A new report from Betterley Risk Consultants, shared with The Intercept, reveals that many of the world’s largest insureres will no longer conside whole industries for “employment practices liability insurance” (EPLI), which covers liability from “sexual harassment, sex discrimination, and other employee claims.”
Ten of the 32 largest insurers will no longer write EPLI policies for financial firms (brokers, investment banks, VCs, etc); eight will no longer sell EPLI coverage to entertainment and media companies. Also blacklisted are law firms, car dealerships, and other industries where “superstars” or “celebrities” or “high-billing rainmakers” have historically been able to get away with bad behavior so long as they continued to perform for the firm.
The blacklists mean that insurers that will extend coverage to the affected industry have a seller’s market, with customers not able to shop around, and that means muchhigher prices and deductibles and lower caps on coverage; but more importantly, it requires that the companies seeking insurance demonstrate extensive institutional changes to minimize the risk of claims.
Companies are being asked to undertake steps like contracting with “confidential outside service for employees to report complaints anonymously” and “circulating anti-harassment policies” and “setting up sexual harassment compliance programs.”
Insurance is one of the great, largely invisible levers for changing corporate behavior. Companies that can’t get insurance face the threat of existential legal crises every day, and if their boards of directors and senior staff can’t get coverage, the threat extends to them, personally, as well.
But that doesn’t mean that markets sort this stuff out automagically. Firms that can’t get insurance, or don’t want to, will seek ways to move the risk off their books — for example, by making employees agree to binding arbitration and to surrender the right to class action; or to reduce or eliminate statutory penalties for bad conduct.
This is one of the reasons corporations are so cavalier about overcollecting and overretaining our data: even though they know they’re going to lose that data someday, but that it won’t cost them in any meaningful way, even if it costs you and me everything we have.
But the corollary is this: a system of statutory damages that can’t be contracted out of through binding arbitration would completely overturn the data practices of the whole surveillance capitalism industry. If insurers believe that the data a company retains could cost them millions in legal judgments, they will charge accordingly for coverage. At that point, collecting and retaining data will become very, very expensive, and choosing not to insure will put the company’s directors on the hook, personally, for everything they have.
“Past is prologue from an underwriter’s standpoint,” said Betterley. “If you have a history of problems, it’s probably a problem for the insurer too.” Along with collecting hard data from an applicant, though, underwriters may factor in whether a company’s reputation is, in Betterley’s words, “a little on the sleazy side.” Insurers don’t necessarily raise their rates after a single sexual harassment case, he said, but companies with a pattern of harassment complaints are at risk of paying more. And companies with egregious histories might find that no one will insure them at all anymore.