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Reputational Risk

How Disgruntled Employees Tarnish Your Social Media Branding and Reputation

The NY Daily News suffered a reputation hit after fired employees used its social media accounts to state their displeasure. Other companies can learn a thing or two from this mishap.
By: | August 13, 2018 • 4 min read

Late last month, nearly a year after acquiring the New York Daily News, media company Tronc made the decision to drastically restructure the newspaper, reportedly paring down its scope to focus on breaking news.

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In one fell swoop — or in this case, one fell email — Tronc cut the paper’s size by half, terminating the editor-in-chief and managing editor, most of the photography staff, much of the sports department, and numerous other journalists.

Among the terminated were the paper’s entire social media team … a fact that perhaps Tronc should have given some deeper thought to. Shortly following the restructuring email to staff, the Daily News Twitter feed went chaotic. In between scheduled Tweets, the feed was peppered with gifs and memes registering the staff’s shock and outrage.

The posts, if embarrassing for Tronc, were largely harmless, but were picked up by other national media outlets including Ad Age. The company’s seemingly mercenary act probably did little to earn Tronc any public goodwill.

But the nominal amount of damage was only due to the apparent restraint of the departing social media team. Far more vindictive individuals could have published more damaging information — from confidential internal emails to public swipes at company investors to the spread of fake news designed to expose the paper to liability or risk defamation accusations.

Some companies allow their social media team a level of autonomy that is necessary from a responsiveness perspective but is difficult to maintain control of. A sophisticated social media footprint can involve multiple plug-ins and automation services, all of which would need to be reset in the event of a staffing change.

Much in the way that a company might immediately lock a terminated employee’s email account or deactivate a building key card, access to company property such as social media accounts should be considered as part of the larger picture of employment actions.

The Daily News incident, said Nir Kossovsky, CEO of Steel City Re, is “a fundamental failure in proper human resources-related management of discharging employees.”

“Whether you’re laying off one person or half of your staff, what are your corporate policies regarding how layoffs are managed?” asked Elizabeth Carmichael, president of Carmichael Associates. Those policies should include how company-owned Twitter accounts or other social media accounts are regulated or closed.

Implement Moves Carefully

Protecting access to social media accounts aside, there’s little chance that Tronc could have avoided some form of backlash. Within a day or two, global news outlets were referring to the situation as the “Daily News Bloodbath.” The departing editor-in-chief tweeted from his personal account: “If you hate democracy and think local governments should operate unchecked and in the dark, then today is a good day for you.”

Meanwhile, New York’s Gov. Andrew Cuomo and Mayor Bill de Blasio took to Twitter as well, with de Blasio tweeting a message calling the layoffs a “greedy decision” and a “disaster for NYC” and Gov. Andrew Cuomo issuing a statement urging Tronc to reconsider.

Stirring up ire at that level could have longer-term consequences for Tronc, said Kossovsky, who writes on this very topic as a Risk & Insurance® Risk Insider. “A city like New York has a very strong regulatory structure. There is a reputational risk to Tronc within the New York environment in how the city may give breaks or not give breaks to the newspaper.

“In terms of reputational risk, companies need to look beyond customer reaction, which is where most people focus, and consider both the regulators and the activists that have the power to mobilize them.

“Oftentimes,” Kossovsky said, “you forget the importance of managing the regulators’ expectations — meaning anyone in a government position. Never underestimate the power of a governing body or a regulatory authority to have its expectations missed and react strongly using the full authority invested in it to challenge a company and its decisions.

“This has to be factored into the tactical management of these difficult strategic decisions.”

There’s no question that, in the age of social media, corporate moves that could raise hackles — no matter how valid — require a risk management perspective. Open lines of communication between human resources, public relations and risk management can ensure a more carefully managed execution of business moves, even unpopular ones.

“These are enterprise-level considerations,” said Kossovsky.

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Engaging a crisis communications team is key, said Carmichael, especially in a high-profile situation like the one faced by the Daily News. Employment actions, obviously, and not unexpected events: “It’s not like they woke up on Monday morning and said ‘oh gosh we’ve got to lay off half of our people,’ ” she said.

The outcome might have been more favorable had the crisis team made a public announcement a minute before the staff was given notice. That, she said, would have allowed the company to get out in front of the situation.

“A lot of companies don’t have a crisis communication plan in place,” said Carmichael. “That’s your first line of defense. Engage a crisis communications team, in the most confidential of ways, to talk about what’s going to happen. Work with that entity to figure out what could go wrong and how do we get ahead of it. How do we tell our story first, and loudest … how do we control the message versus forcing us to be reactive.” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.