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Way back in the pre-now days, it could take years for consumer complaints to catch up with a company. But today, thanks to the now-ness of social media, corporations can lose millions overnight if they're called out on Facebook or Twitter for an egregious policy or practice. Just ask Bank of America.
What's a poor corporation to do? Two words: reputation insurance.
Insurance Journal recently published a chat with Seamus Gillien of the Reputation Institute, a London-based firm that studies reputation management, including crisis management responses to a major Facebook fracas or Twitter-tastrophy. The financial fallout from the Toyota recalls, BP oil spill and that Bank of America belly-flop on debit card fees has made reputation risk the boardroom topic du jour.
"The financial impact on companies which go through a crisis can be significant," says Gillien. "Suddenly, people all over the world and within financial media have been putting a term on that."
A new Lloyd's survey asked corporate chiefs and board members to rank their top business insurance risks. This year, reputational risk ranked third, having finished ninth just two years ago.
Recently, major insurers Aon, Willis and Chartis launched new reputational risk coverage plans that aim to help companies manage their reputation risk exposure and recover financially should tweet come to shove.
Chartis' new ReputationGuard product pays the freight to bring in crisis communications specialists Burson-Marsteller and Porter Novelli to help minimize the damage from a corporate faux pas.
"It is more and more common for the press to glom onto things that put a company's reputation at risk," says Chartis chief underwriter Robert Yellen. "The old adage says, 'It takes 20 years to build a reputation and five minutes to ruin it.'"
Willis takes a more segmented approach with its Hotel Reputation Protection 2.0 policy, which covers losses from adverse publicity through any medium as well as the cost to bring in a PR team to stem the bleeding.
Gillien says the swift migration by businesses toward reputation insurance goes beyond mere damage control. "Unequivocally, in my view the biggest value piece (of reputational risk insurance) is to help the client understand and help prevent a crisis from happening in the first place," he says.
To paraphrase Ernest Hemingway, it would be pretty to think so.
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