Why Today’s Workplace Wearables Could Become Tomorrow’s EPL Claims

Employers monitoring their employees' health is fueling a boom in the amount of health information available to insurance companies and employers.

By: Jared Shelly | March 7, 2019

Employers are using fitness tracking devices like FitBits and Apple Watches to monitor employee health data, which, in turn, is fueling a boom in the amount of health information available to insurance companies and employers.

The Washington Post reported on the phenomenon in fascinating detail: “The volume of highly sensitive health data scooped up from individual employees is exploding, too, raising privacy concerns and adding a new dimension to the relationship of workers and their employers. Often the information is not covered by federal rules that protect health records from disclosure,” the Post reported. “And when it’s combined with data such as credit scores, employees are giving up more insights about themselves than they realize.”

By the Numbers

The use of tracking devices is far more common than you might think. In fact:

20 percent of employers used some kind tracking on their employees’ health last year, compared to 14 percent in 2017. A Springbuk survey put that number at 35 percent.
18 million wearable devices will be used for company wellness programs by 2023.
Up to $1,000 a year: That’s how much enrollees in UnitedHealthcare Motion could receive by hitting certain fitness goals, like 10,000 steps in a day.

Monitoring to Motivate

In the Post‘s article, it followed Wayne Gono, owner of Regal Plastics in Irving, Texas. Gono uses fitness monitoring tools to motivate employees to live healthier lifestyles — namely by taking more steps each day. One named Eddie Watson lost 40 pounds by counting his steps. Another, Chris Zubko, is recovering from a heart attack and gets motivational calls from Gono, who monitors his steps and workouts in real time.

“A digital fitness tracker strapped to Zubko’s wrist sends a tally of his daily movements, via the company’s UnitedHealth Group insurance account, to an app on his boss’s phone,” the Post reported. “While some employees might find this real-time feedback intrusive, Zubko, 51, said he is unfazed. ‘He’s a real motivator,’’ Zubko said.”

The positives are hard to ignore: Employee wellness plans have been around for years. When employees lose weight, stop smoking or exercise more, there’s a better chance that their overall health will be better — and health care costs will decrease. One could argue that fitness monitoring devices are simply tools to help people reach their wellness goals. Counting steps, monitoring heart rates and reducing sedentary time all help create a healthier employee.

There are also implications for workers’ compensation programs. If employees are lifting incorrectly, not sitting ergonomically or doing otherwise dangerous movements, those behaviors can not only be monitored but easily fixed — leading to safer workplaces with fewer claims. (This white paper from AIG lays out nine reasons to embrace wearables to increase worker safety.)

But it’s intrusive and considered ‘creepy’: Should your employer really have information on your sleep cycle? Should they be able to check your heart rate? In turn, would they be more likely to promote a worker with good health scores and punish those who are less healthy?

It’s certainly a possibility said Lee Tien, a senior staff attorney at the Electronic Frontier Foundation, a nonprofit organization that advocates for consumer privacy.

“It’s quite possible there will be effects on whether you are retained, promoted, demoted — who is first to be laid off,” Tien told the Post.

Staying Positive

Like wellness programs, it’s better to stay positive rather than punitive. Reward people for losing weight or quitting smoking — don’t punish them for failing to take a certain number of steps each month. Also, give employees the ability to opt-in.

Further Reading: Our Risk Insider Andy Hosman, vice president of operational risk solutions at Sphera, explained how wearables are transforming workplace safety.

Meanwhile, attorney Richard Reice wrote in Bloomberg that health monitoring is lawful but comes with plenty of potential pitfalls: “This level of personal surveillance gives rise to a host of legal, privacy, data usage, data protection, discrimination and morale issues that should be considered as employers deploy wearables and develop related workplace policies.” &

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.