Celebrity Disgrace Insurance

March 14, 2016 in Daily Bulletin

You can buy insurance against your celebrity spokesperson doing something disgraceful:

  • Brands like to get celebrities to endorse their products. But when celebrities like Lance Armstrong and Tiger Woods go onto become the center of a scandal it can hurt the brand’s image.
  • To insure against this companies can buy celebrity disgrace insurance, which pays out if a celebrity does something controversial.
  • The number of companies that have purchased this insurance has risen 30% since 2013, and it is now a £500 million market.
  • The growth is driven in part by the rise of social media which quickly circulates embarrassing headlines and sometimes connects it to brands that pay some of those involved.
  • The insurance contract may allow a company to recoup the cost of paying for an endorsement.
  • It could also allow the brand to recoup some of the lost profits from a celebrity going crazy and an associated brand being tarnished.
  • Premiums start at 0.25% of the amount insured.
  • One of the trickier tasks is to determine what counts as a “scandal”. It matters what the celebrity’s reputation was before a gossip inducing event. If they already had a “bad” image, then it is harder to win a payout.

The full article is fascinating, though requires a subscription. You should read it here.

Source: Financial Times

Via: Marginal Revolution