by Tyler Cowen
on November 16, 2010 at 3:12 pm
in Economics |
This is why a growing number of companies are buying so-called "disgrace insurance" to cover themselves in case a brand ambassador turns into a persona non grata.
The full story is here and for the pointer I thank Jeremy Davis.
Are they calling it the "Tiger Woods" policy?
Woods definitely has a lot to do with it:
Isn't this market possible because of how the media over-saturates coverage of these "scandals"? The insurers need brands to think that a scandal is more likely than it actually is, so as to pay premiums on celebs who are will probably not fall from grace. The wall-to-wall coverage in the media conveys the impression that these scandals are more probable than they really are. Similar to coverage of Toyota "sudden acceleration" problems, which create a buying opportunity for Toyota stock. Aren't these insurers just implementing Warren Buffet's investing strategy, finding inefficiencies in the overblown media coverage of celebrities?
And to think I'd rather spend the "brand ambassador" and "disgrace insurance" money on producing a superior product and customer experience.
Careful. I got into a lot of trouble in business school for making a similar suggestion during a marketing class discussion of strategies for selling hamburgers. Well, it wasn't a lot of trouble, really, but it was some funny looks, and I doubt it helped my grade.
I would say its the stable stream of low risk clientele because they are the back bone behind most businesses like banks. Being classed in a low risk category you impose small percentages of risks, still pay your premiums and in large volumes of clients, you therefore are able to make profit, off setting the risks……
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