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Property Casualty

Don’t Get Caught off Guard by a ‘Caught on Camera’ Reputational Risk

Cameron Burt
Cameron Burt
Senior Vice President, Property Casualty

Warren Buffet is often quoted for saying, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you will do things differently.”

Think about that for a minute. It’s true. Have you ever seen a YouTube video of a restaurant employee performing a lewd act while on duty? It doesn’t make you want to eat there anytime soon, does it? Those videos are out there, and that scenario is more common than we’d all like to think.

The exponential growth of smartphone users and social media platforms has created a world where millions of people can now display any photo or video they capture anytime and anywhere in near real-time speed. Posting a viral video or getting an idea to “trend” on the Internet could be argued as the new “15 minutes of fame.” For many athletes, celebrities, politicians, and businesses, this instant news phenomenon has now created the opportunity to both win and lose from what is published. Remember, people always look for heroes and villains in everything they see including stories in the newspaper, on the TV, and even online.

If you’re a business owner, have you considered the value of your reputation? How would your business’s reputation be impacted if a video of one of your employees went viral for bad reasons? What if one of your products is recalled due to health and safety issues? How would your revenues be impacted? What expense would you pay to help restore the damage? Would it take 20 years to rebuild your reputation?

Protecting your reputation can be approached with both process and products. At Holmes Murphy, while we suggest you first open the conversation by talking about the topic with your trusted business advisors and work through a process to identify, analyze, and prioritize potential scenarios your business may face, I’m actually going to fast forward to the end of the process. This part is important as it’s where you consider how to fund for a potential loss due to reputational damage. Your options are simple — rely on your balance sheet and “self-insure”…or transfer the risk to a third party (an insurance carrier) by paying a premium in exchange for a specified policy value and legal defense.

Standard property casualty insurance policies can provide protection for loss of income and increased expenses associated with a “covered loss,” but traditionally do not insure your reputation. That’s where insurance specific to reputational issues comes into play. Reputation insurance products have been available for years, but the cost versus benefit has only recently started to make financial sense for business owners.

Pop quiz: If you’re a business owner looking to obtain a policy with a $2 million benefit against a loss in reputation of the business or a related supplier, how much do you think it would cost? I recently had a client do just this for less than $500 per $1 million of the client’s annual revenue.

Is it worth it? Well, to decide you simply have to ask this: “How much is my company’s reputation worth?”

You may not be able to stop an employee from doing something dangerous, disgusting, or damaging at work while on video, and you certainly can’t dictate the processes of outside companies you may work with to build or make your products. What you can do is guard your reputation. So maybe a reputation insurance product is the answer. It’s something to think about while you’re watching YouTube videos.

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