I just finished listening to an interesting podcast by the Freakonomics authors about the risks that gun use presents. They compared the odds of a gun causing a person's death (about 1 in 10,000) with the chance a backyard swimming pool causes a death, which they said can be roughly 100 times greater. Does that mean we should focus on swimming pool control and forget about gun violence? Although no one would seriously suggest that, it is useful to compare relative risks.
For the past dozen years I've had a close-up view of employment practices liability exposures and lawsuits, and my conclusion is consistent: Employee Liability Practices Insurance cannot eliminate the largest personnel risks businesses face. There is no insurance substitute for better hiring, stronger supervision, higher productivity, or keeping turnover low, and insurers who underwrite Public Officials Employee Liability (EPLi) will tell you that many exposures are management problems rather than pure liability risks.
In one recent year the country saw an unusually high toll from mass shootings—several hundred fatalities that drew intense media attention—while in the same period roughly 20,000 Americans used guns to commit suicide, resulting in thousands more deaths that received far less press. The point is not to minimize headline events but to notice which risks are frequent and which are sensational.
The same pattern holds for workplace risks. How many articles will you read about the cost of bad hires, lost productivity, or missed growth opportunities? Those subjects rarely make front-page news, while a juicy lawsuit with a multi‑million dollar verdict will get plenty of headlines.
At most HR conferences the conversation is dominated by compliance issues, but the greatest risk to many companies' survival is poor management and weak operational practices rather than litigation. For firms with public duties, coverage options such as Public Official Liability Insurance address certain legal exposures, yet they do not fix the underlying people and performance problems that most often harm a business.
As with the gun versus swimming pool example, understanding the relative probabilities and expected costs of different risks helps owners and managers set priorities. Sensational events matter, but they are not always the most economically significant ones.
None of us want mass shootings, suicide, or nasty employee lawsuits. Those events rightly attract attention, but they can also divert time and resources from improving hiring, supervision, training, and culture. If you want to review coverage options or how to prioritize workplace risk management, consider taking the next step and talk to an agent.
Food for thought...
Frequently Asked Questions
How does employment practices liability insurance differ from management or operational risk?
Employment practices liability insurance covers certain legal claims such as discrimination or harassment, while management and operational risk relate to hiring, retention, and productivity, which insurance typically does not address.
Should a small business invest more in compliance or in improving management practices?
Both matter, but improving core management—hiring well, training, and supervision—often yields larger, more sustained benefits than focusing only on compliance checklists.
Can insurance premiums be reduced by improving internal HR practices?
Yes, insurers may view stronger documentation, training, and progressive discipline favorably, which can help control claims frequency and potentially affect terms or pricing.
How should a business decide which risks to prioritize?
Assess the likelihood and financial impact of risks, prioritize those with the highest expected loss, and address root causes through management changes and appropriate insurance where needed.