Reputational Risk

Star-Studded Risk

Celebrity spokespersons can significantly elevate a brand, as long as they stay on their best behavior.
By: | October 1, 2016 • 6 min read

As the value of a celebrity or sports star’s contract with a major sponsor has increased in recent years, so it seems has the risk of them disgracing themselves in public.

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The benefits of having an A-list celebrity promote your brand can be enormous — boosting customer sales and raising your company’s profile. Many celebrities rake in multimillion dollar sums for being the face of top brands such as Nike or Coca-Cola.

However, such sponsorships are not without risk, particularly if a brand ambassador commits a disgraceful or criminal act. The consequences can be far-reaching. One small slip-up can turn into a PR disaster, ruining an entire advertising campaign and resulting in huge financial losses for the brand.

Rising NFL star Johnny Manziel, whose sponsors included Nike and McDonald’s, was dismissed halfway through his $8.2 million contract by the Cleveland Browns after breaking the NFL’s substance abuse policy, along with having the shadow of domestic violence charges hanging over him.

Earlier this year, tennis star Maria Sharapova was suspended for two years from the sport by the International Tennis Federation for taking a banned substance. Since testing positive, she has been dropped by most of her major sponsors.

Just weeks ago, Olympic swimming medalist Ryan Lochte was caught in a lie after trying to cover up bad behavior during the Olympic Games in Rio. Lochte lost four major sponsorships, including Speedo USA and Ralph Lauren.

Incidents like these are motivating more companies to seek out death, disability and disgrace insurance to protect themselves against such losses. The market, driven by Lloyd’s of London, has grown to $1 billion, according to industry estimates. Payouts are believed to range into the millions of dollars, sources said.

“There’s obviously massive benefit to using a celebrity to promote your product,” said Alan Norris, head of contingency at Talbot Underwriting. “But there’s also a huge potential downside that comes with it.”

In addition to advertisers and sponsors, financial institutions that provide loans and mortgages to sports stars are buying the coverage to mitigate losses when a player’s contract is terminated for criminal or distasteful behavior.

Public Expectations Tied to Value

The number of high-profile cases where a celebrity has become involved in a scandal or commits a disgraceful act has prompted worry among many advertisers and sponsors.

“Certainly more high-profile scenarios have grabbed the headlines in recent times,” said Mark Symons, contingency underwriter at Beazley, who has seen a 50 percent increase in business over the last five years.

On top of that, he said, social media and the ever-increasing immediacy of news tend to magnify even the smallest indiscretion, and companies have become acutely aware of that reality.

“Because of the internet, the speed at which a person’s behavior can destroy their reputation is almost instantaneous.” — Nir Kossovsky, CEO, Steel City Re

“Because of the internet, the speed at which a person’s behavior can destroy their reputation is almost instantaneous,” said Nir Kossovsky, CEO of Steel City Re, a provider of D&O reputation solutions.

“The attributes of that person are expected to reflect favorably upon a product or brand, so therefore the loss of value of those attributes will have a negative impact on that product,” he said.

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Kossovsky said that an individual’s reputation value was tied to six major behaviors — ethics, innovation, safety, sustainability, security and quality — and their failure to live up to public expectation would put both the sponsor’s and their own value at risk.

“In Sharapova’s case it was ethics — the drug enhancement issue,” he said. “It was the impairment of her value to her sponsor resulting from a failure to meet her public’s expectations in terms of her behavior.”

Lori Shaw, GAMES practice leader at Lockton’s Charlotte office, said that because reputation accounts for 25 percent of a company’s market value, choosing the right brand ambassador is critical.

“Companies need to be aware of what they are getting into when they take on a talent or celebrity to promote their brand, as well as protecting their balance sheet against the exposures that brings,” she said.

One of the biggest problems for insurers is determining what constitutes a disgraceful act and how to price that risk accordingly.

Broadly speaking, a death, disability and disgrace policy is triggered by “an offense against public taste or decency,” ranging from criminal acts to offensive statements.

