In today’s dynamic, fast-changing business environment, organizations can face a multitude of risks related to employment practices. From wrongful termination allegations to discrimination suits, employment-related insurance claims have become both more prevalent and more complex. This surge is driven by evolving workplace norms, regulatory changes and an increased awareness of employee rights and mental health, giving people a voice to speak up about behavior in the workplace. As businesses strive to adapt, understanding the nuances and best practices surrounding employment-related insurance is paramount for leaders looking to protect both their workforce and their bottom line.
Employment-related insurance, commonly referred to as employment practices liability Insurance (EPLI), provides critical coverage against claims arising from employment-related issues. Traditionally, these claims included wrongful dismissal, harassment, discrimination and failure to promote. In recent years, the scope has broadened, encompassing claims for retaliation, invasion of privacy, wage and hour disputes and misclassification of employees.
Employers should recognize that the insurance landscape is not static. As new workplace challenges emerge—such as those presented by remote work, the gig economy and the increasing use of artificial intelligence—so too do new potential sources of claims. Insurers and businesses alike should remain vigilant, updating policies and practices to reflect the realities of modern employment relationships.
Many financial institutions have opted not to purchase EPLI, questioning its economic value due to the generally high premiums. Instead, they prefer to handle matters internally. However, in the U.K., with the Financial Conduct Authority extending its rules on nonfinancial misconduct beyond banks to 37,000 other financial services groups from September 2026, now may be the time to reconsider its value.
There is coverage for ‘insured persons’ for employment-related allegations against such individuals available under a Directors’ and Officers’ (D&O) liability policy. However, more often than not the organisation itself is involved in the formal litigation to target its substantial financial resources. Any costs incurred by, or awards of damages against the organisation, would not be covered by the D&O policy (see our De-mystifying Insurance piece on this topic), particularly in the UK – this may differ in other jurisdictions, such as the US. Additionally, an organisation might consider purchasing EPLI to preserve the D&O limit for any allegations or regulatory matters involving its senior executives.
At WTW, particularly in the financial institution sector, we are generally seeing a rise in employment-related insurance claims, particularly in the UK. According to a published report by the FCA, there has been a two-thirds rise in reports of nonfinancial misconduct across the U.K. financial sector, with 7.2 incidents being reported per 1,000 employees in 2023, up from 4.2 incidents in 2021. Several factors contributing to such a rise include:
Willis, a WTW business's proprietary claims data indicates the percentage of claims per sector:
Asset Managers
15% of loss events are made up of gender discrimination and wage and-hour claims each, with 40% attributing to costs associated with gender discrimination claims.
Banks
23% of loss events are made up of unfair treatment at work, and 14% for each of disability discrimination, racial discrimination, retaliation and sexual harassment claims, with 39% of costs associated with racial discrimination, 32% for sexual harassment and 29% for retaliation.
Insurance Companies
25% of loss events are made up of unfair dismissal claims, and 17% associated with wage and hour, with 12% for racial discrimination. 77% of costs are associated with racial discrimination claims.
*Claims data based on last five years of paid claims for global Willis clients.
Forward-thinking organizations understand that insurance is only one part of a holistic risk management strategy. Regular training on anti-discrimination, harassment, and inclusion and diversity for managers and employees is crucial for fostering an inclusive culture and addressing issues early. Keeping employee handbooks up to date ensures compliance with laws and best practices. Thorough documentation of employment decisions and performance reviews is essential for evidence in claims. Encouraging open communication and early dispute resolution can prevent legal issues. Regular audits of pay and employment practices help identify and correct discrepancies. When adopting new HR technologies, involving legal and compliance teams is important to assess privacy risks and mitigate exposure to claims.
The industry is responding to this dynamic risk environment by offering more tailored products and value-added services. Policies can vary from geography to geography, and it is essential that organizations fully understand the breadth of coverage available to them. Policies now often address specific industries or risks, including coverage for cyber-related employment claims or class actions related to wage and hour laws. Many insurers provide training, legal helplines and access to compliance resources as part of their offering. Advanced analytics, including WTW’s analytics offering and proprietary claims data, helps organizations identify trends, predict emerging risks and proactively manage exposures.
As employment practices continue to evolve, organizations should remain vigilant and proactive. However, some challenges in this space also present opportunities for organizations to demonstrate leadership in responsible employment practices, foster a positive workplace culture and build trust with both employees and stakeholders.
A proactive and informed approach to employment-related insurance claims is essential. Leaders who prioritize transparency, fairness and continuous improvement not only reduce risk but also foster thriving workplaces. As legal and societal expectations evolve, organizations that integrate employment-related insurance into their broader strategy for resilience and responsibility are more likely to navigate the modern workforce's complexities more effectively. By promoting thoughtful leadership, diligent risk management and a culture of respect and inclusion, businesses can turn challenges into opportunities, ensuring both organizational protection and employee wellbeing. Including EPLI in your risk management strategy can provide essential protection in this evolving landscape.
