In Focus: A gap in the HNW market for reputational cover?

The high net worth (HNW) insurance sector brings together a diverse range of expertise in areas such as classic cars, luxury property, fine art and high-end jewellery, while also providing clients with exceptional, concierge style service. 

This corner of the insurance industry is the place to go for wealthy individuals looking to protect and indemnify their physical assets against harms or loss – but what options are there for insuring against less tangible assets? 

For a specific portion of high profile HNW clients – such as footballers, artists or other public figures – large portions of their income and wealth can originate from their public profiles and how they are perceived by polite society. 

Brand or product endorsement deals, advertising partnerships and other revenue streams from social media can often be just as valuable to these clients as any physical possessions – but organising insurance in this arena comes with its own complexities. 

However, HNW brokers are in no way averse to navigating complexity. 

Speaking to Insurance Times, Steven Garry, client director for Tysers’ private clients business, explained: ”We go through everything with our private clients during initial meetings in terms of who they are because the more we know the better. 

”Our job is to provide that client with the best risk management advice, so if they are in the public eye then we will ask about what it is they do exactly, because claims originating from things like after dinner speaking gigs or social media are not unheard of.” 

Noting that social media was “a major factor at the moment”, Garry explained that the ability to capture and quickly share images and videos has created new reputational risks for high profile clients, because, for example, a joke made by a high profile client can quickly be taken out of context and shared across the world.

He added: ”It seems like there’s some sort of storm on social media every day, so it is something that brokers have to identify in meetings as a potential gap in a client’s cover.

“It is obviously a huge exposure for public figures because it only takes one bad word, or for something to be taken out of context for it to throw up potentially massive damages and court cases. We would ideally want to identify that risk and put cover in place before that happens.” 

Damages and remediations

When offering insurance against these risks, brokers should have an understanding of the problems that can arise from reputational issues – such as a client breaking the terms of a brand deal or breaching another individual’s privacy – so that they can better advise on mitigating against them.

Reputational risks for individuals, as opposed to companies, are more diverse because there are legal rules around privacy and data protection that only apply to individuals.

A model who fails to meet the conditions of their exclusive brand partnership deal by being pictured wearing one brand of trainers while being sponsored by another, for example, could be sued for breach of contract.

Or another hypothetical celebrity could be sued for defamation or breaching another high profile individual’s privacy by spreading false information, or revealing details about their life, during a published conversation – such as a podcast.

Michael Yates, a reputation management lawyer and partner at legal firm Taylor Wessing, told Insurance Times: ”People can bring claims for misuse of private information or breach of data protection laws – and with privacy and data protection claims, people are allowed to claim for both financial loss and distress.

“Defamation is different because you can’t claim damages for distress, but you can still claim general damages for the harm you’ve suffered to your reputation, which is quantified in lots of different ways. There are also special damages where you’ve lost money, or aggravated damages in cases where the defendant has behaved in a certain way that’s made everything worse.”

Yates added that the costs involved in some of these reputational cases can quickly become incredibly high, especially when trying to address claims of defamation originating from social media, when it is easy to run into jurisdictional hurdles and the complicated procedures around tackling anonymity. 

A gap in the market?

It is perhaps exactly because legal costs can become so high in these cases, in addition to the non-tangible nature of the risks, that reputational cover for HNW individuals is not a common product in the insurance market. 

“I envisage this product coming into the market more, but maybe taking five years or so to mature – which means there’s a definite gap there for those high profile clients now.”

Speaking to a number of insurers with HNW divisions, Insurance Times was repeatedly told that while there was interest in underwriting this area, the complexity of coverage, potentially huge claims costs and lack of tangible insurable assets made it incredibly difficult to do. 

William Cooper, managing director at HNW broker Stanhope Cooper, said that while HNW clients do not often ask for this sort of cover when approaching brokers, it was a broker’s responsibility to “educate consumers about the risks to them, as we’re always looking to complete a 360 degree health check for clients”. 

He added: “If you’ve got a HNW client who’s in the media, such as a politician or a model, then you need to be talking to them about not just their home, vehicles and personal cyber protection, but also about defamation and the risk of saying something negligent in the media and getting hammered by the press.

“However, insurers are worried about writing this kind of cover because of how costly it can be. I envisage this product coming into the market more, but maybe taking five years or so to mature – which means there’s a definite gap there for those high profile clients now.”

Filling a niche

In investigating this issue, Insurance Times was repeatedly told that while a reputational insurance product did not exist solely for HNW clients, specialist insurer Hiscox does have a proposition that caters to protecting the reputation of high profile individuals, which it began writing in 2018 –its influencer and public figure protection product.

 ”A lot of [HNW brokers] have expertise in luxury contents, cars and bricks, but this is a very different world, so they are maybe not comfortable talking about reputation.”

Max Tipper, Hiscox’s head of media and entertainment, said: ”Our product isn’t really targeted at high net worth individuals – it’s more for people with a public profile, although there will be a lot of crossover there if you think about successful sports people or celebrities.”

Tipper explained that the product functioned “more as a shield than a sword” however, covering claims against the insured for legal fees or damages relating to defamation or a breach of privacy.

In terms of the less tangible elements of reputational cover, Tipper said that Hiscox has always run into the difficulty of “selection bias” when exploring potential propositions. 

“The people that know they’ve got something to hide and have skeletons in their closet would probably be the sort of people buying that product,” he explained. 

A useful tool Hiscox does include in the product, however, is crisis containment media services, as well as legal support. This means that a public relations media firm can be drafted in to advise on or create responses to harmful press coverage or social media comments as part of the policy.

When Insurance Times asked about the distribution of this high profile product via HNW brokers, Tipper said that this was “definitely an untapped market”. 

He added: “It’s interesting that so many of the inquiries for this product come from HNW brokers because the distribution of it has always been one of our biggest challenges. A lot of them have expertise in luxury contents, cars and bricks, but this is a very different world, so they are maybe not comfortable talking about reputation.” 

And, from the broker perspective, Cooper said: ”This is a gap in the market that we, as HNW brokers, probably aren’t serving as well as we could and it’s something we need to think about. 

”However, communication needs to improve between brokers and insurers so that we’re able to better educate our clients on what protection is out there because this is a huge opportunity.” 

An opportunity indeed – in an increasingly litigious, social media obsessed society, HNW brokers are well placed to to arrange this underused aspect of coverage for their clients to fully protect them against risks.