What is disgrace insurance?

Oct 10, 2019 | 1 month ago | Read Time: 4 minutes | By iKnowledge Team
Understanding Disgrace Insurance

Disgrace insurance is an insurance to protect companies if their celebrity endorsers go off the rails and cause damage.

Among the many crazy and unusual things that can be insured is the disgrace that a company suffers from when the celebrities or the public representing them are involved in a scandalous situation. While a company stands to benefit in many ways when they partner with a public figure to promote and back their brand, they can also be in for some trouble if the celebrity involved breaks the law in some way or gets on the wrong side of popular public opinion. In such cases, disgrace insurance covers the direct and indirect costs incurred by a business on account of such celebrity misconduct.

The case for disgrace insurance

Celebrity endorsements have been popular for years now. They’ve been around even before disgrace insurance came into the picture about a decade ago. Up and coming brands as well as established companies often rope in celebrities of various levels of fame to represent them as brand ambassadors and spokespersons. Celebrities also play a pivotal role in video advertisements that are telecast on the television in the commercial breaks between two program slots.

However, much like celebrity endorsements, scandal has also always been around. And if the celebrity involved as the promoter of the brand ever gets involved in a scandal, it doesn’t merely reflect badly on the star; it also maligns the image of the brand they represent. In such situations, the company may typically face huge losses. Before disgrace insurance policies were adopted, the companies had to bear the brunt of these unforeseen costs by themselves. This was most often infeasible, and many brands had to either shut down the entire campaign or incur substantial costs that eroded into their profits.

To protect producers from such unfavorable situations, disgrace insurance was introduced.

Is obtaining disgrace insurance beneficial?

Every kind of insurance, whether it’s a life insurance cover or a retirement plan, seeks to protect the insured party from unmanageable and unforeseen costs. A disgrace insurance cover is no different. But many production companies still refrain from obtaining a cover against celebrity disgrace because of the seemingly large upfront cost.

Disgrace insurance can also be critical for movies and TV shows. Though the celebrity in an actor in these instances (not an endorser), the impact is magnified in these instances because the focus is solely on the celebrity and their actions. In the case of an average feature film, the general film insurance can run up to 1.5 percent of the film’s budget, and disgrace insurance can pile on another 0.75 to 1 percent[1]. A prominent streaming service lost close to Rs 3,54,35,00, 000 crores when one of their stars was hit with allegations of sexual misconduct. [1].

Insurance isn’t so much an expense as it is an investment. And without a cover against celebrity disgrace, the company may find that when an unfortunate scandal hits, they may have to shoot large portions of their film or ad campaign, make several alterations to the project, or even cancel it altogether. Should this happen, the costs of such alterations or cancellations mount up to amounts far higher than the price they would have paid for obtaining the insurance in the first place. So, while the initial costs of obtaining a disgrace cover may seem high, the price of not having such a cover may be too steep to pay. It’s always beneficial to be insured, irrespective of how certain you may be of your future.

What to include in a disgrace insurance plan?

With disgrace covers, the terms of the policy are not set in stone. There’s no pre-existing framework that dictates what such a policy should and shouldn’t cover. Consequently, the terms are framed by a mutual agreement between the insured and the insurer. This makes it imperative for a production company to comb through their policy and ensure that it includes a wide range of coverage. The policy needs to extend over all the possible ways in which celebrity disgrace could affect their brand, their schedule, and the project involved, right from offensive behavior and rumors of past scandals, to criminal conduct of any kind.

As for the insurer, most insurance companies refrain from backing campaigns that include stars or public figures who have already been defamed before. This is a precautionary measure that an insurer takes, because an already maligned endorser image is almost certain to cause disrepute for the company. Some insurance policies also offer covers against the death or disablement of the celebrity involved in the campaign.

Overall, we are seeing a trend where institutions and individuals are waking up to the risk of uncertainty in diverse areas and attempting to protect themselves from it.

A word to the wise

Generally, it’s advisable for the insured party to thoroughly analyze the terms of the policy and ensure that it offers comprehensive coverage against all forms of defamation. Also, when any event that necessitates a claim against the policy comes to pass, the insured party should review their policy to ascertain that they are well within the permissible time frame to make a claim. To know about Aegon Life’s insurance products like term insurance and other products, visit our home page.

Fact citation:

  1. https://www.griffithsandarmour.com/adambrothers/Celebrity-Insurance.aspx
  2. https://www.hubinternational.com/en-CA/blog/2018/03/disgrace-insurance/
  3. http://www.worldwidepci.com/insurance-article.php?id=6

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