Having mostly recovered from that near-death experience, AIG is attempting to turn pain into profit by proffering insurance that will help corporations pay to protect their reputations. The idea is that is that PR firms (called corporate communications experts in more polite company) will be on retainer to identify potential problems and then shape strategies to deal with them, ideally prior to senior executives finding themselves perp walked in handcuffs before an appreciative global audience.
Reputation and brand managers will welcome the attention paid to protecting the financial impact of those intangible assets. From the shareholder perspective, however, one suspects that a lot of value could be saved by required executive ethics refresher courses, but with today's ADHD high frequency attention spans, that may be too much to hope for. JL
Eric Holm reports in the Wall Street Journal:
American International Group Inc. (AIG) knows a thing or two about bad publicity. Now, a subsidiary of the bailed-out insurer is offering a new type of coverage to defray the cost of bringing in outside public relations experts when a company faces a potential p.r. crisis.
Dubbed "ReputationGuard," the insurance will pay for policyholders to seek the counsel of two leading crisis-communications firms, Burson-Marsteller and Porter Novelli, even before a possible crisis becomes public. It's being offered by Chartis, the property-casualty unit of AIG
Companies often turn to such crisis-communications firms when they need help shaping their responses to events that could cause lasting damage to their brands or their businesses, such as product recalls, data breeches, executive scandals--or government bailouts.
Though the insurer's announcement of the new coverage doesn't say it, AIG was a Burson-Marsteller client after getting a massive U.S. bailout in 2008. The billions AIG took from the government prompted criticism far and wide, from the halls of Congress to the faux-newscast on Saturday Night Live, and Burson-Marsteller was brought on to help AIG weather the storm.
Chartis, in fact, wasn't called Chartis until it rebranded itself in 2009 to distance itself from its parent company. The name was changed from AIU Holdings as part of the company's crisis-management strategy.
Chartis isn't the unit that prompted AIG to seek the government's help, and much of the bailout has since been repaid. The U.S. Treasury still owns the majority of AIG's common stock, which remains down more than 95% from its pre-crisis peak.
The cost of the ReputationGuard protection sold by AIG will vary widely based in part on the size of the company seeking the coverage, the soundness of it crisis-response plan and its potential need for the crisis-management services, said Tracie Grella, president of Chartis' Professional Liability unit.
The coverage was created after discussions with insurance clients and brokers indicated a potential market for the product existed, said Rob Yellen, chief underwriting officer of Chartis' executive liability practice.
"When we talk to our clients, reputational concerns are right at the top of the list of things they worry about," Yellen said. The policy is designed to cover a broad range of potential public-relations problems--"the sorts of things that a stakeholder would look at as a breach of trust," he said.
Yellen said the coverage should appeal even to small and mid-sized companies, since they may not have sufficient crisis-communications expertise in house.
"You've got companies of all sizes wrestling with this," he said, citing a study that shows nearly 70% of board members of public and private companies believe reputation risk is their primary concern.
Burson-Marsteller and Porter Novelli were selected because of their expertise in crisis communications and their global reach, Yellen said.
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