My office has advised our clients about the explosion in the EPL insurance market for some time now. The market is encouraging: More insureds are making EPL insurance part of their insurance portfolio. Consequently, the number of markets offering EPL insurance has expanded, doubling the number of new EPL policy forms and increasing insurance capacity.
While all these are signs of a burgeoning market-marked by an increasing hit ratio measured in actual sales as a percentage of formal proposals-this rapid expansion can also spell trouble for agents and brokers. They are now more vulnerable to charges of broker errors and omissions (E&O).
Savvy brokers and agents have been advising their clients for many years about the risks associated with employment practices liability and about the widespread availability of EPL insurance, but it has become difficult to sort out the vast variations in coverage between policy forms.
Selling EPL insurance on price alone is extremely dangerous, since many coverage forms and endorsements simply don't offer meaningful coverage and can result in risks not being covered. Avoid surprises by knowing what's covered and what's not-and conveying that information to your client.
A recent EPL coverage comparison illustrates the problem. A broker had obtained six different EPL quotes from a broad range of insurance companies. In the broker's analysis, 15 features were compared in each of the quoted policy forms. The features compared were vaguely listed, and all the policies were marked as containing a particular feature. From the comparison chart, then, all the coverages were equal. In reality, a close reading of each policy confirmed that they were not the same. The insured ended up purchasing the cheapest coverage, content that it was adequate. You can imagine the difficulty the broker had in justifying the comparison under a deposition by the client's lawyer after a claim was denied by the insurer.
While getting smart on any new line of coverage takes time and effort, such knowledge is essential for making an EPL book of business profitable and free from allegations of broker E&O. Here are some tips that can help:
- Find a mentor. Underwriters are generally very well versed on the ins and outs of policy language. Some are more willing to share information than others. Call a few and tell them you want to learn more about EPL insurance. You'll probably receive a lot of marketing information, but you may hear information on upcoming seminars or educational events worth attending.
- Continuing education. Most brokers have Continuing Education licensing requirements. Seminars and educational training can kill two birds with one stone. Remember to shop wisely, since many expensive seminars are not very informative. When shopping for a seminar, ask the coordinator for a list of past attendees, and call for references.
- Read the policy. If you really want to learn the details of EPL coverage and sell more coverage with confidence, there's no substitute for reading and understanding as many different policy forms as you can. Knowing what to look for and what to avoid is essential, but learning how to do this can be time consuming. New references on the subject are available to help guide your learning. Check around to learn which ones are best.