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Reputation Insurance

28th December
2009
written by Dr. Leslie Gaines-Ross

  Wanted to make sure that us reputation-watchers do not miss the recent new product announcement before the year closes — reputation insurance! Tiger Woods may not have been the impetus, but I’m sure that he helped cement its future viability. DeWitt Stern, a 110 year old insurance broker, is planning to launch this reputation risk product using the directors’ and officers’ liability insurance (D&O) model which protects directors/officers from shareholder law suits. Heard about this in The Financial Times and The Washington Post.  The reputation-based product “would pay policy holders for the lost sales, ad expenses and endorser fees caused by a public relations crisis — some unforseen event or misbehavior that casts a shadow over the company.”  Needless to say, someone is going to have to define what exactly constitutes a crisis or “shadow over the company.”  DeWitt Stern says the product was in progress before the Woods incident which I believe to be the case.  Makes sense in this world of Internet nakedness and transparency, celebrities will be prime targets for disclosures of all kinds.  Interesting too, DeWitt Stern will be able to provide help with a crisis communications strategy when that celebrity endorser goes wild!  A total package.

crisis, public relations, Reputation crisis, reputation damage, reputation risk

3 Comments

  1. Kirk Hazlett, APR, Fellow PRSA
    29/12/2009

    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.

  2. Dr. Leslie Gaines-Ross
    29/12/2009

    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.

  3. Nir Kossovsky, CEO, Steel City Re
    29/12/2009

    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?

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