Both Kossovsky and Symons noted that the loss of value often depended on that one individual’s expected behavior.

Celebrities with an existing reputation for being controversial are less of a risk than those with a squeaky clean image.

“Perversely, that means the most sensitive risk is often the individual with the best reputation because the impact of their actions can be felt far more disproportionately than someone who has a track record,” said Symons.

Quantifying Losses

Death, disability and disgrace insurance can be bought either as a stand-alone product or as part of a broader policy.

In addition to covering the costs associated with having to change or drop a campaign altogether, a standard policy can also be used to protect against a loss in sales linked to the death or disgrace of the individual concerned.

Alan Norris, head of contingency, Talbot Underwriting

Alan Norris, head of contingency, Talbot Underwriting

Often, however, it’s difficult to quantify the size of a potential loss in revenue or damage to the brand associated with an endorsement when things go wrong.

“With a death, disability and disgrace policy you can only really insure the actual costs associated with that campaign, but what you can’t insure against is the financial damage to the brand because it’s an intangible asset,” said Norris.

Shaw said that even before assessing the impact of a celebrity’s behavior on a company’s market value, you’ve got the upfront costs of scrapping the campaign or starting a new one.

Initial costs can include hiring a replacement spokesperson, removing a celebrity’s image from packaging, reshooting or reproducing new advertising material or reimbursing the money paid to secure the endorsement in the first place.

It can also extend to money spent on TV or radio commercials and advertising space.

Edel Ryan, partner and head of media and entertainment at JLT Specialty Ltd., said that the onus was on the policyholder to prove that the celebrity had committed a disgraceful act according to the contract.

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“The underwriter will start by looking at the morals clause within the contract and the celebrity’s past history to determine if the policy should be triggered,” said Lockton’s Shaw.

Some acts, though considered outrageous, might be excluded if they are deemed to be within the bounds of the celebrity’s normal behavior.

All things considered, the benefits of a celebrity sponsorship must be weighed against the potential pitfalls.

“It’s critical to have the right cover in place to protect against the loss of value to their product or service,” said Kossovsky. &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

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Claims Trends

Treating Pain Without Drugs

Other pain relief therapies hold substantial promise in defeating drug dependency.
By: | February 20, 2018 • 9 min read

From high praise to a spiraling crash, opioid-based pain medications are out of favor. Once thought to be the solution to chronic pain, opioids opened the door to an even bigger and scarier addiction epidemic — one that menaces the workers’ comp industry and the population in general.

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According to the Centers for Disease Control and Prevention, since 1999, more than 183,000 people have died from narcotic painkiller addiction. An estimated 91 people die each day from opioid abuse.

“Opioids are dangerous drugs. The side effects are dangerous and severe. Their efficacy is not always what people expect,” said Marcos Iglesias, senior vice president, chief medical officer, Broadspire.

“If opioids aren’t the answer, what do we turn to?”

The time to answer that question is now. Workers’ comp professionals, physicians, insurers and employers alike are looking for that next solution to pain, one that will help curb addiction and more quickly get workers on their feet.

Medical cannabis is one candidate.

Marcos Iglesias, senior vice president, chief medical officer, Broadspire

“Marijuana is unique in that everyone comes into the conversation with a bias,” said Mark Pew, senior vice president, PRIUM, a division of Genex Services.

With opioids, he said, no one knew of the dangers at first. Marijuana, on the other hand, always provoked two very polarized views: It does a great deal of good or it’s a strong drug with bad consequences.

A 2014 study published by the Journal of the American Medical Association (JAMA) found a link between legalized medical marijuana and a decrease in opioid-related deaths. States that legalized medical marijuana saw a 25 percent decrease in deaths from opioid overdoses.

Yet, “when people make the claim that medical marijuana is the solution to the opioid epidemic, it resonates with some people because of that bias,” said Pew.

Because of ongoing controversy, not to mention its classification as a Schedule 1 narcotic by the federal government, medical marijuana isn’t lined up to be the pain-relief answer anytime soon.

