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What I don’t see in this story, other than insurance companies seizing yet another opportunity to reap a profit, is anything about counseling clients on the very real risk of doing something stupid.
While I am happy that, with the myriad of financially overpaid/ morally bankrupt “stars” floating around, crisis communication/ reputation management professionals are pretty much guaranteed continuing employment, I am troubled by the seeming eagerness of others to cash in on the disruption caused by indiscretion on the part of someone who should be old enough and wise enough to know better.
I think that reputation risk insurance will have a robust underpinning. It will have to because there are so many risks facing companies today besides marital indiscretion, steroids and other assorted transgressions. Companies are going to need insurance to manage the increase in confidential leaks, privacy issues, ethical misbehavior, employee naysaying, etc. My sense is that over time it will become standard just like health insurance (for those of us lucky to have it). Thanks for your comments, however, because I believe that alot of people have become arm chair crisis experts since the recent problems of Tiger Woods.
Sidestepping Mr. Hazlett’s disdain for a profession which has its own reputation issues, let me share that insurers generally avoid assuming risks arising from moral hazards. The term, for those unfamiliar with industry jargon, refers to acts over which one has control, and elects not to exercise it. For example, Mr. Woods could have kept his fly in the full, upright, and locked position. He elected not to do so, and his sponsors and their investors are out an excess $12B of enterprise value. Connecting the two thoughts, the challenge with the insurance offering Dr. Gaines-Ross describes will be pricing; i.e., what do you charge for $12B in coverage when the likelihood of a claim is greater than zero?