actions, Adele says there were more small and midsize companies purchasing EPLI coverage for the first time. She says the number of large companies making purchases held steady.

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