Employment Practices Insurance Sales Rise

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

Marsh Inc., in a report titled "Employment Practice Liability 2004," said the average cost for stand-alone EPLI rose 49 percent in 2003, but more employers?20 percent or more, depending upon company size classification?purchased the insurance than in prior years.

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

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

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

"The growth of stand-alone employment practices liability insurance can be tied to the facts that employment-related litigation is on the rise and more employers are aware of that as well as the deterioration of coverage for these exposures in other types of insurance policies," said Gina Higgins, a managing director of Marsh and head of the firm's EPLI practice, in a statement.

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

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

In addition, as businesses increasingly sought to provide optimum levels of protection for their directors and officers, a growing number have chosen not to obtain EPLI coverage as part of their D&O insurance policies to avoid eroding the limits because of employment-related claims.

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

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

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

Marsh's study examined businesses in 17 industry sectors. Those in the food and beverage sector had the highest average limits among all industries in the study. They were followed by financial institutions and retailers.

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

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