Navigating the Evolving EPL Landscape: A Strategic Outlook for 2024

The Employment Practices Liability (EPL) market has long been a cornerstone of risk management for businesses, particularly in sectors fraught with complex employment-related challenges. As we progress through 2024, the EPL market is witnessing subtle yet significant shifts. At DOXA, we believe in empowering our partners with insights that transcend the average, enabling them to navigate these changes with precision and foresight.

The Current State of EPL Renewals

One of the most prominent trends in the current EPL landscape is the competitive nature of rates, especially for clean accounts. While many renewals are maintaining flat rates, opportunities for reductions exist. Underwriters are increasingly open to applying decreases between 5% and 10% in some cases, provided the risk profile supports such a move. However, this landscape isn’t without its challenges.

An area of concern is the upward trend in retentions, a shift that began in 2023 and shows no signs of abating. Underwriters are particularly focused on increasing retentions for highly compensated individuals. This strategy, while perhaps necessary from a risk management perspective, poses a significant burden on insureds who must now bear a higher portion of potential claims. For agents, this shift requires a more nuanced approach to policy structuring and client advising.

Emerging Coverage Issues

As the EPL market evolves, so too do the specific coverage issues that underwriters and insureds must address. One emerging trend is the introduction of Biometric Information Privacy Act (BIPA) sub-limits. This development is particularly noteworthy because not all markets are offering BIPA coverage freely. In many cases, obtaining this coverage may require additional underwriting or even a specific request from the agent.

Similarly, Fair Labor Standards Act (FLSA) and Immigration Reform and Control Act (IRCA) defense sub-limits are now available on most accounts. These sub-limits are critical for businesses operating in industries with high exposure to employment-related claims. However, it’s essential to note that these offerings are not universal. Prior claim issues, for instance, can complicate or even preclude access to these sub-limits, necessitating a careful evaluation of each client’s claim history and risk profile.

Sector-Specific Challenges

Certain sectors are facing more significant challenges in securing favorable EPL terms. Industries such as healthcare, auto dealerships, restaurants, staffing agencies, and legal services are considered tough classes in the current market. These sectors typically present higher risks due to factors like workforce size, employee turnover, and regulatory scrutiny, making them less attractive to underwriters. As a result, agents working with clients in these industries must be prepared for more rigorous underwriting processes and potentially higher rates.

California’s EPL market, often seen as a bellwether for national trends, provides an illustrative case study. After years of volatility, California EPL rates are beginning to stabilize, especially for clean accounts. Most renewals in the state are flat, barring significant growth in the insured entity. This stabilization is a welcome relief for many businesses in the state, yet it underscores the importance of a proactive approach to risk management. For agents, this means closely monitoring any changes in the client’s operations that could trigger rate increases or necessitate adjustments in coverage.

Strategic Implications for Agents

Given these market dynamics, insurance agents must adopt a strategic approach to renewals and new business. The current environment demands a deep understanding of each client’s unique risk profile and the ability to anticipate how underwriters will view that profile in the context of broader market trends.

One effective strategy is to leverage detailed data analytics, like those provided by DOXA’s proprietary tools. These analytics enable agents to gain insights into pricing trends, risk factors, and underwriter behaviors, allowing for more informed decision-making. For instance, understanding the impact of increased retentions on a client’s total cost of risk can help agents craft policies that balance coverage needs with budget constraints.

Moreover, agents should be proactive in educating their clients about the evolving market conditions. This includes discussing the potential implications of higher retentions, the availability (or lack thereof) of certain sub-limits, and the specific challenges associated with their industry. By setting realistic expectations and providing actionable advice, agents can build stronger, more trust-based relationships with their clients.

The Role of Data in Shaping Outcomes

At DOXA, we understand the critical role that data plays in shaping successful outcomes for both agents and their clients. Our tools are designed to provide instant intelligence on pricing trends, industry-specific risks, and coverage opportunities, enabling agents to negotiate more effectively and deliver superior results.

In today’s competitive market, the ability to access and interpret data is no longer a luxury—it’s a necessity. Agents who can harness the power of data-driven insights will be better positioned to secure favorable terms for their clients, even in challenging market conditions. Whether it’s identifying opportunities for premium reductions or navigating the complexities of sub-limits, data is the key to unlocking better outcomes.

Looking Ahead: Preparing for Future Challenges

As we look to the future, it’s clear that the EPL market will continue to evolve, presenting new challenges and opportunities for agents and insureds alike. The trends we’ve observed so far in 2024—competitive rates, increasing retentions, emerging coverage issues—are likely to persist, albeit with regional and sector-specific variations.

For agents, staying ahead of these trends will require a combination of strategic foresight, data-driven decision-making, and proactive client engagement. By keeping a close eye on market developments and leveraging the resources available through DOXA, agents can ensure that they are well-equipped to navigate the challenges ahead and capitalize on the opportunities that arise.