Increased risk factors are leading to higher rates and stricter underwriting in the employment practices liability insurance (EPLI) sector. Here’s a breakdown of what’s happening with EPLI now.
EPLI Rates Soar
Insurance rates have been increasing in general, but EPLI rate hikes have been above average.
In the third quarter of 2021, the MarketScout Market Barometer shows that EPLI rates increased by 9%, noticeably higher than the composite rate for all commercial lines, which was up 6.8%. Both commercial auto and commercial property lines also saw average rate increases of 9%, and the only lines that saw higher rate hikes were umbrella/excess (up 11.7%) and D&O liability (up 11.3%).
The rate hikes aren’t the only changes we’re seeing in EPLI, either. Risk & Insurance says that insurers are scaling back their EPLI offerings, and many insurers are introducing exclusions for various pandemic-related claims.
A Combination of Factors Are Impacting EPLI
What’s happening with EPLI right now can be attributed to a combination of factors.
AI-driven hiring and management tools are an increasingly important source of upheaval in the market. As employers lean on AI to screen resumes, evaluate performance, and inform promotion decisions, these tools have become a target for bias claims — with algorithmic discrimination emerging as one of the fastest-growing EPLI exposures. Expanding state pay transparency laws (now enacted in 16 states and D.C.) and disputes tied to remote/hybrid work arrangements are compounding the pressure. Disability discrimination charges alone rose more than 47% between 2021 and 2024.
Sexual harassment cases remain another major factor. Harassment charge volume and payouts have climbed sharply in recent years: total harassment charges rose from 21,270 in FY2021 to 24,430 in FY2022 to 31,354 in FY2023 — a 47% increase in three years — while monetary recovery for harassment claims grew from $142.2 million in FY2021 to $144.1 million in FY2022 to $202.2 million in FY2023. Sexual harassment charges specifically rose from 5,581 to 6,201 to 7,732 over that same period. EEOC-wide, FY2024 brought in nearly $700 million in total recoveries for victims of discrimination — the highest in the agency’s recent history.
Racial discrimination has resulted in numerous claims against employers. Some of these claims have had massive awards and settlement. In one example, TechCrunch says that Tesla has been ordered to pay $137 million to a former worker who says his supervisors neglected to stop racial abuse.
Biometrics technology is also leading to new employee privacy concerns and the potential for litigation. Business Insurance says that a court has ruled that an EPLI policy must provide coverage for a case involving biometrics litigation. The case occurred in Illinois, where the Biometric Information Privacy Act requires consent before employers can collect biometric information and allows plaintiffs to sue for violations.
Take Control of Your Risks
Given what’s happening with EPLI right now, employers need to be proactive about managing their employment practices risks. Doing so will help prevent claims, and it will also make the risk more attractive to underwriters when it’s time for renewal.
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