Often buyers of Employment Practices Liability (EPL) insurance don’t realize that most carriers provide a loss control / loss mitigation tool at no cost as part of the insurance policy. Typically, an explanation of the available services and how to access them is provided as the first page or an early page of the policy itself. The loss mitigation tools are almost universal among the leading EPL insurers today, yet many clients don’t know they are there and even fewer actually utilize these tools. This article will explore the reasons why policyholders fail to take advantage of these resources and how stakeholders offer better incentives to policyholders to affect a change in their habits.
What is available from a typical insurance company? Many insurance companies, Travelers for example, offer a 1-800 number to a specialist law firm. In Travelers' case, the firm is Jackson Lewis. The client can call Jackson Lewis for no cost and inquire about a specific situation they are facing or ask questions about policies or procedures that they have or should consider. There is no cost to the policyholder for the first hour of consultation. If the situation requires more than a simple phone consultation, then the policyholder can engage the law firm for additional resources. The initial consultation is designed to help the policyholder quickly address concerning items and seek professional representation rather than attempting to go it alone.
Online resources are also provided by the majority of carriers. Online resources can be limited to a few articles or can be weekly newsletters. These resources typically include sample employment policies or even a sample employee handbook. They may provide online training including sexual harassment training that is required by certain states. The training provided meets state standards and can reduce the need for the client to engage outside help or pay fees to a consultant or training company to provide this same training.
The EPL loss mitigation services don’t cost the client anything and they are included with every policy. Yet carriers have a very low adoption rate for these services. The carriers we interviewed estimate their usage rate at less than 5%. This is an estimate of 'ever used' not regularly used. Carriers have spent a great amount of time and money to prepare these resources and promote them to the brokerage community and to their policyholders. So why do clients fail to utilize tools that can reduce their chance of a claim and reduce the severity of a claim? See part 2 of this post coming soon.
Monica M. Minkel, RPLU, MLIS, cyRM, CPLP has been working exclusively with Directors & Officers Liability, Professional Liability, Cyber Liability and related products for nearly 20 years. She started her interest in finance by loaning money to her mom at age 11 (complete with a loan agreement and competitive interest rate). She is passionate about all things in the financial industry and the way technology is changing the way capital markets function.