Honest Insurance?

Is it an oxymoron?

We consistently pound on the fact that the best way to handle a crisis is to confront it head on by admitting the mistakes that caused it. The thing is, this advice often clashes with the advice your insurance company would issue after say, a car crash involving a company vehicle.

What do you do then, when your need to act with transparency and honesty clashes with someone else’s bottom line? That was the question posed by “Mr. Media Training,” Brad Phillips, in a recent article. A quote:

Let’s be clear. Insurance companies care primarily about two things: reducing payouts and increasing profits.

On the other hand, crisis communications professionals care about your company’s long-term reputation, your personal reputation, employee morale, your ability to attract and retain employees, your professional relationships with vendors and lenders, and the long-term financial consequences of the crisis.

So what are you supposed to do when you know you should apologize and move on, but can’t out of fear that your insurance contracts will be voided? Here are three ideas:

1. Find an Insurance Company That “Gets It”

Jonathan Bernstein, President of Bernstein Crisis Management, says there are some far-sighted companies out there: “AIG (surprisingly) is one of the more progressive insurance companies in this regard.”

Bernstein adds, “In my experience, more and more insurance companies are aware that settlements tend to be lower, even when an organization is factually liable, if the court of public opinion is engaged in accordance with crisis management best practices.”

2. Find a Carrier That Offers a Crisis Management Policy

According to Bob Sobel, Vice President of Sales for Oxford Insurance, “There are some errors and omissions insurance contracts that have a crisis management component. The insurance companies would normally send you to one of their own pre-approved crisis management vendors.”

Still, analyze the language in your policy carefully. Although some plans may allow you to use a crisis management firm to help you notify customers of a breach of credit card information, for example, they may not allow you to admit responsibility for other types of crises.

3. Go It Alone

If the potential payout is relatively low but the risk of inaction is high, you might consider going it alone. Read your policy to see whether this would void the contract altogether, or whether the insurance company would void it only for that one event. This decision is risky, so consult a professional before making your final choice.

All of these solutions have something in common – they seek ways to avoid sacrificing your integrity as an organization while maintaining the insurance that’s required to run a business.

Remember, your associates’ behavior reflects on you as a company as well. Make sure those that provide a service to you are on the same page in terms of ethics and behavior, or risk a reputation crisis.

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For more resources, see the Free Management Library topic: Crisis Management
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[Jonathan Bernstein is president of Bernstein Crisis Management, Inc. , an international crisis management consultancy, and author of Keeping the Wolves at Bay – Media Training.]