How to customize D&O and EPL coverage with a Coalition Risk Assessment
![Coalition Active-DO-EPL](/https/www.coalitioninc.com/_next/image?url=https%3A%2F%2Frp.liu233w.com%3A443%2Fhttps%2Fimages.ctfassets.net%2Fo2pgk9gufvga%2F5yKLSO4laQnkuuN941shGb%2F900aa31ba6a5bd047d040fdccd6d4053%2FCoalition_Active-DO-EPL__1_.jpg&w=3840&q=75)
In the tale of “saddest grocery store of all time,” the founder falls prey to #MeToo allegations and is accused of harassment. BrNext, the media brings negative attention to the store and uncovers a false advertising claim by unearthing a few products improperly labeled as organic. Then the store’s new mobile app, built on the cheap, is hacked, creating a cyber emergency. Forced to sell, the grocery store is undervalued, leading to a D&O lawsuit from shareholders.
While this is an extreme example of everything gone wrong, the point is changes occur during a policy period. Traditional insurance models are designed to react to risk and are simply not equipped to keep up with the fast-moving pace of business in today’s digital economy. In these scenarios, brokers often lack the tools to gain necessary insights into their clients’ dynamic risk exposure.
In a recent survey of 1,000 small business executives, 55% were involved in an M&A lawsuit over the past two years. With Coalition’s Executive Risk Assessment (ERA) and backed by Coalition’s Active Insurance, events or changes in a policyholder’s status are diligently monitored, thereby providing brokers and policyholders with the most up-to-date information.
When it came to Directors & Officers (D&O), 36% of those surveyed reported a claim with an average loss of $120,590; 26% had an employment practices liability (EPL) claim, with an average loss of $68,867. By monitoring key company changes, Active Insurance provides the data that brokers need to offer the appropriate Executive Risks coverage.
Introducing Coalition’s Executive Risk Assessment
Coalition’s Executive Risk Assessment (ERA) is a powerful resource that identifies five specific risk exposures that may impact an organization. Completed at the beginning of engagement with Coalition, the ERA provides key data, visibility and insight into the underwriting process as well as risk management solutions to mitigate a company’s risk exposure. It also enables the broker to best advise their clients to set up the most appropriate, customized insurance program.
While Coalition will continue to add more to the ERA, the following is a breakdown of the five current risk exposures shared in the Coalition ERA.
1. Financial Risk
This is an important topic for D&O coverage as companies performing poorly financially will face liability with their shareholders. The ERA accesses data sources to paint an accurate financial picture of the company even before we see the company’s financial statements. By seeing a company’s average risk, we can then use that information to ask fewer questions during the application process, such as waiving the need for financials for EPL.
2. Employee Sentiment
If employees don’t think highly of their company, there’s a greater risk of claims. Consequently, employee sentiment is a significant risk factor for EPL claims as social media mentions, and online reviews contribute to the assessment. To help employers improve in this area, we provide pertinent risk management services such as top five considerations for your COVID-19 vaccination policy or best practices on diversity and inclusion.
3. Paycheck Protection Program (PPP) Loans
COVID-19 related PPP loans are eligible for forgiveness if used for employee salaries, and companies must use the required percentage of these loans for wages. Otherwise, companies can be asked to repay their loan or face regulatory fines. Coalition also provides a pre-claim hotline for questions on topics such as PPP loans. Unlike most companies, Coalition’s hotline can be used both for these types of D&O questions and any employment issue questions.
4. Regulatory Issues
In addition to highlighting any issues discovered, such as attorney general investigations or false advertising claims, we also provide various risk management tools to help the insured mitigate some of these issues. For example, suppose we see the presence of overtime and other wage and hour violations. In that case, we can provide the insured with state-specific information about overtime laws or even provide Equal Pay Act notices for employees in different languages.
5. Investors
Boards of directors, acquisitions and funding sources are consistently evolving. When a majority of the company is purchased during the policy period , for example, this is considered a change in control and often new coverage will need to be put in place given this new ownership structure. Similarly, with new funding, it’s often recommended that the insured purchase higher limits. In fact, in our experience, newer, more sophisticated investors want to see $5 million in limits. This type of market intelligence will help brokers best advise their clients.
Coalition risk assessment benefits
ERA benefits both the brokers and the insured. An ERA is a resource for companies to identify their specific risk exposures in a tangible way. The tool provides visibility and insight into data and underwriting criteria used when evaluating an organization’s risk. It also shines a light on recommendations and guidance on how to improve risk exposure and reduce the possibility of claims.
This level of intelligence better enables Coalition and brokers to right size price and coverage limits, and provide visibility and clarity into quickly changing risk. The ERA streamlines the application and quoting process by providing brokers with as much information as possible about their clients’ risk profiles. And for the insured, the ERA is also a tool to support their risk management discussions.
Contact us to learn more about Coalition’s Executive Risk Assessment program.