Fifteen or twenty years ago employment practices liability insurance (EPLI) was in its infancy and few clients purchased the coverage. Many times this was due to the high cost, restrictive coverage and limited availability. Over the past 5 or 7 years the cost of coverage has come down, coverage has been expanded and the availability has grown tenfold. So why won’t my clients buy the coverage now?
Some of the reasons for clients not understanding the true nature of the employment practices liability exposure are:
– Belief that it could NEVER happen to them. They believe they are meticulous in their hiring practices and believe they treat their employees like kings and queens.
– The cost of defending an EEOC action or an employment practices lawsuit are not that much so they just “self insure” the exposure. I doubt that they are aware that it could easily run $40,000 to $100,000 to defend and have a “baseless” action or lawsuit thrown out of court.
– Clients still see EPLI as an “optional” coverage. This is amazing since few if any clients are willing to “self insure” their general liability exposure but many “self insure” their employment practices liability exposure. When you consider that there are more employment practices liability actions (EEOC filings and lawsuits) filed annual that liability lawsuits, this disparity is amazing.
– They believe any kind of claim they would have is going to be excluded anyway, so why buy the coverage. This is a “hangover” from the early days of EPLI. Policies offer much broader coverage than they ever did before and most claims ARE covered.
– They still believe it costs too much. When it costs less than $75 per year for each employee, it is truly a bargain.
– They believe they are better equipped financial to withstand a long legal battle with a former employee. This is a misconception since many EPL claims are taken on a contingency basis by the plaintiff’s attorney so they will pursue lawsuits that have even a minimal amount of merit.
So how does my agency go about changing the attitudes of my clients or potential clients? There are a number of ways, but it will take a concerted effort and will not happen over night. Some of the methods you could use are as follows:
1. Buy the coverage for your own agency. How can you profess to your clients that they should carry the coverage when your agency doesn’t carry the coverage. If you truly believe this is something they should add to their insurance program, put your money where your mouth is.
2. Reassess or reassert the minimum standards your agency will offer to clients as part of a “comprehensive insurance program”. Too many times EPLI is offered as an “optional” coverage rather than as “essential” coverage. This reflects the attitude of your agency and lets clients know that you are looking out for their best interests and are not just trying to “sell them another coverage” they may or may not need.
3. What about offering seminars on “employment exposures”? You could cover everything from employment practices to employer’s liability to employee benefit liability and workmen’s compensation coverage. (You can even include fiduciary liability exposure which is a misunderstood or unknown exposure) The person handling human resources at your client’s office will appreciate the information and will be better able to handle their human resource duties. This could even include risk management. The employment practices liability can be reduced, but not eliminated through proper risk management.
4. Offer it on ALL commercial accounts, every year. It is so easy to get a quick indication and add it to your proposal. This will reduce your E&O exposure and eventually you might wear your client down and they will buy the coverage. If they don’t want it, find out why they don’t think they need it or why they don’t see the value in the coverage. Make sure to get them to sign off that you recommended the coverage and they chose to not buy and SELF INSURE the exposure.
5. Build a database of claim and potential claim information. By showing that claims do happen locally and to firms in their industry it will also hit closer to home. It will also show how truly common they are. Include estimated numbers on what the legal costs totaled and what settlements or judgments went for. This will help them realize how quickly the cost of an employment action can add up to. The more “real” you can get with these “stories” the more genuine you will come off. Have details so they can see this is a real life example. Walk them through what actually happens in a claim. What kind of information they may have to provide to the plaintiff’s attorney, how they can deposition any and all other employees and how when you are 95% “right” you can still end up paying a significant judgment. Also explain the potential bad PR and what types of information could become “public” information.
6. Keep them informed of new or growing exposures. You can do this via e-mail alerts or via your newsletter. The more you can give the image of the EPL exposure coming “to a boil”, the better you will able to provide EPLI as a solution to this growing exposure. (Wage and hour claims have tripled since 1997) Explain third party exposures and exposures for independent contractors working on your hehalf.
7. Mid year client contact. Many clients say that they only get contacted once a year, when their insurance renews. So, why not set up a mid point meeting and just catch up on where their business is headed and see if you can uncover or detect upcoming exposures or changes. This is a good time to discuss an exposure like EPLI when all the rest of their insurance program is not up for renewal. The client will most likely be more relaxed and open to listening to what you have to say.
8. Statistics. Have statistics that show how prevalent EPL claims are and how they are growing. Show how in an economic downturn, the number of claims go up. Give local numbers on costs of claims that go to different stages of litigation. (3 out of 5 employers are sued by former employees in the last 5 years) (40% of all EPL claims happen to firms with less than 100 employees) Make these part of your proposals or give this information when discussing this coverage.
9. Explain to clients that not only do they get a policy, they get much more. Many carriers include other Human Resource services with their coverage. This includes services like free human resource consulting (toll free help line to discuss current issues or how to handle a current situation.) It can also include reduced cost services such as compliance training or background checking service. They also may offer assistance on your employee manual or a reduced cost to have a manual done by an outside vendor.
10. Flat out tell them that it is a good business decision to purchase coverage. The relative cost of coverage, versus the exposures make it inexpensive and a “sound” business decision. In a growing environment of “victim mentality” you need to put coverage in force before you need it. It would be tough to buy coverage when “the smell of an EPL claim is in the air”. Insurance companies won’t sell property coverage for a building that is already on fire!