What Is Crisis Management Coverage?
Crisis management coverage is insurance coverage designed to help a business limit the negative impact of events on the business’ reputation. It is an insurance agreement usually made as part of technology errors and omissions (E&O) and Internet/online property and liability insurance policies.
Larger corporations are the most frequent buyers of crisis management coverage, but any business whose profitability is closely linked to its reputation is a potential customer.
- Crisis management coverage insures a company against potentially harmful reputational damage.
- Different insurance policies will cover specific hazards but may also include events like data breaches, kidnapping, negative headlines, and workplace accidents.
- Crisis management insurance has become more important with the rise of the Internet and real-time information sharing across social media and news outlets.
Understanding Crisis Management Coverage
Crisis management is the identification of threats to an organization and its stakeholders, and the methods used by the organization to deal with these threats. Due to the unpredictability of global events, organizations must be able to cope with the potential for drastic changes in the way they conduct business.
Crisis management often requires decisions to be made within a short time frame, and often after an event has already taken place. In order to reduce uncertainty in the event of a crisis, organizations often create a crisis management plan.
As business has globalized and embraced digital transformation, so too have its threats. Global exposure to cybersecurity breaches, terrorism, political risk, travel risk, kidnap and ransom, product contamination, supply chain and product distribution disruption, and adverse media coverage has amplified previous reputational threats to an unprecedented scale.
Crisis management coverage can extend from local PR incidents such as the drunk driving arrest of a prominent board member to international threats such as massive breaches of customer data or viral computer network invasions. Covered crisis management services can include threat assessment, impact analysis, and crisis management and response.
Previously concerned with reputation management, crisis management coverage is increasingly used to cover expenses incurred to restore confidence in the security of the insured's computer system in the event of a cybersecurity or data breach. It also covers reputational threats such as product contamination or recall, terrorism and political violence, natural disasters, workplace violence, and adverse media exposure.
Insurance policies offering crisis management coverage may narrowly define the types of events they cover. Types of covered events may include workplace violence, assault, firearm use, food contamination, and workplace accidents. Covered events may also include credit card breaches or the hacking of a company’s computer network by an outside party. It may also cover damage caused by an inside job or employee sabotage.
The coverage may be triggered by news media coverage of the event, whether in regional forums or national forums. Coverage will typically apply for a set period of time, such as 60 days, after a crisis event occurs, and be subject to an aggregate limit.
Policy coverage may include paying for various types of consultants, such as communications professionals, to assist the policyholder in identifying and executing a strategy to limit any further impact of the event in the media.
For example, the business may need to employ a public relations professional. The policy may provide coverage for a loss of business income for a set period of time as well. In some cases, policies may cover post-event issues, such as funeral arrangements or counseling for individuals who witnessed or were involved in the event.