Reputation is key for all businesses and it takes time to build. At the time of social media and cyber risks, reputation can be easily compromised in few days and having long term consequences to the business, up to the point of bankruptcy. It is logical for companies to seek for ways to cover themselves against such risks. Learn how some insurance policies such as the reputation protection insurance can include ways to protect your business reputation.
Reputation insurance helps a brand deal with financial losses due to negative press and public image issues. Most reputation insurance is part of a more comprehensive policy, such as a general liability policy. Reputation risk insurance covers potential sales losses when a brand’s image is tarnished.
Source of claim
One of the key principles of insurance underwriting is the ability to measure the loss. Companies may invest a lot of money in developing logos and brand names, but measuring the financial costs of reputation damage remains very complex. This is the reason why insurance companies have a lot of difficulty offering comprehensive coverage for reputation damages.
No direct coverage
There is no “reputation insurance” as a standalone policy at least not in China, Hong Kong and Singapore, and not for SMEs. Reputation is indirectly covered under various types of coverage depending on source of claims:
- Business Owner’s liability insurance or Commercial General Liability: under these policies, there is a basic element of reputation coverage, but it is minimal and limited to events like libel and slander lawsuit, which may occur following accidental use, false or illegal information of marketing materials
- Cyber insurance: in the event of cyber attack, companies may lose key data and compromising the company’s reputation. Cyber insurance can cover such damages by covering the costs of public relation companies and/or indemnifying client’s loss of business following such cyber attacks.
- There are also some element of reputation coverage under professional indemnity insurance. If your client sue you following business issue, you may suffer loss of reputation if this is publicly exposed. In the event you are considered not responsible at end of trial, the insurer will cover, if negotiated in your policy, the costs of public relation company to help communicating the result of trial and rebuild your reputation after such case.
- Under Directors and Officers Liability insurance (D&O), there is also the same element as under professional indemnity insurance: reasonable fee of public relation company will be covered to disseminate the findings of a final adjudication in favour of individual insured following a claim.
There are therefore many indirect policies covering reputation damages depending on source of claim. But no policy will cover an actual loss of income following sales dropped related to reputation crisis, unless the reputation crisis is related to cyber attack or product liability issue (and if business interruption insurance is in place).
Identifying exposure and set up internal procedures: Reputation protection insurance
As insurance companies will not cover the full risk of reputation, it is important for SMEs to identify exposures in your business operation and set up internal procedures to quickly handle potential issues. In event of crisis, it is indeed crucial to be able to deliver the right message to the right audience through the right people.
Business reputation is a valuable asset but there are no easy ways to protect it. But through insurance policies and attentive management, SMEs can mitigate their risks and reduce its impact on their organisation. Contact us at Clema Risk Solutions if you want to put in place basic protections for your business.