Given the Enron debacle, insurers are no doubt increasingly concerned by lawsuits by employees who hold company stock in their 401(k) plans – as in the case of Enron – and they may demand higher premiums for fiduciary liability insurance from companies whose stocks have plummeted.
Fiduciary liability insurance covers the cost of lawsuits related to negligence and mismanagement of employee benefits plans, while fidelity bonds, mandated by ERISA, cover losses caused by employee fraud.
Increases in premiums that did not already take effect at the start of the year will probably come into play at the beginning of July 2002. Segal said plan sponsors would be wise to start shopping around now and locking in rates as early as their renewal agreements allow.
As fiduciaries, plan sponsors should inform their brokers that they’ll be making their buying decisions 40 days prior to renewal, and ask to receive a quotation no later than 45 days prior to renewal, advises insurance brokerage firm Poulton Associates.