Employer Insurance Compared – Are You Really Covered?
By Ukoo, advised by Wymark Insurance Brokers
The decision of which service provider is right for your business is an age old dilemma. It’s a decision that’s fraught with risk, and can result in hefty costs or public embarrassment. We see it all the time, our clients are simply trying to compare apples with apples when it comes to IR, HR and people strategy support. The truth is, it very rarely is an apples vs apples comparison.
Similar to other critical areas of compliance in a business environment, practices related to people leadership and management can be exceptionally risky, and getting it wrong can close the doors for good! So, matching the right solution to your business is a decision you must get right, in any area of your business.
It never hurts to have a solid back-up plan, though, and insurance is the best place to start. The right insurance will not only save your business during rough times, but it can also propel you forward where unfortunate events occur.
Insurance products that sound great aren’t always the best for your business. Popular insurance options, and insurance products that don’t really have any competition for comparison may present more risks than they “appear” to fix.
In the area of HR and employment practices, we’re often hearing about insurance products clients are considering. One of these products is provided by employment compliance advisors, Employsure.
Who are Employsure?
Interestingly, Employsure is typically sold to business owners as a competitor to most HR or IR consultancies – upon closer inspection, this may not be the case.
The feature difference between Employsure and other consultancies is that Employsure’s services seem to start and finish with compliance (ie. documents, contracts and policies). On the contrary, HR and IR consultancies tend to begin their work with compliance, moving on to implement strategic HR management services in partnership with the business. Think restructures, organisation design, performance management, high-performance culture development, for example, and you’ll be firmly in the strategic HR environment.
It’s easy to judge, then, that Employsure seem to be in the insurance business. They charge fees based on payroll figures – just like other employment insurance providers, and they advise on Fair Work Compliance, which is their insurance products baseline or framework for determining coverage.
So, we thought we’d take an even closer look at the comparisons between more common insurance products that cover employers, against a seemingly unique insurance product provided by the compliance-business, Employsure.
Ukoo is all about HR, IR, and strategy – we’re certainly not insurance experts. So, we asked our insurance advisory partner and insurance guru, Nathan Trembath, to review the Employsure product in comparison with other employment related insurances available to our typical clients, employers.
Let’s hear from Nathan Trembath, at Wymark Insurance Brokers:
After being approached by Ukoo to provide a professional insurance review of the Employsure “Fair work cover, employment advice and indemnity policy”. I must admit, I was very surprised at what I read.
Employsure’s insurance product in question can be reviewed online – click here for a direct link.
From a general insurance perspective, the type of cover offered by the Employsure Fair Work policy may be identified by other insurers as Employment Practices Liability (EPL). EPL provides protection to the policy holder for claims made by employees such as, discrimination, unfair dismissal, harassment whether bullying or sexual. Generally, EPL policies will also extend to circumstances such as failure to promote and discrimination claims brought by third parties.
In this blog, I will examine the Employsure Fair Work policy condition relating to the limit of indemnity. I’ll also provide case studies of actual claims as examples showing the implications those claims had for business owners. There’ll be plenty of information for potential insurance consumers to consider whether this type of insurance might be suitable to them.
Limit of indemnity – Page 6
The total aggregate limit of indemnity in respect of all loss (including defence costs) under this insuring clause will not exceed $200,000 (including defence costs) in any one claim and $2,000,000 (including defence costs) in the aggregate.
Whilst the total aggregate limit (annual limit) for the policy is set at $2,000,000 the indemnity is limited significantly to $200,000 per claim. In the following scenarios if the insured parties did not hold an EPL limit greater than $200,000, there is a very real possibility they would have lost their business.
- Industry: Retailer
- Employees: 7 staff
- Turnover: $500,000 in annual revenue.
Background: An employee of the Insured lodged a complaint with the Human Rights Commission alleging that she had been sexually harassed by the Manager and sought compensation of $1,100,000.
Outcome: The Insured was able to claim under the EPL section of their insurance Policy in respect to harassment and discrimination charges, settlement and legal defence costs in defending the claim.
Total Cost: $580,000
Note: It is an important consideration that if the retailer did not hold an EPL policy and an experienced legal team as provided by their Insurer, the final payment would likely have exceeded $580,000. Furthermore, if the company was unable to meet the awarded amount, it would be the Directors personal assets in jeopardy.
Background: A claim was made by four (4) former drilling contractors against certain directors, managers and supervisors for bullying, harassment, abuse and sexual harassment. Claims were made against the entity alleging that it failed to respond to those allegations. Employees claim combined compensation of $500,000.
Outcome: It was deemed that insuring clause for EPL was triggered. After protracted litigation, the matter settled for payment by the company of $80,000 per claimant. In addition to this, the company incurred over $150,000 in defence costs.
Total Cost: $470,000
Note: In this scenario we would again see the $200,000 limit as provided by the Employsure Fair Work policy to be entirely exhausted leaving the company to foot the bill – an additional $270,000.
What’s Nathan’s advice?
Companies have readily available the option to purchase a combined insurance solution called Management Liability which is tailored for SME’s. In addition to Employment Practices Liability the cover also includes cover for Directors & Officers Liability, Statutory Liability, Crime (Theft by Employees) OH&S Breaches & Tax Audit to name a few and, in our experience, provides more value for money than a stand-alone EPL policy.
Business owners need tailored and professional advice to combat these risks in our ever increasing litigious society and should review their current insurances to ensure they provide the protection the business needs to meet claims of such nature.
Ukoo thanks Nathan for his advice and expertise.
To wrap up our thoughts:
The truth is, sometimes things go wrong – that’s inevitable. Even when you’re actively trying to do the right thing in your employment practices, the complexities of law can often leave you exposed to significant risk. Advice is key to preventing these matters from derailing your business, no matter what area of your business requires that strategic input.
Insurance is just as important. Risk to employers is real and it’s not ever going to disappear. As advisors to business owners, we urge all those we work with to carefully consider insurance options, and truly ensure you understand the best product or service for your business.
IS IT TIME TO RETHINK YOUR CLAN?
Our services are designed to unite your team with the right leadership, support and development, growing your business, brand and reputation.