Site logo

Cedric Stephens Reputation risk insurance in the AI era

Adrian Dunkley, AI developer and researcher and founder-CEO StarApple AI, wrote a topical and fascinating letter to the editor last Wednesday. It was thought-provoking and perhaps was more worthy of the letter-of-the-day title than a former Prime Minister’s letter about constitutional things like term limits and fixed election dates.

Even though Mr Dunkley limited his remarks to the impacts that artificial intelligence can have on public health, the bigger picture is that AI is now rapidly affecting all areas of our lives – including governance – in profound and concrete ways. Political leaders have been dilly-dallying about term limits and fixed election dates for over a decade.

The discussion about public health led me to think about the recent lock-down of the stalls operated by crab vendors at Heroes Circle in Kingston by the Ministry of Health and Wellness. According to The Gleaner, the ministry’s action “follows a viral video showing what appears to be an unsanitary activity by a woman at the popular food spot called Crab Circle”. More than a dozen vendors who hail from the nearby Fletcher’s Land community and surrounding areas of downtown Kingston are affected by the closure.

“The closure was ordered by the Kingston and St Andrew Public Health Department. The video sparked outrage and significant condemnation on social media. Several persons say they will never buy from the vendors again.” Crabs were sold on the site for over five decades.

The ‘Crab Circle brand’ has been tarnished. This has immediately affected the lives and livelihoods of an informal group of business operators, non-traditional SMEs. Adam Uzialko, a staff writer at in a February 23, 2023, article titled ‘What is reputation insurance?’ wrote that dirtying a brand “takes only one major crisis. Loss of reputation is a significant risk for any brand because it can potentially impact future earnings or even force a company to close its doors”.

Crab Circle vendors are, unfortunately, now finding this out. Small-business operators in other sectors should pay attention. There are lessons to be learned.

Launching a business and building a powerful brand, Mr Uzialko says, takes time, effort, and investment. Overseas ‘insurers recognize this risk and underwrite it as they would other insurance risks businesses face. But what is reputation insurance, and how does it work? How can something as abstract as reputation be quantified and rolled into an insurance policy? And is reputation insurance right for a small business?’

Jim Loughlin, an expert at Coverwallet, writes: “If you’re looking specifically at reputational risk insurance, there’s a broad aspect to it. There is coverage in some standard policies you already buy all the way down to specific reputational risk policies geared toward covering an actual loss on your balance sheet due to a sales drop based on a reputational incident.”

Here are some of the most common types of reputational risk insurance:

Business owner’s third-party liability insurance:

Some of the most basic liability insurance policies include reputational risk coverage. The coverage in this business insurance type is often minimal, including events like libel or slander lawsuits. These events could occur because of accidental use of false or offensive information in marketing materials or on social media – a risk many non-lawyers do not recognise.

Cyberthreat insurance:

Cyberthreat insurance focuses specifically on network security threats to data on a company’s network. Reputational risk coverage included in this type of policy generally relates to activity on social media and sensitive customer data that could be compromised, resulting in harm to the brand’s reputation.

Crisis management insurance:

Crisis management insurance covers the emergency use of public relations teams to mitigate any future damage that could occur to a brand’s reputation following a public incident. For example, if a business suffers a data breach, crisis-management insurance would kick in and retain a PR firm to address the issue proactively.

Reputation insurance:

Specific reputation insurance is typically reserved for very large companies and is less common than the forms of reputational risk coverage found in wider-ranging policies, Loughlin said. These policies cover an actual loss in sales resulting from a brand-damaging incident. However, this coverage can be difficult to quantify and underwrite, meaning premiums are significantly more expensive than those associated with more traditional insurance policies.

There is a slight difference between reputation insurance and reputation risk insurance. Where reputation insurance covers costs – such as legal fees – when your reputation takes a hit, reputation risk insurance specifically covers the potential loss in sales resulting from damage to your brand’s public image.

Reputation insurance is usually part of another, more comprehensive policy, such as a general liability policy. Reputation risk insurance is typically a stand-alone policy that requires specialised underwriting to fully understand the risks associated with the brand’s name and reputation.

Brand management is a function of marketing. It uses techniques to increase the perceived value of a product line or brand over time. Effective brand management builds loyal customers through positive brand associations and images or a strong awareness of the brand and effectively manage risks to which the brand is exposed.

The root cause of the problem at Crab Circle was not the absence of bathroom facilities. It was ignorance on the part of the vendors, municipal officials, and sponsors who funded the erection of the stalls. ChatGPT, the natural language processing tool driven by artificial intelligence technology, I am quite sure, would agree.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: or

Read More


  • No comments yet.
  • Add a comment