September 2013

Reputation Insurance

Is Reputation Insurance the Right Policy?

 

A number of leading insurers are offering Reputation Insurance in response to growing awareness of how damage to reputation can cause companies lasting harm and financial loss.

However, it is incorrect to think that insurance can ever adequately protect an organisation’s reputation.

Many of these policies simply transfer the risk of paying for ‘reputation’ services, such as business consultancy, PR or digital communications to prepare for a crisis or respond to its immediate impact.

Such a policy does not protect reputation it simply pays for the hefty consultancy bills that may be incurred – crisis PR is not reputation insurance.

In terms of the financial losses caused by damage to reputation, only 2 of the 7 major insurers offering such reputation insurance policies extend their cover to include lost revenue or profits.

Even in these cases will the policies really match to the true extent of the potential financial losses incurred?  A recent study sponsored by Aon found that companies had an 80% chance of losing 20% of their value once every five years due to reputational issues.

Therefore, instead of relying on insurance, a better policy would be to proactively prevent a crisis by managing reputation as a crucial business asset.

This can be achieved by: