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.