AIG Division To Begin Offering Negative Publicity Insurance


AIG offers ‘Reputation’ Insurance. The policy would also cover costs associated with minimizing the potential impact of negative  publicity, the company said.

They say image is everything, and now companies can insure theirs.

After taking heaps of blame for the financial crisis and accepting a $130 billion government bailout to survive, American  International Group Inc. knows a thing or two about bad publicity. Now it wants to help others weather such storms—for a price.

Crisis veteran AIG is offering crisis-management insurance. Chartis, the property-casualty subsidiary of the New York insurer, is offering a new type of coverage to help companies offset  the cost of bringing in outside experts when a public-relations crisis hits.

Dubbed ReputationGuard, the insurance policy is  aimed at small-to mid-size companies, which may not have their own internal crisis communications teams.

Companies often turn to such crisis-communications firms when they need help shaping responses to events that could cause lasting  damage to their brands or their businesses, such as food contaminations, environmental disasters, executive scandals—or government  bailouts. Chartis’s new product comes with some precedent.

Some types of product-recall and data-breach insurance, for example, provide  coverage for consulting with public-relations companies. Broker Willis Group Holdings PLC offers it as part of a  bedbug-infestation product it launched earlier this year. Chubb Corp. even provides money for public-relations expenses for  wealthy homeowners if they are sued by their household help in a high-profile case.

The Chartis policy, however, doesn’t specify a particular event that would trigger the coverage. Instead, it is designed to cover  a broad range of potential , said Rob Yellen, chief underwriting officer of Chartis’s executive-liability  practice — “the sorts of things that a stakeholder would look at as a breach of trust.”

The coverage was devised after discussions with insurance clients and brokers indicated a potential market for the product, Mr.  Yellen said. 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 precrisis peak. As for the ReputationGuard product, the cost will vary widely based in part on the size of the company seeking the coverage, the  soundness of its crisis-response plan and its potential need for the crisis-management services, said Tracie Grella, president of  Chartis’s Professional Liability unit.

Small companies with a crisis-communication-preparedness plan could see premiums of about  $10,000 annually. Christopher Lang, a managing director at insurance broker Marsh Inc., said the coverage would likely be most attractive to small  and midsize firms, in part because they may not have sufficient crisis-communications expertise in-house. Larger firms may also be  more able to absorb the cost of consulting with such outside experts without tapping the insurance markets.

“There certainly is broad-based concern about having a crisis-management strategy,” he said. “There should be a marketplace for  the new product, though it won’t have universal appeal”, he said. AIG can’t buy insurance from itself, of course. But when asked if the product would have appealed to company ahead of its P.R.  troubles in 2008, an AIG representative declined to comment.

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