Aon | Financial Services Group
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The EPL insurance market has been experiencing a flattening of pricing, with the average increases falling as 2022 progressed.
At the onset of 2022, there was significant concern surrounding vaccination mandates and employers’ struggles with evaluating Americans with Disability Act (ADA) and religious accommodation requests seeking to avoid any corporate vaccine mandate. However, once the federal vaccine mandate was struck down, many employers changed their strategy and eliminated any proposed vaccine mandate. As a result, the wave of anticipated claims did not materialize on the expected scale, although there were occurrences in certain industries.
According to our benchmarking, pricing stabilized near +10% early in the year. There was a brief period when the average pricing improved to closer to +5%, but later in the year there was an upward trend with average pricing moving back to between +5 and +10%.
Return to office, diversity, equity, and inclusion (DEI) efforts throughout an organization, including in the boardroom, and workforce management issues have been the areas of greatest focus by underwriters. The workplace is increasingly complex, and underwriters are paying close attention to how employers juggle how best to acquire and retain diverse talent, compensate them fairly without running afoul of pay equity issues, and manage the growing potential of a recession and associated layoffs.
These newer trends have caused fewer issues for carriers than traditional sources like sexual harassment, age discrimination, and disability discrimination. Overall, claims frequency has been down but claims severity has increased, especially in jurisdictions like California, New York, and New Jersey. As a result, as pricing increases have flattened, some carriers are struggling with profitability.
With the hiring of an additional 450 positions and the anticipated change in leadership at the Equal Employment Opportunity Commission (EEOC) hiring, expect an increased focus on discrimination claims based on color and LGBTQ+ status in 2023. DEI matters also remain top of mind, and companies whose CEOs make public, verifiable statements surrounding intent and strategy would likely receive more favorable treatment from underwriters.
In terms of capacity and pricing expectations for 2023, it’s possible some of our larger Bermuda trading partners may restrict capacity because of increased claims severity experienced during 2022.
Read more about management liability marketplace trends as we look ahead to 2023 here.
Aon is not a law firm or accounting firm and does not provide legal, financial or tax advice. Any commentary provided is based solely on Aon’s experience as insurance practitioners. We recommend that you consult with your own legal, financial and/or tax advisors on any commentary provided by Aon. The information contained in this document and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity.