For employers purchasing employment practices liability insurance, or EPLI, cost is usually a top concern. Many people wonder how exactly premiums for this insurance are calculated. Employers have little control over most of the variables that help determine premiums, but employers can still benefit from understanding those variables.
1. Employer History
Many insurance companies require employers to furnish information about past employment practices liability issues. High turnover rates or a large number of claims involving harassment or discrimination can be a predictor of whether an employer will experience similar problems in the future.
Insurance companies also consider the industry the employer works within, since some industries have a greater risk of claims. Retailers, for instance, typically have higher turnover rates. Companies that employ highly educated or well-paid people may also have a higher risk of incidents, since these employees may be more inclined to seek legal help and pursue a claim.
3. Employment Practices and Policies
Finally, an insurance company may consider an employer’s stated employment practices as well as adjustments the employer made after past claims. This is one area where employers can directly influence premiums by demonstrating effective practices and policies.
There are a few ways that employers may be able to lower their EPLI premiums, such as mandating that every employee complete harassment training. Employers should discuss all of their special policies and proactive measures with an insurance agent to determine whether those might favorably affect the policy premium.