Are business leaders under-playing employer risk?

Employer risk is ranked moderately low by business leaders on both sides of the Atlantic and companies feel broadly resilient to it.

But in many ways the challenges could be just beginning. In a world where there are no longer any reliable ‘right’ answers, we may expect to see an increase in COVID-19 claims, including challenges over vaccine mandates in the workplace, wrongful termination, discrimination claims and even harassment.

Business leaders in the financial institutions and professional services sector expected to feel most exposed to employer risk overall in 2022, with 16% ranking it top. By contrast, real estate and construction business leaders were least concerned, with only 7% expecting to rank employer risk their top concern in this category in 2022.

Is resilience mis-placed?

COVID-19 has shone a spotlight on many of the long-term struggles faced by gig workers. While gig employment models offer flexibility, workers have limited access to unemployment benefits, health insurance or sick leave. Many workers have said they are not satisfied with the support they received from their companies during the pandemic, according to the World Economic Forum.8

Established businesses are also struggling to establish the best way forward particularly on working from home or hybrid working. In the banking sector different approaches are being adopted which typify a dilemma that faces every business9, with some high-profile investment banks advocating or insisting on a full return to the office and others opting for a more flexible approach. Some companies in more modern tech-led industry sectors are at the other end of the extreme stating that employees can continue to work from home “indefinitely”.10

Challenges such as these, compounded by the impact of movements including #metoo and #socialjustice are set to impact employer liability claims and lead us to question whether business leaders’ strong sense of resilience to employer risk is well placed.

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Claims rose in frequency and severity through 2014-2018, with a consequent market hardening in 2019. Court closures due to COVID-19 slowed claims development and has had a direct impact on claims frequency, but as they begin to reopen, we are starting to see an increase in severity with recent settlement amounts far exceeding historic levels. As we enter a new claims cycle facing a fragmented US plaintiff bar and rising defense attorney costs, we hope claims frequency will remain stable, but the ongoing COVID-19 situation will make both frequency and severity harder to predict. We believe COVID-19 could create a myriad of issues around employment, plus third party exposures in relation to clients and business partners. Cases will start with employment practices liability and discrimination issues. But if the trend becomes wider spread, this could easily morph into management liability or boardroom issues if we see COVID-19 related class actions.

Wayne Imrie Wayne ImrieFocus Group Leader - London Market D&O

Are criminal risks yet to surface?

Only 6% of business leaders in the US and UK expected to rank crime as their top concern for 2022, though retailers, wholesalers and food and beverage businesses are a notable exception, with 15% overall rating this their likely top risk for 2022. At 41%, however, the proportion of businesses expecting to feel ‘very prepared’ to anticipate and respond to the risk is at the top of our range, with notably higher levels of confidence reported by US business leaders.

Only time will tell whether the recession returns and its historic association with crime is renewed.11