Risk Managers still not insuring against reputational risk
A survey of risk managers by Airmic echoed the findings of a recent AON survey – reputational risk is the biggest concern for businesses in 2015. However, while we regularly see reputation rank highly in lists on risk, it is interesting to see how slow the insurance industry is in creating suitable reputation insurance products.
The Airmic survey found that of all the respondents who listed reputational risk as important, 93% did not actively purchase insurance cover for this issue.
Companies unsure how to insure against reputational risk
The main reasons given for this lack of coverage were a lack of available cover or a lack of adequate cover. This indicates that the insurance industry has either been slow to respond to increasing demand in this area, or they are still struggling to quantify the subtleties of reputational shift.
alva’s core objective is to accurately connect corporate reputation to business performance, using big data. However, our discussions with senior risk insurers have revealed that the majority are still reliant on unsuitable and inaccurate data. As the speed grows at which reputational issues can escalate, and the spotlight on reputational risk expands, this approach is increasingly impractical and inefficient.
Businesses need to treat reputation more strategically
This widespread lack of statistical analysis is also an indication as to how companies are attempting to handle potential and emerging risks. This is an important consideration, as if identified early and acted upon, most reputational issues can be controlled before they get to the point where insurance claims are necessary.
Until companies treat reputational risk with the same methodical and statistical care that they place on their other threats, they will remain worryingly exposed to what they view as their main risk. To achieve this, they need a cohesive approach across numerous functions within the business to ensure reputational issues are identified, contextualised, managed and, for worst-case scenarios, insured against.
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