Reputational Harm Insurance for Your Online Business

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Starting an online business and creating a strong, worthwhile brand identity takes a lot of time and effort, as well as a significant financial investment. Starting your own business used to be done through word of mouth, but now, in the age of technology, there is more power in the hands of the consumers in terms of highly visible reviews and the need for premium customer service before, during and after purchases.

One day your business might be in perfect reputational standing, but it only takes one bad review to completely change that. If you run a food business and a customer doesn’t like cilantro, and orders tacos with cilantro on them, they might not enjoy their meal. This person can then turn around and write a horrible one-star review amplifying their hate for your establishment, even if it was only a few sprigs of cilantro that were stated on the menu as accompanying ingredients.

Some businesses close after multiple poor online reviews, even if they are not credible. Luckily, there is something that can protect you against this backlash called Reputational insurance. Insurance companies understand the risk that goes along with building a reputation and are happy and willing to insure your company.

Why Business Reputation is Important

Growing up, we are often told to not worry about what other people think and to just be ourselves. Although this is true and great advice, in business you need to be mindful of what your customers think and feel about their interaction with you, as the implications can be far-reaching should they be dissatisfied.

Before purchasing an item or hiring a company, customers are able to research products or businesses with a simple click of a button. In fact, in a study by Social Media Examiner that was conducted in 2014, it was found that 44% of online shopping begins with a search engine. This can be beneficial or damaging to your success depending on your company's reputation online.

In the same study, it was found that when it comes to ratings, 83% of consumers say online reviews influence their purchasing decisions and 92% of consumers will use a local business if it has at least a four-star rating.

On the opposite end of the spectrum, only 5% of consumers will continue to consider a product or business if they encounter negative reviews on a product. This means although you could have 14 five-star ratings, and one very horrible rating, 95% of consumers may decide to not to go with your business due to that one rating!

Forms of Reputational Harm Insurance

Most reputational insurance policies generally cover that same thing: helping to mend your reputation or cover losses due to a damaged reputation. What’s more, there are actually many different variations to choose from. Some types of reputation insurance are purchased alone, but most are purchased under an umbrella of coverage for your business.

Business Owner's Liability Insurance

Most basic liability insurance policies include a minimal amount of reputational risk coverage. Business Owner’s Liability insurance is helpful if you have an incident such as a slander lawsuit. This can also be helpful if an employee uses offensive or fake information in marketing.

Cyber Liability Insurance

All businesses either in tech, or those businesses that operate in any form online should have Cyber Liability insurance. Cyber Liability insurance protects your data online and anything that is communicated across your company's network. Reputational risk coverage regarding cyber threats is usually related to social media or customer data that becomes compromised. Cyber Liability insurance also helps repair damages if your brand’s reputation is ruined due to the work of a hacker.

Crisis Management Insurance

In case of a need for an emergency public relations (PR) team, crisis management insurance will help your business to avoid any future damage. In the case of a public incident such as a data breach of sensitive customer information, a PR team is crucial, although they can also be quite expensive. In this case, your crisis management insurance would help to retain a PR team and fight the issue by delivering the proper communications to customers and stakeholders and helping to mitigate future damage.

Stand-alone Reputational Harm Insurance

Large companies typically require stand-alone reputational harm insurance because it covers an actual loss of sales resulting from reputational harm. Since this policy covers an actual monetary value, the premiums are much higher. Essentially, when examining the other forms of reputation insurance mentioned, if they do not seem to click or if they seem too specific, then stand-alone reputation insurance is a great option.

Reputational Harm Insurance for Small Businesses

If you own a small business, you may not always consider Reputational insurance. However, Reputational insurance is extremely important, especially for online businesses.

Since standard stand-alone Reputation insurance often carries high premiums that could potentially exceed the budget of a small business, Crisis Management coverage will be the best option.

Generally, if a crisis is unable to be averted, it must be rectified. In the case of small companies or businesses, this can mean that if the issue isn’t addressed, then the survival of the business is very unlikely.

