March 2013: Reputation Insurance

One of your most valuable assets is your business’s reputation. A positive reputation makes it easier to command preferential terms in the purchase of goods/services, attract employment talent, secure affordable financing, dictate a premium price, and enhance your equity value.

Your reputation can quickly come into question over executive scandals, product safety, data breaches, actions of associated third parties, or simply an individual’s negative opinion. Today, more than ever, nearly anything can be posted via the Internet or social media and quickly go viral. The way you handle these situations–or the public’s perception of your response–can have a lasting impact on your reputation and bottom line.

Defining Reputation

  • The beliefs or opinions that are generally held about someone or something
  • Impressions held by stakeholders that creates both future expectation and present behavior
  • Comprehensive set of enduring stakeholder perceptions, opinions, and expectations
  • The way others see the company

Reputation Insurance
Reputation Insurance provides access to public relations experts to consult on the best manner to avoid or mitigate the impact of negative publicity, either anticipated or incurred, and to pay the cost related to doing so.

Covered costs include the following action needed to address the adverse publicity:

  • television, print and online advertising
  • social media campaign
  • monitoring of the perception of your brand

With this insurance, the carrier often provides access to some consultation/review of your crisis communication response plan and access to a public relations firm at a discounted rate to solidify your plan.

Note that most reputation risk insurance policies do not provide any coverage for the loss of revenue resulting from the reputation damage. This increases the need to proactively manage incidences to minimize the financial impact.

Insurance Factors
To consider offering a Reputation Insurance policy and determine the premium to do so, the carrier would reconsider the following relating to your business:

  • Financial summary (revenue, net income/loss, net cash flow, cash, current liabilities, annual advertising budget)
  • If you employ legal counsel, a director of media, public relations or employee relations
  • Policies
    • If you have a crisis communications plan or procedures in place to respond to public disclosure of adverse information or a negative event
    • If you mandate training for all employees on anti-discrimination and anti-sexual harassment policies
    • If key executives are required to have media training
    • If you have written guidelines for employees regarding speaking to the media or use of social media
    • Whether you monitor public perception of your company, products, or brands
  • Operational
    • Whether you have had layoffs in the last 3 year
    • Whether a single customer represents 20% or more of your sale
    • Whether a single supplier’s goods or services are essential to delivering a product or service which represents 20% or more of your sales. If so, whether you have an alternative or contingency plan in the event of supply chain disruption.
    • Whether your business or key executives have been the focus of adverse publicity or involved in any class action litigation, litigation proceedings alleging regulatory violation, or criminal proceedings.

How We Can Help You…
Introduced in 2011, Reputation Insurance is a relatively new product to the insurance industry. There are only a handful of major carriers offering such a product and the pricing is still evolving. It is not a sole remedy for a business to survive a negative reputation experience but it can be the differentiating factor for some businesses.

Contact us to discuss identifying your exposures, gaps in your response plan, and the role insurance can play for you.

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