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Putting a spin on bad news

13 March 2019 Jonathan Faurie

Over the past three years, the insurance industry has had to deal with the failure of one insurer (Saxum), a scandal where an insurer was linked to the VBS saga (Insure Group), and a case where an insurer took a lot of flack because it initially refused to pay the death benefit of one of its clients (Momentum).

All three of these cases saw the industry’s reputation take a bit of a knock. However, it also highlighted the fact that crisis management plays a vital role in the industry and can go a long way in saving the reputation of a company. 

Four steps to success

Before we get to crisis management, Laurence Beder – a Lecturer of Marketing and Entrepreneurship at the Wits Business School – believes that an insurer/brokerage needs to establish a well thought through culture that the company can hang its hat on. 

“The insurer/brokerage needs to identify the desired perception of the organisation that it wants to portray. What would the company like to identify with? The company then needs to develop an image which will be the initial impression of the organisation; this image needs to be aligned with the company’s identity,” says Beder. 

The thirds issue that needs to be defined before an effective crisis management strategy can be developed is performance. This is the actual interaction between the organisation and its stakeholders. Companies need to ensure that they deliver on promises. 

The above factors will contribute towards the company’s reputation. These are the enduring perceptions and attitudes that are developed based on the company’s repeated interactions. “Companies need to be consistent in what they say and what they do,” says Beder. 

Crisis management

Crisis management is a critical capability for handling major reputation problems – and an area that more and more companies are investing in. 

“An effective crisis management approach helps you stay ahead of growing threats that have the potential to undermine your business. Don’t do it when your back is against the wall and you’re running out of options,” says Beder. 

He adds that an important ongoing internal prevention intervention is to ensure that claims teams communicate clearly to brokers/tied agents/policyholders what truly constitutes repudiation. This will close the gap between expectation of potential pay outs and what really would be paid out. 

Immediate action

When a crisis does occur, Beder says that it is important to remember the following five elements when it comes to crisis management: 

-Gather the facts. Sift through the information that is being put out there that is just protecting jobs. Companies need to find the true and useful facts regarding the crisis;

-Consider the human aspect of the crisis. There always is a human element to every crisis, even with financial institutions;

-Speak the truth. You wouldn’t even require a

script as the truth never changes;

-Be quick to tell it. It’s never going to go away if you avoid having tough

Discussions and making tough decisions; and

-Keep talking until people stop listening. Provide regular updates, be available to the media and other stakeholders. Only stop giving updates when the matter frizzles out. 

Another factor that must be taken into consideration is that companies should never underestimate the power of public opinion. The Momentum case is a prime example. The public can put enough pressure on a company to take a specific course of action or make a certain decision. Even if that course of action/ decision is unpopular or wrong.

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