Will insurers ever be able to address reputation risks?

Reputation is the fastest growing concern for businesses globally, according to a new survey from CNA Hardy.

The study found that while managing the logistical challenges associated with reputational risk and implementing a timely plan of action were among the top issues facing executives – maintaining brand value was their highest priority.

Carl Day, vice-president, property, marine and energy at CNA Hardy said: “In the past it has all really been about how to protect tangible asset from an insurance point of view. Now businesses are really pushing up the league table of concern how much they’re worried about reputation risk.

“There are lots of things that you can’t quite control that have a direct impact on your bottom line at a reputational crisis. Between not being able to control messaging, social media, and heightened regulatory risk, you’ve almost got a perfect storm to drive that reputational concern.”

Despite the increased importance of reputation to the c-suite, Day argues that insurers have lagged when it comes to creating suitable products and services to help risk managers deal with these threats.

He explains: “Trying to think about how you offer a product for reputation risk is a whole new challenge. The industry has only just started thinking about it how to address it and how to set values to some of this stuff and it’s quite difficult. There are external places to go for points of reference but it’s definitely not mainstream yet. It’s on the fringe of research and development.

“A good insurer should be able to develop a product that can be priced according to their perception of how well a reputational crisis would be handled, but I think we’re a long way off that.”

But Day thinks that that the opportunities around reputation and brand risk could be massive for insurers – especially those who are willing to broaden their offering to be more consultative and help businesses to prevent reputational crises in the first place.

He believes that insurers who get on top of intangible risks such as these are likely to create deeper and more long-running relationships with risk managers.

He says: “Some transactions between insurance and clients are quite short-term, twelve-month contracts, where all the focus is on price not value adding. But [managing reputational risks] gives the insurance community a real opportunity to add further value, get deeper into a business, and also build relationships beyond that 12-month transactional relationship.

“To understand how well someone would handle an event to protect their reputation, you need to really be immersed in the culture of a company. You can’t do that on a twelve-monthly basis, so I think that creates huge potential.

“It’s like the NHS promoting healthy living rather than curing you once you’re ill. Progressive insurers will be working with risk control and other consultants to be more preventative rather than curing an event. This gives them the opportunity to be part of that risk management function almost as an internal resource.”