Monday, December 21, 2009

Reputational Risk Insurance for Celebrity Product Endorsement

Given the recent “transgressions” of Tiger Woods had made his sponsors backing away en masse, would a reputational risk insurance of celebrities endorsing their sponsors’ products be a good idea?

By: Ringo Bones

The recent high-profile “transgressions” of G-Rated family-friendly golf megastar Tiger Woods not only sent the tabloid press community into their trademarked coverage frenzy, but also made Tiger Woods’ sponsors – whose products he’s been so busy endorsing for more than ten years – backing away en masse. As one of the golfing world’s top cash cow who managed to earn over a billion dollars during his career that might yet still to reach its prime. Is Tiger Woods not only unnecessarily endangering his own golfing career, but also the long-term economic viability of the sport of golf as well?

High-profile celebrity product endorsers whose reputation leaves much to be desired has been de rigueur in the Rock and Pop music world for a long time now. Remember W. Axl Rose, the mercurial frontman of Hair Metal era Rock outfit Guns N’ Roses? Despite of his reputation, Axl’s “unique” singing style made every live concert sound engineer notice the frequency response band limitations of Shure SM57 Beta microphones that made them better “plan” on how to use these idiosyncratic microphones on stage in live Rock concerts. Thus making such dynamic microphones a mainstay in Shure’s product lineup despite of a non-flat frequency response. Even someone like Paris Hilton, who’s name is unlikely to be ever used with the phrase “moral turpitude” on the same sentence manages to endorse top of the line beauty products from the world’s top cosmetics manufacturers.

Although in the multi million dollar endorsement contracts world of professional sports, the established “overlords” are not so forgiving when it comes to “transgressions” and “improprieties”. A few years ago, a promising basketball superstar named Kobe Bryant who’s sporting career has yet to reach its prime also has his sponsors moving away en masse after his own “transgressions” became supermarket tabloid fodder. And now, the problem plaguing Tiger Woods not only threaten the famed golfer’s bottom line, but also the bottom line of the golfing world whom his golfing career has seemed to prop-up since 1996. Can the establishment of a form of reputational risk insurance be of help on the fiscal aspect of this debacle?

Reputational risk insurance could be modeled after occupational health insurance or permanent health insurance where a reputational risk policy provides the policyholder with a source of income akin to “disability benefits” when the policyholder can no longer make money from the high-profile celebrity who endorses their products. Instead of just “abruptly” terminating their fiscal obligation with the celebrity endorsee in a fiscally unjust manner.

Reputational risk insurance might also be used to provide benefits when the high-profile celebrity is no longer able to perform substantially all of the contractual acts that he or she signed when endorsing the product(s) of his or her main sponsor. This could be either due to marital “transgressions” or other “impropriety” of reputational nature. Maybe it is high time that the product endorsement world should find ways to insure themselves against vagaries such as these in order to maintain fiscal stability.

Thursday, December 17, 2009

Creativity Disability Insurance

As a viable part of the global economy, should folks with creativity related jobs be provided an insurance system against creativity disability?

By: Ringo Bones

Picture this scenario: a very lucrative crime fiction writer whose works so far – lets say 20 of them – managed to crack the top 5 of the New York Times bestseller list, eleven of them even reached the number one spot. Not only that, his or her books managed to become a required reading of every major law enforcement agency around the world – akin to Tom Clancy’s The Hunt for Red October becoming a required reading for US Navy’s cadets-in-training. Thus making the writer a veritable cash cow. Then imagine our writer out of whim joining some “maverick” Evangelical cult that made him or her no longer able to write those gristly but fictional ways of committing murder. Thus resulting in the loss of his or her multi-million dollar a year livelihood. If this happens, what does his or her financial estate do? Sue the cult or collect some form of insurance?

Even though there might have been a legal precedent with regards to this scenario, as of late, I’ve been too lazy to check out the current US Supreme Court docket about legal and / or financial liabilities when it comes to persons affected by creativity disability. Especially if creativity is the main source of livelihood of that person in question. But the question now is, is some kind of creativity disability insurance economically viable enough to be underwritten by today’s insurance providers?

