Celebrity endorsements are all well and good … until the celebrity starts misbehaving. That’s where the insurance companies come in. Insurance brokers report a growing interest in “disgrace insurance,” which protects companies in the event that “a brand ambassador turns into a persona non grata.” “We live in a time where interest in a celebrity’s life is everything,” said Robert Barron of Lockton.?”These people are under constant media surveillance and it’s very difficult to keep what they do a secret. Brands know that even if they have someone endorsing their product who is squeaky clean, there is always a risk they could be caught doing something.” Of course, a “wild” brand ambassador might be a good thing for some companies: “While we can’t advocate the off-pitch antics of ambassadors, there may be a time where a few wild nights might work for a brand and not against it,” said Joe Hale, a brand consultant. (HT: Marginal Revolution) [%comments]
Do You Need "Disgrace Insurance"?
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@KarenS Good point… I rather doubt it does.
Since there isn’t really a sophisticated and accurate method of valuing brands and brand-ambassadors on balance-sheet, typically brand-value is assigned based on the discrepancy between market-value and fair-value. This is not a great system, as it usually results in under- or over- valued brands that, in certain situations, can float around a lot without any real changes to value.
However, in order to provide a market for insurance of brand-ambassadors, insurance providers will have to find some way of measuring the risk of each individual and the potential return/loss. Doing so would, theoretically, provide a value for each individual brand-ambassador as well as the total brand, but will it be any more accurate than what we have now?
I would question whether there is a direct correlation between the risk of a potential brand-ambassador and that person’s potential return. Don Imus or Russell Brand are definitely riskier than having Derek Jeter or Julia Roberts, but I’m not sure that one side or the other is guaranteed to have a higher return. But obviously an insurance company will base their policy based on the potential risk of that person. So could companies then use that assessment as a balance-sheet valuation?
Some posters have talked about the potential for a company to encourage an ambassador to act poorly in order to collect on insurance. More interesting to me would be if all of a sudden risk-and-return rates are being measured by insurance providers, could companies then higher a riskier ambassador to plug a sudden loss in value without any actual correlation to potential return? It would be an interesting thing to watch.
Two questions come to mind. How would a company like Nike even begin to quantify how much they might’ve lost because of Tiger Woods? And how would an insurance company calculate this risk before agreeing to underwrite a policy?
Would a policy for a company that signs Lindsay Lohan to an endorsement deal be relatively expensive based upon her past misdeeds and likelihood to repeat, or would it be inexpensive because the disgraceful reputation is already there?
And would Paris Hilton have celebrity if it were not for the disgrace? I wonder if, in our contrameritocratic world, we have gone beyond disgrace.
Drink milk; O. J. will kill you.
heh, talk about a moral hazard!
Well, disgrace insurance, divorce insurance (see below) and others that are in the pipeline will be the next wave after the credit markets and default swaps.
http://bucks.blogs.nytimes.com/2010/08/06/divorce-insurance-yes-divorce-insurance/
What about insurance against abused childhood, unmet expectations (disappointment insurance), etc. and the biggest one of all, national neurotic index about terrorism, global warming and economic meltdown.