Crisis management insurance critical to reputation protection
In my more than 30 years career it has never ceased amazing me how many companies let a bad situation get worse by failing to engage a crisis management expert at the outset of an issue that poses a reputational risk to their business. One of the reasons for that is that they have not purchased insurance coverage that covers the costs of crisis management. Another is that while they may be covered, the executives managing the crisis are unaware they are covered or are reluctant to activate the insurance. So, what is crisis management insurance and how does it work?
What is crisis management insurance?
Crisis management insurance is meant to mitigate the damaging impact of an event or issue on a company’s reputation. In short, if your business is reliant on its reputation or good name in the marketplace, you need to ensure your insurance helps you protect that reputation in an adverse situation. Crisis management insurance can be included as part of a business’ liability insurance policy.
What does crisis management insurance cover?
Some crisis management insurance may only cover specific events, such as kidnapping and ransom, travel risks, workplace accidents, workplace violence, consumer injuries, product contamination and failure, product recalls, industrial sabotage, fraud and other white collar crimes, cybersecurity, terrorism, political or sovereign risk, supply chain risk, and negative media coverage.
Apart from covering the operational costs of a crisis, crisis insurance can also cover the legal costs that may be incurred, as well as the PR costs associated with trying to mitigate the reputational damage. Some policies also cover post-crisis issues, such as legal representation, medical costs and counselling for staff and members of the public who may have been involved in a serious accident or incident.
Getting a crisis communications expert on board early in a crisis situation is essential. Whether or not it is covered by your insurance it could save you considerable money in the long term. But, of course, it is better to have insurance coverage in the first place. It’s like fire insurance – you can’t buy it after your house burns down; but you still have to rebuild your house.
It’s important therefore for a company to conduct a risk audit or crisis audit to determine its vulnerabilities and ensure it is adequately covered for all potential reputation-damaging events to which it could be vulnerable.
Steps you can take now
To find out if you are covered you should check your insurance contract or contact your insurance company. If you don’t have crisis management insurance, you should take the following steps as soon as possible:
1. Engage a crisis management expert to conduct a risk audit of your company;
2. Contact an insurance broker to arrange crisis coverage for the identified risks;
3. Ensure you have a crisis manual in place to manage the identified risks; and,
4. Ensure you have retained a crisis communications company to assist you in the event of a crisis.
If you’d like to have a confidential discussion about your crisis management preparedness please email us at firstname.lastname@example.org or call on 0419 290 578.