When it comes to reputational risk, insurers are stepping up
Insurance against reputational risk has assumed something of a Holy Grail status in insurance...
Senior executives at our client companies consistently list reputational risk as one of their leading concerns. But the insurance market has yet to step up.
Not so fast. The market has in reality been doing something about reputational risk for some years now - it just hasn't been labelling it as such. The reality is that reputational risk is a second order effect: it is often a consequence of mismanaging another risk. And insurers can do a great deal to safeguard their clients' reputations by offering well designed incident response services that nip reputational risk in the bud.
The poster child for this approach remains cyber insurance, where it has become customary for insurers to offer breach response services that help clients manage the consequences of data breaches. These include forensic services to identify how much personal data was lost or stolen and, if need be, to plug the leaks; legal advice on who needs to be informed and when; and customer notification and call centre services. Do all of these things - and do them well - and it is far less likely that your client's reputation will take a hit. (It is also less likely that they will be sued, but this can never be guaranteed.)
But there are other lines of business where the reputational benefits of the right advice and services may be even greater. In two situations the stakes are clearly very high and a poor response can have devastating consequences. These are when an organization faces allegations of failing to protect children or vulnerable adults from a sexual predator, and following a deadly weapons attack.
Clearly both these situations are freighted with reputational risk, and businesses or institutions that either do or say the wrong thing can lose the confidence of customers and other stakeholders very rapidly. They key benefit that insurers can bring is in partnering with specialist advisors who have seen numerous such scenarios unfold before and can offer clients timely - and cool-headed - guidance.
At Beazley, we saw one such scenario play out recently in Florida. Two adults were shot in the campus parking lot adjacent to the football stadium of Palm Beach Central High School while a game was in progress. Still subject to investigation, it is suspected that the shootings were gang related. Although those directly involved with the shooting were not understood to be connected with the school, the impact on the school and local community of such an incident can be profound.
The School District of Palm Beach County was a Beazley client and within hours of the attack we had arranged a face to face and telephone based counseling service to be accessed by approximately 10 schools that may have had students impacted.
Diane Howard, director of risk and benefits management at the school district, described the value the district's deadly weapons insurance policy provided in this case. "We of course hoped that we would never have to implement our gun incident response plan. However these shootings showed the importance of being well prepared and being able to rapidly draw on the expertise provided [through our insurer] to support our students and the wider school community when they needed us most."
The search for the Holy Grail of comprehensive reputational risk protection will continue, as it should. But in situations of extreme reputational peril, insurance already offers some valuable assistance.