EPL Market Growth Drivers

The Employment Practices Liability (EPL) market is seeing a surge in the use of AI tools by unrepresented claimants to draft and submit claims, adding complexity to an already tightening market. This, along with an increase in frequency and severity of claims, and evolving workplace risks, is driving the EPL market’s evolution and demanding more attention from wholesale brokers.

Market Trends and Drivers

James Walsh, President of eRisk, a nationwide company, attributes the increased complexity in EPL to several factors. These include:

• A broader legal definition of disability under the Americans with Disabilities Act, requiring businesses to accommodate both physical and mental disabilities.
• An increase in pre-litigation demand letters, allowing claimants to test the waters and avoid litigation while keeping matters private.
• A rise in the use of AI tools by pro se or unrepresented claimants to draft and submit EPL claims and disputes without representation. These claimants lack legal expertise, but their claims still require significant defense effort and oversight.
• Nuclear verdicts and social inflation, driving up expectations for larger settlements when claims are submitted.

Walsh notes that wholesale brokers play a key role in translating these market conditions into clear and defined placement strategies. They provide agents and insureds with guidance on pricing, underwriting, and coverage changes, given their specialisation and experience in the EPL line of business.

Carrier Selection and Risks

The EPL market is selectively hardening, with responsible carriers repricing where exposure has deteriorated. Brokers should not solely focus on finding the lowest price but consider several factors when selecting carriers:

• Claims handling philosophy, as it significantly impacts defense costs and outcomes.
• Underwriting discipline, to ensure risks are properly assessed and priced.
• Commitment to the EPL line of business, indicating a long-term commitment to growth and supporting the market.

Walsh warns that brokers chasing low numbers from inadequately pricing carriers risk being left with poorly covered risks when the market turns. He advises brokers to ensure carriers are reputable, experienced, and understand their clients’ needs.

Related: Guy Carpenter names new Pacific chief

Emerging EPL exposures include the use of AI tools in hiring and screening, which may be accused of bias, and the increased EPL claims that typically accompany economic downturns. Brokers should help clients prepare for these risks by:

• Documenting employment practices and ensuring they comply with relevant laws and regulations.
• Implementing human oversight of AI tools used in employment decision-making processes.
• Updating employment handbooks and policies to reflect new regulations and best practices.

Carriers that can remain committed to the EPL market through different cycles share several traits:

• Disciplined underwriting, focusing on profitability over top-line growth.
• Specialised EPL expertise in both underwriting and claims handling.
• A long-term commitment to the EPL market, demonstrating a commitment to growth and supporting insureds.
• Financial strength, signaling operational stability and the ability to withstand market volatility.

Brokers should look for these qualities when placing business with carriers to ensure they partner with long-term, reliable providers.

eRisk, a specialist underwriter, supports wholesale brokers in handling today’s EPL challenges. With nearly three decades of experience, eRisk offers:

• Proprietary data to enable accurate pricing and coverage.
• Investment in technology for speed, accuracy, and ease of doing business, without sacrificing personal touch.
• A stable, personal touch in its wholesale-focused business model, backed by the financial strength of Nationwide.

eRisk’s wholesale-only approach and specialist underwriting capabilities enable it to provide a well-rounded and experienced model for the wholesale market, supporting brokers in managing increasingly complex employment-related risks.