Public attention from U.S. athletes and celebrities and movements like #MeToo and #TimesUp have drawn increased awareness of—and action around—sexual harassment.
As employers work to improve existing sexual harassment training and policies, they continue to find themselves dealing with the repercussions of past incidents, often through lawsuits or insurance claims that are typically covered under their employment practices liability (EPL) policies. These policies provide employers with liability insurance covering wrongful acts arising from the employment process, one of the most common of which is sexual harassment.
When pricing for an EPL policy, actuaries typically use historical claims experience to predict the emergence of claims in the future. Similarly, actuaries estimate incurred but not reported reserves on existing claims to account for growth in the claim value expected above that contemplated in the claims adjusters’ case reserves. To the extent that trends in claim frequency and severity are changing, the historical claims experience may no longer be an accurate predictor of future claims experience. It is essential for companies writing these policies to consider this level of uncertainty in their estimates.
Legislative changes are also introducing a level of uncertainty to claims that may affect pricing and reserving in the future. And now more than ever, companies must find the right balance of coverage and retention limits as well as establish a plan and budget for prevention. This includes sexual harassment training, policy establishment, and enforcement. With this evolving climate, it is also essential for employers to closely monitor their EPL coverage.