Employment Liability Pricing

EPLI Underwriting Model Overview

People always ask us to "show us how it works". Below are the key factors that are scored and priced for a company looking to manage these times of high Social Inflation Rate. Every risk is yellow highlights is ad-hoc and risk unless it is tied to an ISO-30415 audit.

1. Company Profile

• Number of Employees: Higher headcounts generally increase exposure.

• Revenue: Correlated to the ability to settle claims and potential claim value.

• Industry Sector: Certain industries (e.g., hospitality, retail, healthcare) carry higher EPL risk.

• Business Type: Public vs. private companies (public companies face more shareholder-driven suits).

• Geographic Location: Jurisdictions with stronger employee protections (e.g., California, New York) increase risk.

2. Human Resources Practices

• Written Policies:

  • Anti-discrimination

  • Harassment and retaliation

  • Equal Employment Opportunity (EEO)

• Employee Handbook: Existence, distribution, and acknowledgement tracking.

• Training Programs: Frequency and scope of supervisor/employee training on EPL topics.

• Hiring and Termination Practices: Use of standardized interview and review protocols.

• Use of Outside Counsel or HR Consultants: For sensitive personnel decisions.

3. Claims History

• Prior EPLI Claims: Number, nature, and outcomes of claims.

• EEOC or State Agency Complaints: Even if not resulting in lawsuits.

• Trends in Internal Grievances or Investigations.

4. Risk Controls and Culture

• Internal Reporting Mechanisms: Whistleblower hotlines or reporting apps.

• DEI (Diversity, Equity, Inclusion) Programs: Especially if aligned with ISO 30415 or similar frameworks.

• Internal Audits: Frequency and scope of compliance or cultural audits.

5. Coverage Considerations

• Requested Limits: Higher limits often prompt deeper scrutiny.

• Retention/Deductible Levels: Higher retentions can reduce premium but shift more risk to insured.

• Wage & Hour Coverage: Typically excluded or sub-limited due to high severity.

• Third-Party Coverage: For claims from customers, vendors, etc.

• Retroactive Date: Determines how far back claims may arise from.

• Defense Inside/Outside the Limit: Impacts limit erosion from legal fees.

6. External Environment

• Regulatory Climate: Federal, state, and local laws affecting EPL exposure.

• Litigation Trends: Class action activity, settlements, and jury awards.

• Reputational Exposure: Media presence or history of public incidents.

Output: Pricing and Policy Terms

Based on the above, underwriters determine:

• Premium (Base rate + modifiers based on risk factors)

• Coverage Limits and Sublimits

• Exclusions or Endorsements

• Risk Mitigation Requirements (e.g., training, policy updates)

• Retention or Deductible levels