- Share this article on Facebook
- Share this article on Twitter
- Share this article on Email
- Show additional share options
- Share this article on Print
- Share this article on Comment
- Share this article on Whatsapp
- Share this article on Linkedin
- Share this article on Reddit
- Share this article on Pinit
- Share this article on Tumblr
Today, many, maybe most, celebrities endorse products. And that means brands face a challenge when their endorser suddenly shows up in the news for the wrong reasons: a drug scandal, domestic violence charge, hate speech, even shoplifting. The next move may be to back away: terminate the contract, cancel the advertising and pull the physical product if its celebrity-branded.
But that can be a costly and unanticipated expense. What to do? Enter an apparently new form of insurance, Celebrity Product RecallResponse. Yes, when you’re an insurance company, every risk is a potential business opportunity.
“We’ve been working on this for a while,” said Jeremy Johnson, president of the Boston-based Lexington Insurance Co. “This was the outcome of a think tank of employees.”
Despite that think tank, it’s not quite as exotic as insuring Betty Grable’s legs, a singer’s voice or a food critic’s taste buds, all of which has reportedly been done by the folks at Lloyd’s of London.
Instead, it’s an outgrowth of other policies that Lexington, a unit of AIG, has written for years, covering recalls for more mundane reasons such as product defects. They already know a lot about the cost of cancelling ads and recalling and potentially destroying product – the latter can vary depending on the product’s weight, size, shelf-life and other factors – but what about the risk side of the equation?
Here Johnson was cautious about disclosing too many of his company’s underwriting secrets.
“We might use background checking,” he offered, in a tone that left no doubt that that they do. And, he said, “we insure a lot of celebrities already.”
Would they do Google searches, read the trades, hire a private investigator?
“There could be elements of that” was all the Oxford-educated executive would say.
Can marketers sleep easy? Maybe. Not everything is covered though, with a potentially big exclusion being damage to a company brand’s public image. Also not eligible: movies and TV shows. The insurance is targeted at manufacturers of physical products with celebrity endorsement, not at projects that celebrities appear in. Sorry, Hollywood.
Coverages range up to $1 million in aggregate if purchased as an endorsement – that is, a supplement to an existing policy – or $5 million for a standalone policy. Premiums are a minimum of $15,000 for $1 million coverage or $50,000 for $5 million, and depend on coinsurance, self-insured retention (deductible), the nature of the product and, of course, “what experience has the celebrity had in behaving badly.”
That last will vary all over the map, but with a steady supply of celebrities with all the wrong experience, Johnson says his new offering is getting an lot of interest.
Sign up for THR news straight to your inbox every day