Navigating Employment Practices Liability (EPL) Insurance 2025 Outlook 

Following years of challenging market conditions and strict underwriting scrutiny, most businesses with good claims history experienced only modest premium increases for employment practices liability (EPL) insurance in 2024. A recent poll of U.S. brokers found most EPL buyers saw premium increases of 5% or less, signaling a less challenging pricing environment. Overall, market stability in 2024 was driven by increased competition and overall growth. Experts predict the EPL insurance market will reach $4.94 billion by 2031. While the outlook for 2025 remains stable, emerging risks could introduce new volatility.

AI in Hiring Practices

The use of AI in hiring has been growing, with nearly 25% of organizations incorporating AI or automation in HR workflows, according to the Society for Human Resource Management (SHRM). While many employers see AI as a way to reduce biases in hiring, the EEOC has raised concerns. In its Strategic Enforcement Plan (SEP) for 2024 to 2028, the EEOC prioritized addressing potential discrimination from AI in HR processes. Employers leveraging AI must proceed cautiously to avoid introducing bias and triggering claims.

Stricter Regulatory Oversight

New EEOC guidelines on workplace harassment, pay transparency and enforcement of the Pregnant Workers Fairness Act (PWFA) are poised to increase litigation risks. Compliance will be critical as insurers may tighten underwriting guidelines, raise premiums or limit coverage for high-risk industries.

Increased Claims & Litigation

The combination of stricter regulations and greater scrutiny is expected to lead to an increase in EPL claims related to discrimination, harassment and noncompliance with pay transparency laws. Enhanced compliance efforts and updated workplace policies are essential to mitigating these risks.

Trends Shaping the Employment Practices Liability Market

AI Risks in Employment Decision-Making

Many businesses have adopted AI systems that utilize algorithms and data to make automated decisions, eliminating the need for human intervention. However, they may also introduce potential EPL exposures. For example, AI may inadvertently perpetuate discrimination if the underlying data or algorithms are biased. If AI is frequently used, biased decisions can occur on a mass scale, increasing the risk of discrimination-based litigation and EPL claims.

Several major companies, such as Google and Amazon, have recently faced backlash over AI systems demonstrating bias. The EEOC’s first AI-based discrimination settlement in 2023 resulted in a $365,000 payout to more than 200 job applicants who alleged the company’s AI-powered hiring system automatically rejected candidates above a certain age.

Given these risks, businesses must proactively assess their AI technology for biases to mitigate litigation risks and EPL losses. New York City recently passed the first legislation requiring annual bias audits of automated employment decision-making tools. Colorado followed suit, with additional states (California, Georgia, Hawaii, Illinois, Washington) considering similar regulations. These laws aim to mitigate algorithmic discrimination, which occurs when an AI system unfairly impacts individuals based on protected characteristics (e.g., age, race, disability, religion, sex).

At the federal level, the White House issued an executive order addressing AI-related discrimination, and the EEOC issued guidance on preventing discrimination in hiring practices. In September 2024, the U.S. DOL introduced an AI & Inclusive Hiring Framework (the Framework). The Framework provides 10 focus areas to help employers minimize algorithmic discrimination risks.

Considering these legal developments, in 2025, employers should continue to monitor state and federal restrictions on AI’s use in the employment context. Employers who use AI to make or assist in making employment decisions should ensure appropriate safeguards are in place to prevent discrimination.

Workplace Harassment

On April 29, 2024, the EEOC released updated guidance on workplace harassment, which went into effect immediately. The guidance marks the first significant revision in 25 years and provides clearer definitions and rules regarding workplace harassment under federal equal employment opportunity (EEO) laws. These laws prohibit discrimination and harassment of individuals based on protected characteristics, including race, color, religion, national origin, sex, disability, age and genetic information.

Key updates in the new EEOC guidance include:

• Expanded Definition of Sexual Harassment: The definition now includes harassment based on sexual orientation, gender identity and transgender status. Examples include denying access to a bathroom consistent with an employee’s gender identity, intentional and repeated misgendering, and outing someone’s sexual orientation or gender identity without permission.
• Protections for Pregnancy-related Conditions: The guidance extends protections to pregnancy, childbirth and related medical conditions, including lactation, contraceptive use and abortion decisions.
• Remote Work & Online Harassment: The guidance clarifies that harassment can occur in virtual environments, such as video conferences, group chats and emails, and provides examples such as sexist comments in a video meeting or displaying inappropriate content in an employee’s video background.
• Religious Expression Protections: While employers are required to accommodate employees’ sincerely held religious beliefs, the guidance emphasizes that such accommodations should not create a hostile work environment, particularly when they conflict with other expanded protections, such as those for pregnancy or LGBTQI+ employees.

