Reputational crisis insurance for luxury brands

Which reputational risks are affecting the luxury brands industry?

Reputation is a broad area with many different and often competing interpretations.

However, your business chooses to view and value its reputation, it is a major intangible asset and something that has grown to be a significant part of many company’s stakeholder value.

For this reason, damage to reputation should be considered as an important risk for any business.

The forces that affect reputation have multiplied over the past decade with the systemic changes in how people consume information, form opinion and take action.

This is true both in terms of where people choose to obtain their information and the lens of interpretation they view it through.

It has been said, we are living in a ‘post-truth’ era, where fake news and mass psychological conditioning are fast becoming the norm.

Changing demographics, falling public trust, rising state and non-state manipulation of public opinion and the exponential rise in both the quality and quantity of data are all factors driving a new reputational landscape for companies to navigate.

Some of the major reputational risks facing the luxury brands industry that reputational crisis insurance can help manage include:

• Sale of harmful products causing physical injury or property damage
• Harm to people on the premises (physical accident or food poisoning)
• Allegations of unsafe or unhygienic conditions
• Discriminatory attacks or abuse on customers
• Animal abuse, this is particularly relevant for businesses that have animal welfare concerns in their supply chains

How reputational crisis insurance works

Our reputational crisis insurance solution is specifically designed to help companies understand and manage the risk of reputational damage.

Key areas that may result in reputational damage:

Abuse/discrimination

A group of risks that applies to employees, customers and animals.

Actual or threat of injury/harm

Perils covered include physical injury, the outbreak of disease, abduction, assailant threat and products that cause harm.

Damage by association

Damage by association could be due to association with either individuals or organisations guilty of reckless, malicious or inappropriate acts.

Each policy is designed to cover a client-selected number of the nine key perils described under the headings above, but it is possible to discuss other perils for inclusion as insured events on a bespoke basis.

5 key benefits of reputational crisis insurance

1. 01

   Real-time reputational intelligence

   Artificial intelligence (AI) powered analysis of global open-source data from Polecat to minimise risks by uncovering leading risk indicators.

2. 02

   Profit protection

   Indemnity for loss of gross profit, arising from named reputational perils.

3. 03

   Crisis communications

   Cover for public relation costs following a crisis event.

4. 04

   Brand rehabilitation

   Promotional and advertising costs for brand rehabilitation and revenue recovery.

5. 05

   Interim claims payment

   Fast payment of a proportion of the net loss to provide rapid liquidity.

How reputational crisis insurance can help you

Reputational risk is one of the most dynamic and systemic risks facing modern companies.

Greater public and shareholder scrutiny with regards to a board’s fulfilment of fiduciary and regulatory duties on the subject has resulted in greater pressure on companies to prepare for and mitigate against reputational crises.

In response to this growing problem and to the fact that intangible assets comprise an ever-higher proportion of total enterprise value, WTW has developed a truly value-driven suite of new products and solutions, with our reputational crisis insurance solution at the forefront.

The solution combines an innovative risk management tool, incorporating technology to drive proactive risk management with responsive crisis management insurance that covers critical costs, such as business interruption.

Reputational risk management

Many companies are looking for reputational risk management and transfer solutions.

Company executives frequently articulate how hard it can be to identify and manage reputation-harming events, with many saying that they are taking positive action to invest in products and services that can help them to understand the situation and scan the horizon for threats.

WTW have partnered with Polecat, a technology leader in reputation intelligence, to deliver the critical actionable insights that corporate reputation professionals need to be able to make key decisions.

a technology leader in reputation intelligence, to deliver the critical actionable insights as shown in this screenshot that corporate reputation professionals need to make key decisions.

Real-time reputational intelligence

Polecat solutions support many of the world’s largest businesses across multiple sectors. It’s products and services allow you to:

• Put corporate reputation at the heart of strategic decision-making processes
• Reduce over-reliance on budget heavy, expensive consulting services
• Monitor reputation campaigns that directly impact the corporate brand
• Gain foresight around issues happening on the horizon, so you can plan your response now
• Improve the speed and efficiency on delivery of insight around changing trends
• Understand perceptions of your corporate brand across key stakeholder groups, including NGOs, politicians, activist investors, etc.

Frequently asked questions

How can social media damage my company’s reputation?

The exponential growth in mobile devices has driven unforeseen levels of immediacy in stories being shared. Negative public commentary about products and services can go viral at any time, spreading rapidly in ways that can be very difficult for unprepared companies to control.

Rogue states have also been seen to use social media for disreputable objectives, for example in the context of electoral manipulation. Such activities have tended to be targeted at specific companies, especially those that are important constituents of national economies.

Can media democracy escalate reputational damage?

Amid an atmosphere of wider public mistrust of corporations, greater media democracy has the effect of escalating reputational damage. Consumers now have a more accessible route to voice opinions and are more likely to post damaging content online than ever before.

The public is grappling with a shifting trust dynamic; in today’s world, many consumers struggle to identify products, services and companies in which they have a high level of trust.

How are demographic changes influencing reputational risk?

Younger generations, an ever-more important consumer segment, increasingly look to social media to consume news and opinion rather than traditional sources of media, such as established newspapers.

Whilst traditional news sources remain influential, they are losing ground to platforms that are not subject to the same stringent ethics and reporting quality. Negative stories on social media can be highly influential, can go viral, and can be difficult to target via traditional public relations methods.

Does reputational crisis insurance provide cover for any reputational crisis event?

The reputational crisis insurance product offers financial indemnity for certain costs and expenses that arise as a result of the occurrence of a ‘named peril’, which are listed in the policy as ‘insured events’.

Named perils policies operate in a different manner to ‘all-risks’ policies. Under a named perils policy, cover applies when the facts and circumstances of a given event match one of the insured events.

A key benefit of the reputational crisis insurance product is access to real-time data analysis via the Polecat Intelligence portal.

Regardless of whether an ‘insured event’ has been purchased by a policyholder, access to the Polecat platform is available. In fact, the Polecat portal tracks over 8,000 different data aspects relating to reputation – both positive and negative.

How is reputational crisis insurance different to other reputational damage insurance policies?

There are several similarities between reputational crisis insurance and other reputational damage insurance policies.

In all cases, we encourage comparison and wording review to ensure that you understand the terms and conditions that have been offered.

On a high-level basis, the main benefits of the reputational crisis insurance offering are:

1. Meaningful policy limits of liability – available for business interruption, crisis consultancy and brand rehabilitation.
2. Clear terms and conditions – the policy wording is under 15 pages and uses clear language.
3. Crisis consultancy support – available on both a pre and post crisis basis from a leading global consultancy.
4. Brand rehabilitation – the policy pays for promotional and advertising costs, designed to help a policyholder recover market share and sales.
5. Artificial-Intelligence powered data analysis – helping the business executives, and other functions, understand what open-source data says about their brand in real-time.

Disclosure

WTW offers insurance-related services through its appropriately licensed and authorised companies in each country in which WTW operates. For further authorisation and regulatory details about our WTW legal entities, operating in your country, please refer to our WTW website. It is a regulatory requirement for us to consider our local licensing requirements.