AI powers reputational damage insurance policy

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Insurance broker Willis Towers Watson has joined forces with Liberty Specialty Markets to introduce artificial intelligence (AI)-powered reputational crisis insurance.

The product uses live, client-controlled reputational data and intelligence analysis, provided by Polecat Intelligence.

Reputations can be bolstered or decimated by an inappropriate Tweet, and sometimes the company is only made aware of the reputational damage when the comment is distributed by an influencer or celebrity on social media.

Research from AMO Strategic Advisors, conducted in 2019, found that 21% of more than 1,000 of the world’s largest companies saw their market capitalisation reduced by a total of $436bn due to the impact of negative reputations.

Overall, AMO reported that corporate reputations account for 35.3% of the market capitalisation of the world’s 15 leading equity market indices, which equates to $16.77tn of value for shareholders.

The challenge for the insurance sector is that it is easy to put a value on a physical asset, but much harder to assess something like corporate reputation, which is intangible and is heavily impacted by the digital domain.

According to Polecat, 80% of the total value of the average company consists of intangible assets, such as intellectual property, trademarks and reputation, but 90% of companies have inadequate data to manage reputation.

David Bennett, head of sales, global markets, property and casualty hub at Willis Towers Watson, said previous attempts by the insurance sector to provide indemnity for reputational risk had fallen short. Despite the risks to the business, “people don’t think the insurance sector is meeting the needs of the corporates around reputation”, he said.

“Most risk products kick in after the event, which in most cases is too late,” he added. “The way ours works is that we horizon-scan, monitor the event as it unfolds and, after three months, we provide an interim payment of up to 40% of the complete cover.”

The new product, Reputational Crisis Insurance, has taken four years to develop and uses AI-based analysis to monitor events across news and social media sites that may have an impact on the company, or adversely affect the sector in which it operates.

From a technology perspective, James Lawn, CEO and co-founder of Polecat, described the challenges of analysing vast amounts of social media data and determining sentiment. “We are now talking about external stakeholders, external domain data, how to collect that information in every language around the world and draw context,” he said.

Reputational Crisis Insurance has been developed through an exclusive partnership between Willis Towers Watson and Liberty Specialty Markets. It is available globally and is initially available to clients in the leisure and hospitality, manufacturing, retail and transportation sectors.

Lewis Edwards, head of underwriting, specialty binders at Liberty Specialty Markets, said: “Clients’ increasing exposure to both traditional media and social media has led to a rise in reputational losses globally. Most reputational products in the market currently only respond to the crisis communication fees incurred following a reputational crisis event. 

“This new product is one of the few that provides coverage for the loss of an organisation’s gross profit following such an event, providing financial protection and also giving clients the tools they need to protect their reputation. The ability to act quickly and transparently can have a hugely positive impact on a crisis outcome.” 

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