On April 18, 1906, a rupture of the San Andreas Fault was felt from southern Oregon to south of Los Angeles. Measuring 8.25 on the Richter scale, the tremor killed an estimated 3,000 people and caused $500 million in damages (about $10 billion in today's dollars).

This still ranks as one of the worst natural disasters in United States history, and was a watershed event for the insurance industry. It also served as an early lesson in the area of industry reputation.

Similar to the wind-versus-water controversy that followed Hurricane Katrina, the earthquake-versus-fire question raged following the catastrophe.

Burst water pipes throughout San Francisco immediately after the quake were blamed for the widespread fire that eventually engulfed the city. Insurance claims were disputed around the subject of cause, and those insurers that held back in paying claims became subject to public scrutiny and bad press.

In more recent times, a number of issues crossing the insurance spectrum have placed carriers under Congress' microscope, caused them to be batted about by the press, and resulted in criticism by consumer advocates and state lawmakers.

Add to that new realities such as the challenging economic environment and the question of federal insurance regulation, and it is easy to see why the industry feels more pressure than ever to protect its reputation and brand identity.

The good news is that there are a number of actions companies can take in building relationships with stakeholders, including:

o Focusing on strategic communications.

o Creating a risk management approach to reputational risk.

o Creating communication frameworks that encourage all members of the team to speak the same language with consistent and comprehensive messaging.

The financial services industry, and large insurers in particular, are grappling with swiftly unfolding market realities. No one needs a reminder of the performance of the markets in recent months, or of jobless rates and government bailouts.

But the truth is these conditions have either sparked new trends or served to exacerbate existing ones–with consolidation and restructuring, regulatory reforms and sustainable cost management playing high on the list.

With these challenges in mind, insurers must work harder than ever to protect their reputations and to correct misconceptions arising with disturbing frequency.

Strong external and internal messaging serves to both highlight strengths and dispel myths. By leveraging such communications, industry leaders can build message frameworks that take a proactive stance in supporting strategic and comprehensive communications to both internal and external stakeholders.

The building blocks of such a framework might include four key areas, beginning with brand reputation:

o Reputation: To combat loss of trust and the consumer's sense of uncertainty about the future.

o Risk: To focus on the importance of implementing an integrated risk management approach that addresses risk across all business decisions and activities.

o Reform: To be prepared and proactive about coming regulatory changes.

o Realignment: To return to the basics of the business by refocusing on key areas such as growth and operational effectiveness.

Now more than ever, a solid reputational risk communications plan must be imbedded in your organization's DNA. Carriers can no longer just be defensive against bad publicity or be forced to react in an uncoordinated fashion that serves to cause further harm.

By rethinking communications strategies and taking a new risk-focused approach to reputational risk, savvy insurers are positioning themselves to be proactive, rather than reactive, when it comes to battling misconceptions and safeguarding brand and reputation.

Communicating progress toward implementing and building enterprise risk management systems is also one path to reassuring investors and other stakeholders.

One major element of an enterprisewide view of reputational risk is a business strategy that includes integrated core messages customized to all stakeholders, both within and outside the firm.

Part of this might include winning over the media. According to the Harvard Business Review, winning a “share of voice” in the media is an effective hedge against reputational damage when the news turns problematic. By boosting the number of media stories that quote somebody from the firm, or citing data provided by the organization, a company establishes a foothold that serves well when crisis hits.

“Strong relationships and credibility with the press are crucial to attaining a large share of voice and are especially important during a crisis, when a company generally needs to communicate its point of view,” the Harvard report stated.

Lastly, by having a proactive communications framework in place, companies foster an environment that encourages all members of the team to become involved.

Beginning with a business strategy and core messages, the framework includes a communication strategy that integrates messaging to all stakeholders, including those internal and external to the company.

This successful communications approach prioritizes minimal business disruption, promotes leadership visibility and alignment, and presents one face to the market. With it, messaging is aligned with strategy and ensures that good business is at the center of the communications effort.

Here's an example of an integrated communications strategy that encompasses both external and internal messaging, in the case of a company that seeks to create a new image, or re-brand itself:

o At the employee level, staff will be reminded that ours is a great industry, critical to society–and that their company is one for which they should be proud to work.

o At the board level, the message might convey that senior leaders are stewards and protectors of the organization's image.

Likewise, senior leaders and management should foster the message to staff that they have a key role in shaping the brand through the experience they give the customer.

At its root, messaging to a company's external stakeholders should be very similar in nature to what's being said internally.

o Prospective employees will know that the insurance industry is an attractive place to work for all and is positioned to meet the modern expectations of future generations.

o Customers are assured that the quality of product and value of services remain constant in good times and in bad.

o Regulators, meanwhile, are getting the message that a company is communicating and maintaining a high level of compliance and transparency, no matter the climate.

Reputational risk has the power to impair a firm's ability to operate successfully in the long run. Companies that work to adopt firmwide views on strategic communications prepare themselves to succeed in today's world of 24-hour news cycles, increasing regulatory scrutiny and rising consumer expectations.

Organizations that pre-identify items that could lead to reputational risk are proactive in keeping the focus on strategic communications, creating a risk management approach to communications and building communication frameworks that encourage all members of the team to speak the same language with consistent and comprehensive messaging.

By putting a premium on reputational risk today, insurance companies can position themselves to succeed in the marketplace of tomorrow.

Rebecca Amoroso is U.S. head, and Howard Mills, the former New York insurance superintendent, is chief advisor at Deloitte's insurance practice in New York City.

Special Reports /

Insurers Need To Rebuild Credibility With Stakeholders

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