Insurers understand that business risks can exist both inside and outside a company and can evolve and change based on the industry, global and cultural landscape. As businesses encountered different types of risk moving into the pandemic, the Embroker insurance team wanted to explore which claims will increase or decrease as we move into 2022. Beyond insights and trends, we also explored a correlation between these risks and the types of claims we see coming in from our customers holding different business insurance policies, and how these policies, claims and possibly payouts affect insurers.
After reviewing the claims data of Embroker’s startup customers from 2019 to 2021, we uncovered some interesting trends and shifts that can help insurers predict the types of claims that businesses will most likely continue to see in 2022:
Cybersecurity
In 2021, over 40% of the cyber claims Embroker processed were related to social engineering and email scams. In May of 2021, President Biden issued an executive order to bolster the nation’s cybersecurity, however, government initiatives like this take time to result in any major impact.
In 2022, there will be more government regulation when it comes to insurance policies to slow the growth of cyber attacks.
The insurance policies currently in place for businesses to protect themselves from cyber attacks will also see a change in 2022. As risk increases and ransomware demands go up, the amount of cyber insurance coverage will continue to increase throughout the year.
Harassment and discrimination
In 2019, harassment claims made up roughly 18% of the Employment Practices Liability Insurance claims that were analyzed. Of those harassment claims, 72% were for wrongful termination. Most claims focus on retaliation because the burden of proof for harassment and discrimination is much higher than that for retaliation. Retaliation can include termination for complaints, denied assignments, denied raises, etc. as well as being put on a performance improvement plan.
In 2020, our data shows that there was a material decline in standalone harassment or discrimination claims, and the data shows primarily wrongful termination claims. With COVID-19 and the initial spike in unemployment rates, it was not surprising that wrongful termination claims would soar, and with the move from in office to remote working, it is not surprising to see the decline in harassment and discrimination claims. In 2021, with more people employed and the gradual transition back from working remotely to in-person, there was a slight shift back into harassment and discrimination claims. 29% of claims in 2021 were related to harassment or discrimination.
This year, we can assume there will be more claims as some companies move toward returning to in-person work.
Overview:

Defense costs
From 2019 to 2020, there was a 115% increase in known legal or arbitration defense costs for employment practice liability insurance claims. Defense firms are increasing rates, and the plaintiffs’ bar has become extremely aggressive in pursuing claims, so it costs more money to defend against them. We also saw a 165% increase in known defense costs from 2019 to 2020 for settling Directors and Officers claims. The costs for defending D&O claims are skyrocketing for different reasons than settling claims. With an increase in corporate divorce and breaches of fiduciary duty, these types of claims are harder to defend. These claims can include fights about stock options, executives leaving and not fulfilling contracts.
In 2022, the number of known defense costs for settling employment practice liability insurance claims and Directors and Officers claims will continue to increase. As people begin returning to in-person work environments, there will be more EPLI claims resulting in higher defense costs for settling the claims. With the burden of proof for harassment and discrimination being much higher than that for retaliation, we can expect to see an increase in retaliation EPLI and D&O claims.
In summary, claims across cyber, EPLI and D&O are expected to increase in 2022. Businesses can try to implement tactics and internal strategies to mitigate these risks but the best way to transfer risk is to increase insurance coverages and limitations. Insurers should be prepared for a new era of risk mitigation for business owners in 2022.

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