Non-Drug Therapies

So how about this: Let’s treat pain with no drugs. Radical as it may sound, non-drug pain therapies hold merit.

Meta-analyses collected for a U.S. National Library of Medicine study found that cognitive behavior therapy (CBT) had a positive effect on chronic pain and fatigue. Specifically, CBT was found to be a superior method to other treatments for decreasing pain intensity in fibromyalgia patients.

Iglesias, who has worked as a physician for more than 25 years, said CBT, a psycho-social therapy used to teach patients about the emotional and psychological factors influencing their pain, leaves a lasting impression on the injured.

“The methods I’ve seen work well are behavioral approaches — giving people tools and methods so they can manage their own life.”

“Marijuana is unique in that everyone comes into the conversation with a bias.” — Mark Pew, senior vice president, PRIUM

In workers’ comp, physicians using a CBT approach look at an injured worker’s life outside the office walls. Their home life, their health, their financial responsibilities and their mental ability to cope with an injury all factor into the healing process and could potentially lead to a lengthened claim if untreated.

Assessing these additional forces enables a physician to recommend therapies beyond the typical pill prescription.

Sometimes that means sending a patient to physical or occupational therapy. Sometimes yoga or acupuncture will do the trick, with both philosophies tapping into the mind-body connection  and encouraging relief. Exercise, diet and overall wellness are factored into an injured worker’s chronic pain management.

“Drug-related therapies tend to mask the pain symptoms,” said Michelle Despres, vice president, national product leader physical therapy, One Call Care Management. “Opioids are like the ‘quick fix.’ In physical therapy, we investigate pain patterns, seek to correct musculoskeletal problems and teach people about their anatomy.”

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A non-drug pain therapy, PT looks at the physical components of an injury, educating injured workers about the muscles that hurt and how to effectively use them in daily activities. The big question physical therapists ask: What triggers the pain?

“We look at outside activities that could be affecting the injured worker,” she said. “We look at strength, range and flexibility. We want to change the behavior instead of masking the pain.”

Iglesias pointed to another example of non-drug pain therapy called acceptance and commitment therapy (ACT), in which health care professionals work with an injured worker to accept their chronic pain but then commit to living their values in spite of that pain.

ACT, in essence, focuses on mindfulness and function in a person’s life.

Iglesias added he’s seen disability duration lessen because more professionals are starting to address function instead of pain.

Cost and Well-being

But pain is still a big factor in an injury, and CBT primarily focuses on pain management. It’s being used increasingly as an alternative to opioids, too. So much so, in fact, that some states are starting to draft legislation aimed at adopting  its methods.

In Ohio, for example, residents with work-related back injuries are now required by law to try remedies such as rest, physical therapy or chiropractic care before surgery or opioids are even brought into the discussion.

And Ohio isn’t alone; at least 17 states have added restrictions on opioid prescriptions, including limiting the length of time such pills can be prescribed. But not all states are turning to CBT and like methods to combat the growing epidemic.

Michelle Despres, vice president, national product leader physical therapy, One Call Care Management

“In workers’ comp, anytime we talk about change, it’s about cost containment,” said Pew. “But this has nothing to do with cost containment, premiums, closing claims, scale of benefits. It’s about personal well-being.”

Iglesias added he has seen much more acceptance of CBT and other non-drug therapies on the payers’ side, though not everyone is on board.

“Payers see opioids have not helped patients. They’re cognizant of needing to move beyond just drug medications. However, psych and behavioral factors can be a significant issue in workers’ comp. Some individual payers are afraid that a behavior approach might induce a psych claim,” he said.

“Nobody wants to pay for everything that happened to you in your life but, in essence, we do when psychosocial concerns aren’t addressed early and it delays recovery,” added Pew.

“There are payers who have started to see the value in the biopsychosocial model [looking at every aspect of a person’s life], but there’s still an obstacle with psych.”

Still, cost-wise, moving beyond opioids yields reduced pharmacy expenses — not just for opioid prescriptions but also for other prescriptions written for opioid-related side effects like nausea, vomiting, headaches, lack of sleep and so on.