Without having a Reputational Harm insurance package, there is a high risk that your business will be unable to maintain and control the crisis. When examining your coverage, there are a few questions to ask yourself to see if you need to add more crisis management solutions or Cyber Liability coverage.

  • Do you retain sensitive records?
  • How many sensitive records do you hold?
  • How much Cyber Liability do you hold?
  • Do you have any chance of falling prey to a cyber risk or cyber attacks?
  • Has there ever been a data breach at any point in the history of your company?
  • In the event of a data breach, would your revenues be at risk?

These important questions are in fact similar to what companies consider when they are drafting a Reputational Harm insurance policy for a small business. If you are ahead of what information insurance companies will be collecting, then you will already understand your risks and know what to expect.

Reputational Harm Insurance at Work

One example of a reputation being ruined and needing crisis management is what happened to Domino’s Pizza in 2009. The incident occurred when two of Domino’s pizza employees filmed themselves contaminating food. They showed themselves actually contaminating the food and then serving it to customers from the restaurant’s kitchen.

After the video was posted to YouTube, it was viewed over one million times within just a few days. Although these employees were fired and also faced felonies, the damage had already been done to Domino’s Pizza and they had to spring into action.

If Domino’s Pizza did not have Crisis Management insurance or at least some form of Reputational insurance to pay for an emergency PR team, then they would have been spending huge amounts of money directly out of pocket to fix their reputation and cover their losses.

Huge companies such as Domino’s Pizza can afford to rebuild their reputation and brand using large amounts of money, but for smaller companies, this is not as easy and will likely require some form of Reputational insurance.

Is Reputational Harm Insurance Necessary?

Although you may have never had an incident where you feel you have needed to defend the reputation of your business, you never know what can happen.

When considering if you need Reputational Harm insurance for your business, it is important to ask yourself:

*If you had an employee post something online that harmed your business reputation, would you be able to handle the liability? *

This also goes hand-in-hand with data breaches or mistakes made in cybersecurity departments. Would your company be able to monetarily handle the Cyber Liability and crisis management needed due to a data breach? If you cannot answer yes to either of these questions with complete certainty, then Reputational Harm insurance should be considered for your company to protect your assets and long-term success as a business.

Preventing Reputational Damage Lawsuits

As it stands, online businesses have some of the most risks when it comes to reputational damage, but there are ways to avoid reputational damage.

Make sure all employees are educated on written and oral defamation

You cannot control everything that your employees say or write, but you can educate them. Oftentimes, slander and libel occur due to the fact that employees are not properly educated in that their actions online have repercussions. Explaining what constitutes both slander and libel can save you from a variety of repercussions in the long term.

Monitor third party reviews and social media pages

With a social media page such as Instagram or Facebook, you are in control of any public comment posted. You also have the ability to delete nasty comments and set filters for keywords to be left out. On third-party review sites, you do not have this luxury, but you can respond to negative comments in an attempt to justify your actions, explain the situation from a rational perspective and soften the blow.

Avoid making negative comments about other entities or people

If you avoid attacking other people and other businesses, this will help you to avoid a situation that can cause your business reputational harm. The age-old saying really does ring true in this situation: “If you don’t have anything nice to say, don’t say anything at all.”

Do not make any statements that you cannot prove to be true

Even if you do not purposefully state something false and it in fact turns out to be untrue, you can still be sued for defamation. Only make statements that you know are absolutely true.

Protect Your Company’s Reputation

It takes years to build up a company’s reputation and unfortunately only seconds for it to come crashing down. Protecting your company with Reputational Harm insurance can be the difference between keeping your doors open or going out of business and closing your doors forever.

There are a lot of aspects in business that you cannot control, and customer reactions and reviews are among them. This is why it is important to have a Reputational Harm insurance policy to ensure your company’s reputation is in good standing with your consumers.

If you are uncertain of how your company would fare if its reputation was attacked or are concerned about the costs associated with handling a fall-back on your own, contact Coverwallet today!

Coverwallet’s experienced professionals have seen and dealt with all kinds of companies and will know which policy will best fit your company to protect all the hard work you have put into growing your reputable business. Contact us today to explore insurance solutions that are fit to your needs.

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