After checking on existing insurance policies on offer, I think for it to be economically viable, creativity disability insurance could be modeled after occupational disability insurance. Unfortunately, occupational disability insurance – also called permanent health insurance – is quite a complicated subject that often grabs the news headlines upon claims refusals. Your typical occupational disability insurance policy provides the policyholder with a source of income in the form of disability benefits when the policyholder is no longer able to perform substantially all of the material acts of his or her occupation, as designated in the policy. Should disability benefits also be applicable for those working in the creative fields like novelists and songwriters?

But it can easily get complicated from the point of view of the disabled – even the creatively disabled – claimant. Imagine the claimant having a firm belief of the Protestant Work Ethic and has a moral perception that receiving easy money is morally reprehensible. In other words, the claimant wants to retain the ability to engage in a sure form of employment while collecting disability insurance benefits. Might this prove in the end to be economically essential, in which the insurance company could make a creativity disability insurance with such proviso at a much lower premium – thus making it widely available?

Returning to the scenario I’ve mentioned, could this be resolved or eased by the existence of some form of creativity disability insurance; or is the existing civil court systems around the world could easily handle this as a “mere” torts and damages compensation settlement case? Given the rarity of such cases, its safe to say that I don’t know – yet. Maybe, the only really viable solution to this dilemma is for anyone who works in the creativity fields to become more empowered with the assistance of their friendly neighborhood broker in selecting the right insurance products. Thus, enabling them to make appropriate decisions with respect to benefit design, understand the policy’s wording and how it will impact them in the event of a claim arises.

Friday, December 4, 2009

Do Pessimists Make Good Insurance Company CEOs?

Given that the primary business of insurance companies has been on dwelling on what’s the worst that could happen, does this make pessimist prime candidates for insurance company CEOs?

By: Ringo Bones

Maybe that bloke named Murphy who they named Murphy’s Law should have started his own insurance company, who knows, he could have made a bundle – or what about Friedrich Nietzsche? Just a few historically famous “pessimists” who would have made top notch CEOs for today’s insurance companies. A will to power ones investment portfolio? Or is it just a routine risk management as usual?

After reading Bright-Sided by Barbara Ehrenreich, a pet theory of mine has been renewed once again. A theory pertaining to why people with a naturally pessimistic disposition are better suited to be insurance company CEOs compared to their cheery, chirpy counterparts – especially ones that practice unnecessary discrimination when it suits them while maintaining a happy disposition. Despite the howls of protest of those cheery CEOs that ran their company to the ground during the Bush Administration over the accuracy of Barbara Ehrenreich’s pet theories on why Wall Street buckled only proves Ehrenreich’s insights on this contentious issue to be self-evident. Even though recent findings in cultural anthropology and archeology had always tried to tell us that too much positive thinking – especially when combined with leaving things to chance – could be humanity’s undoing.

Humanity’s earliest ancestors manage to survive through a series of supposedly insurmountable challenges like climactic extremes, super-volcanic eruptions and earthquakes that would make those catastrophic tragedies that happened within our living memory seem tame in comparison. Thanks to humanity’s intelligence and wit – largely driven by constantly worrying about the worst that’s yet to come. In other words - pessimism. Could it be that Natural Selection is Mother Nature’s very own risk assessment strategy? If humanity manages to survive through the worst aspects of climate change that is yet to come, it is safe to bet that it is because we finally took action on the most pessimistic ramblings of Al Gore over the dangers of climate change.

Unfortunately, corporate America has a habit of firing overtly cautious employees with pessimistic disposition. The very same people who could have warned the impending subprime mortgage crisis that can trace its roots back in 2006. The Wall Street overlords have no use for such folks, favoring instead to “yes men” too spineless to point out to their very own mistakes and shortcomings. Sadder still, this corporate oversight grew in popularity during the time when Ronald Reagan ruled the Free World where Wall Street amassed huge profits during the “Decade of Greed” of the 1980s.

Bright-Sided by Barbara Ehrenreich really did point out the culture of a “happiness delusion” that undermined the true potential of corporate America. An overtly positive thinking without a safety net, or worse still – using the ideology of happiness delusion as a safety net, really did almost destroy America. During the 1980s, this happiness delusion became an industry in itself with books, office accessories, posters, etc. and it did become mandatory in the corporate world – especially Wall Street. I just hope that an overtly positive thinking won’t be used as a fairy-dust against failure anymore. Folks that worry so much in working out solutions in making good out of worst situations now need the much-deserved commendation they were once ignored. Maybe somebody should hire Barbara Ehrenreich as a risk assessor.