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Assessing The Market And Supply Of Employment Practices Penalty Insurance

Employment practices liability (EPL) insurance, which offers legal protection for SMEs, came into its own during the COVID-19 pandemic – as industries saw a great need to protect themselves from a myriad of risk disclosures. Speaking with IBTV, Andy Talbot, head of sales at ARAG, examined the rising interest in EPL insurance among brokers and how the pandemic is beginning again to impact the market.

“The pandemic itself gave several unique risks, which we’ve come through,” he said. “But it has given the realization to industries that they do need legal protection. We’re going to see more needs with things [the push] to work from home, so there’s going to be new ruling coming through that businesses will need to deal with. And should it go wrong, they’ll want legal insurance to pay the legal cost.”

Examining the impact of COVID, Talbot noted that when the pandemic happened there was a substantial knee-jerk reaction across the EPL space with players pulling out of the market. That created new opportunities for companies such as ARAG, he said. Since then, some players have come back into the space but they’re more reserved about their risk appetites now.

“We’re seeing price boosts, bigger excesses,” he said. “But as I say, the demand is there. So we think in time, there will be more capable. But the underwriting is certainly more careful than it was before. People before largely saw EPL insurance as a bit of a kind of cash cow – there weren’t that many claims. So, people will be a lot more cautious underwriting it in the future.”

Looking at how brokers can support their clients at this time, Talbot noted a key challenge facing brokers is when a business has a history of employment disputes and is peeking to buy cover.

What brokers can do when presenting such a risk to insurers such as ARAG is get the full information, he said, and be able to explain the problem – and critically, why it won’t reoccur.

“So there has been a problem in the business, but now their HR function is more active, or they’re buying in legal services that make the risk different from when the claim occurred,” he said. “I think what brokers need to do is tread carefully when dealing with clients who have had previous claims.”

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