“Opioids have addictive qualities,” said Despres. “It’s easy for us as a society to want to see something diagnostic tied to a drug-based solution. But with alternatives, we lose nothing and chances are we can mitigate chronic pain. We know there are no long-term bad effects to physical therapy.

“The cost to get people off of opioids is huge. Just getting them back to their daily routine, the back-end cost of detox from opioids is enough to at least consider other non-drug pain relief methods as the first treatment option.”

Changing Mindsets

Effective change comes once the employers and their workers understand the benefits of non-drug pain therapies.

Untill now, “in between the payer and the treatment is the patient who has often created this passive mindset that someone else will take care of them,” said Pew.

This mindset isn’t going to help in the long run. Education is key for both employees and employers to work toward pain management.

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“One appointment isn’t going to solve the problem,” said Despres. “We have to break the cycle. Time is the biggest downfall; we have to get people moving versus letting someone sit at home. For chronic pain, we provide the education [to the injured worker] on what’s happening inside when they do activities and how to not only manage their symptoms but also correct musculoskeletal imbalances.

“Workers’ comp, as a practice, needs to embrace the idea of being seen quickly and early and getting the injured worker in the mindset of having a role to play,” she added.

For employers, Pew said those who are engaged in their workers’ well-being see more positive outcomes when injuries occur. Investing in wellness programs enables workers to address those outside factors — like psych and diet and exercise routines — before any injury.

“[Wellness programs are] a way of trying to show there is more than a drug or a procedure; employers and physicians can work to teach that concept before an injury even occurs,” said Iglesias.

“There’s a fear that we’re taking something away. There’s a belief that opioids are the best pain modality. Could we develop more programs to teach about opioids to an employer’s population before an injury?”

His answer is a resounding yes.

Public perception plays a big role in the move away from opioids. Workers’ comp professionals, health care workers and legislators see and understand the negative effects of opioids; however, the public isn’t as convinced.

Mark Pew, senior vice president, PRIUM

The New England Journal of Medicine released a study in January entitled, “The Public and the Opioid-Abuse Epidemic.” In it, researchers examined several national polls conducted in 2016 and 2017 regarding how the public believes opioid addiction should be addressed. They found that a significant number (28 percent) don’t actually see it as a national emergency.

Fifty-three percent did say it was a major problem, though only 38 percent of respondents said it affected their home communities.

“An important finding from our review is that at a time when [we] are seeking a substantial increase in government funding for opioid-addiction treatment programs … polls show a large share of the public uncertain about the long-term effectiveness of treatment,” the authors wrote.

They speculate this uncertainty might lead to less funding for alternative treatments to opioids and less funding for people recovering from addiction.

“Sometimes we don’t know everything,” said Despres, “but we should still open up and embrace what could be. If [non-drug therapies] don’t work, you haven’t lost anything. If it does help, you’re better off.”

That’s why engaging employers and their employees is imperative.

“If we see an employer with a pattern of the same injuries, we can offer many possible solutions from ergonomic improvements to classes for body mechanics training.”

A Balancing Act

But one size doesn’t fit all when it comes to pain relief, and while non-drug pain therapies do help, Pew said that doing away with drugs altogether would be unwise.

“Every person is an individual and needs customized — individualized — treatment plans. Every individual is different. How they deal with pain is different, what their support system is like is different — that’s why treating pain is so difficult.

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“Exercise, a better diet, yoga and other non-pharmaceutical treatments are effective, but often underutilized components to a successful pain management protocol. But trying to come up with a one-size-fits-all is counter to common sense,” he added.

In a 2017 study released by JAMA, researchers examined patients admitted to the emergency room for pain-related causes. They monitored the cause of their pain and what medicine brought them relief.

Acetaminophen and ibuprofen were found to be more effective than opioids. Combined, they had as much of an effect on pain as opioids.

Iglesias added, “We do need to move beyond opioids. Other pharmaceuticals do have a role to play, but we need to embrace other modalities of treating pain.” &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]