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Tuesday, July 28, 2015

Death and disgrace insurance might sound extreme - But it's on the rise

By Peter Collins

A well as earning huge amounts of money from their movies, sports or TV careers, celebrity and athletes also benefit from plenty of lucrative endorsement deals and marketing campaigns. Nike, Adidas, Coke, Pepsi… countless brands have promoted their products off the back of a famous face.

But the issue with this is that you’re staking your brand on that celebrity’s reputation, and it can, and does, go wrong. And, thanks to the wonders of the Internet, it’s everywhere in seconds. So what are advertisers doing to cover themselves in case the worst happens?

The rise of death and disgrace insurance

With this rise in endorsement deals, combined with the potential for things to go very wrong very quickly, comes the rise in death and disgrace insurance. This covers campaigns that involve everyone from athletes to musicians, films stars and iconic models. It might sound over the top, but when you consider just how much money is poured into these sponsorship deals, it doesn’t sound so crazy.

Advertising campaigns can cost millions, meaning some insured values can run as high as $60 million. This can also cover the loss of predicated sales as a result of either the death or disgrace of the celebrity in question. Obviously this is fairy hard to calculate, but it’s pretty reassuring for advertisers non-the-less.

Why now?

Celebrities have been endorsing products for decades and this insurance has been around for years, so why is this trend only just appearing? Well, social media now plays a huge part in the concerns of advertisers and big companies. Reputation is everything and the potential for bad news to spread over the internet is now practically a guarantee.

Celebrities can no longer be marketed and monitored as tightly as before as through mediums like Twitter and Instagram, they have instant access the whole world. All it takes is one poorly timed tweet or post, a quick screen grab and it’s an instant scandal. Although disgrace is entirely subjective, and some brands will tolerate far more than others, it’s impossible to predict exactly how much damage a scandal can have, so insuring against the worst possible outcome actually makes a lot of sense. It’s not just brands either.

Celebrities now often link themselves to charity as a way of publicising a good cause. That’s all well and good, until something happens to tarnish their reputation – then there’s plenty of bad press and the charity is often dragged into it. Again, a reason for the rise in this kind of insurance.

Sports stars

Celebrities are actually able to, in some cases, take out death and disgrace cover for themselves as an individual. This is nowhere near as common as it is for large brands, but for footballers in particular it’s becoming more popular. The potential for injury, either on or off the pitch, could really damage their finances.

The risk is higher when compared with other celebrities such as actors, and many see it as future proofing against injury. Clearly there is a lot more to consider in cases of individual insurance, including drugs and lifestyle. Ironically enough, if a player has a squeaky clean image it can make it harder to get this kind of insurance as, if that reputation is tarnished, the payout will most likely be much larger.

With the continued popularity and the advances in smartphone cameras, meaning people can snap and share images in seconds, it seems like this kind of insurance will only become more common place for big brands with millions on the line.

Please note - the Kevin Bacon photo is used for illustrative purposes only.

About the author: Peter Collins is a director at LFC Risk and Insurance, an Essex company that provides business and individuals with bespoke insurance and risk management solutions.

Image license: tpsdave/Pixabay;  CC0 US-PD