These changes highlight the EEOC’s commitment to addressing evolving workplace dynamics, especially as remote work and technological advancements continue to shape the work environment. Employers must be proactive in updating policies and ensuring compliance with evolving standards to reduce the risk of harassment claims.

Expansion of Pay Transparency Rules

Pay transparency laws aim to reduce wage disparities and foster equitable compensation practices by requiring employers to disclose salary information. These laws typically mandate disclosing salary ranges in job postings, responding to requests for wage data from employees and applicants, and proactively sharing pay details.

Key Legislative Developments

Colorado started the movement in 2021, introducing the first comprehensive pay transparency law. Following its lead, states like Connecticut, Nevada, Rhode Island, Washington, California and New York implemented similar legislation. By 2024, new pay transparency legislation took effect in Hawaii and the District of Columbia, along with expanded requirements in Maryland. Starting Jan. 1, 2025, Illinois, Minnesota and Vermont enforced new pay transparency laws.

Employers in these states must prepare to comply with the incoming requirements to avoid penalties and align with local workforce expectations.

Federal Action & Broader Implications

The EEOC incorporated pay equity initiatives into its Strategic Enforcement Plan (SEP) for 2024-2028. This inclusion signals a heightened federal focus on wage discrimination and equity issues. Employers should anticipate increased oversight, even in states without dedicated pay transparency laws, and stay updated on new and evolving regulations, adjusting hiring and compensation practices accordingly. Creating clear and compliant salary structures not only avoids legal repercussions but also fosters trust and fairness among employees.

Pregnant Workers Fairness Act (PWFA) Enforcement

Effective June 2024, the PWFA introduced significant obligations for employers with 15 or more employees. It requires businesses to provide reasonable accommodations for known limitations related to pregnancy, childbirth or related medical conditions unless it would impose an undue hardship. The EEOC has identified protecting pregnant workers as a top enforcement priority, and early signs of enforcement are clear. The EEOC filed its first lawsuit under the PWFA in September 2024 against a major equipment producer for failing to accommodate known pregnancy-related limitations and conducting an unlawful medical inquiry. Since the law took effect, nearly 2,000 charges of potential PWFA violations have been filed (as of November 2024).

Retaliation Claims

Workplace retaliation becomes discriminatory when an employer punishes an employee for participating in legally protected activities (e.g., filing a claim, participating in the investigation). These claims can severely harm a company’s reputation and bottom line, lower employee morale, reduce retention rates and hinder productivity. Retaliation claims are the most common discrimination charge filed, with the EEOC accounting for 46,047 or 56.8% of all discrimination charges. The EEOC filed over 40 retaliation lawsuits under various statutes in 2024, emphasizing its commitment to enforcement.

Want to dive deeper into the P&C market trends shaping your business in 2025? Download our comprehensive P&C Market Outlook today to stay ahead of emerging risks and evolving coverage options.

Risk Management Strategies

• Evaluate Policies: Review your employee handbook and related policies to ensure they’re up to date and include language on discrimination, harassment and retaliation.
• Implement Sexual Harassment Prevention Measures: Adopt a zero-tolerance policy for sexual harassment, develop awareness programs and establish clear reporting methods and response protocols.
• Provide Training: Offer routine training to foster diversity, acceptance and inclusion. Educate employees on emerging forms of discrimination (e.g., pregnancy, size) and provide clear prevention and response measures.
• Prioritize Accurate Documentation: Take discrimination reports seriously and maintain thorough records of all evaluations, employee complaints and termination decisions.
• Seek Legal Guidance: Consult your legal counsel for state-specific employee wage and hour guidance. Proactively address workplace issues that could influence wage and hour complaints.
• Audit AI Systems: Evaluate the algorithms for any AI systems utilized in employment procedures to prevent discriminatory decisions and ensure compliance with EEOC guidelines.
• Investigate Harassment Claims Promptly: Respond to harassment claims quickly and align your procedures with updated EEOC harassment guidelines to minimize risks and demonstrate compliance.
• Prevent Retaliation Claims: Develop clear, consistent processes for handling employee feedback, complaints and terminations. Regularly train managers on complaint management and ensure documentation of performance reviews and grievances is objective and nonpunitive.
• Accommodate Pregnancy-related Needs: Update your organizational policies to explicitly address accommodations for pregnancy, childbirth and related medical conditions in line with PWFA requirements. Train HR and managers to handle requests effectively and inform employees of these accommodations.
• Comply With Pay Transparency Laws: Stay ahead of pay transparency requirements by understanding applicable laws, ensuring job postings include accurate compensation information and establishing methods to disclose salary data when required.

We’re Here to Help to Protect Against Employment Exposures

Experts predict a -5% to 5% increase in EPL insurance premiums in 2025. Do not worry; you are not in this alone. We are here to help you understand the current EPL market and strategize with risk management opportunities to protect your organization from these risks. If you have more questions about your EPL coverage or the status of the market, connect with a member of our team.