APPROACHING THE 2024 EPLI MARKET

BY Frank Huang

P&C Actuarial Practice Leader
Davies North America

March 2024

It has been a while since I last shared on the EPLI environment. While much has changed, much is still the same. As we head into 2024, what should insureds do differently to mitigate and potentially lower their EPLI costs? In this article, we’ll survey where the market is, discuss current issues and continued trends, and then highlight what companies should do in response to everything.

MARKET CONDITIONS

While it seems so far back now, 2022 brought a hardening market with many insurers increasing rates, raising retentions, or both. 2023 saw a brief reprieve for some as many insureds, primarily those with better experience, saw small rate decreases, but others increased low single digits and those with poor experience saw high single digits or even double-digit rate increases. All of this was consistent across higher risk states (e.g. California and New York) and certain industries (e.g. health care, retail, hospitality). While we’re early in the calendar year, 2024 does appear to be more of the same as 2023.

TRENDS, OLD AND NEW

Of the many trends over the last few years, the most notable carryover, with a new wrinkle from my perspective, relates to accommodation requests. As the nation transitioned out of the pandemic, companies either kept their workforce fully remote or started asking employees to move to a hybrid schedule. The end of 2023 and start of 2024 seem to hint that the trend will accelerate, leading to a potential confrontation between employers and employees over accommodation requests. According to an August 2023 report from Resume Builder, 90% of companies plan to implement return-to-office policies by the end of 2024, and 28% say they will threaten to fire employees who do not return to the office (RTO).

An early indication of this is seen in the EEOC reporting that the number of religious discrimination complaints filed in 2022 increased more than 500% over 2021 (from 2,111 to 13,814). The EEOC explained that much of this increase is related to vaccine requirements in RTO pushes, but this can also be viewed as an issue of accommodation.

A related note is that the American worker continues to be more aware of mental health issues, especially for those in Gen Z and Alpha generations via the influence of social media. A 2023 NIH study showed that individuals with more frequent exposure to social media led to higher rates of depression, anxiety, or both. As awareness of these issues and unhealthy usage of technology grow in lock step, a potential confrontation between employees and employers in the EPLI arena may ensue.

A few other trends that are worth mentioning include wage and hour coverage, the Pregnant Workers Fairness Act (PWFA) which went into effect last June, and the broader use of AI and the potential inherent biases as they impact employment practices.

Next Steps

While old trends persist and new trends emerge, the steps that companies can take to mitigate program costs are largely unchanged. Employers can ensure proper blocking and tackling via:

  • checking employee handbooks and employment policy documents are appropriate on current and/or concerning issues
  • educate staff on said issues
  • support proper documentation across the board

Another way to mitigate costs is to better understand what the drivers of costs are, and proactively address them. Better understanding risk exposures can help inform whether your EPLI program should be redesigned. Businesses can potentially benefit if they retain more risk, and those retained losses are ultimately less than what they would’ve paid an insurer to assume that risk. PEOs specifically can also consider passing on small deductibles, or otherwise sharing risk with their clients, as a way to keep all parties mindful of the risk exposure.

Another area that has grown tremendously in 2023 and continues even in this nascent 2024 is the creation and use of captives. Many of our clients are reaching out to address rising costs and market capacity issues primarily in the property market but also for GL/PL, workers’ compensation, and EPLI. Captives are not for everyone but, if done correctly, the benefits over traditional insurance can be material. Company leadership should connect in-house risk professionals to an outside captive manager and third-party actuary to properly consider whether a captive program is a right fit.

TAKE-AWAY

While much of the EPLI landscape has changed in the last couple of years, much is still the same. Companies should look to ensure that they understand the basics of caring for colleagues and promoting a healthy workplace. At the same time, companies should monitor loss drivers and revisit whether a traditional or alternative risk program is best for their respective situation.

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