All it takes is one click for a brand’s reputation to be ruined; one upset mommy-blogger who thinks a product might have made her child sick; or one post on Facebook that names and shames a company and gets shared a thousand times.
Social media is a blessing and a curse. It has the power to make or break a brand in one viral post – but there are ways for companies to control the impact of that virus (good or bad) through product recall insurance.
“Product recall is complex coverage that’s individually tailored to specific client needs. It’s really important to have specialist brokers who can provide appropriate guidance and education because not many people realise the extent of the coverages that are available,” said Caitlin McGrath, vice president, National Product Recall and Accidental Contamination Risk Consulting, Lockton.
“A key coverage people sometimes miss is Adverse Publicity coverage, which protects against the accusation of a contamination whether or not the product actually has one,” she added. “Consider the mommy-blogger example, where a mom shares a blog post suggesting a ‘contaminated product’ made her child sick. That post is shared 500 times and then a supermarket calls the affected brand to cancel their contract because they can’t sell the product. That can cause a significant drop in sales and a huge financial impact on a company.”
Reputational harm isn’t necessarily top-of-mind for clients purchasing Contaminated Products insurance, but it’s one of many coverages that are available. But with social media bashing on the rise, inquiries around reputational harm have increased.
Adverse publicity issues have also spawned an uptick in first-time Restaurant Contamination buyers – a product previously known as Trade Name Restoration coverage. There’s “huge growth space” in the product recall markets, according to McGrath, and great opportunities to address emerging exposures, like the blank canvas of social media.
“For a very large organization, purchasing a standalone Reputational Harm policy is certainly an option. But for a small or middle market organization, that might not necessarily be the best option. The underwriting and the price of that product might be too cumbersome for them,” McGrath told Insurance Business at RIMS 2018. “Therefore, what I typically do is steer smaller clients depending on their type of business towards a Contaminated Products policy or a Restaurant Contamination policy, which would also provide some Reputational Harm or Adverse Publicity coverage.”