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Boston startup sells ‘disgrace insurance’ to cover companies hit by celebrity scandal

A start-up insurance company in Massachusetts will cover brands negatively impacted by public scandals and those insured could receive payouts as large as $10million if the public reaction is big enough. 

Boston-based Spotted Risk is targeting the likes of sports teams, networks, financiers and brand advertisers to take out this upgrade on ‘disgrace insurance’, in the wake of scandals ranging from the college admissions scheme to the widespread misconduct allegations that have sparked the #MeToo movement.

Consumer brands with celebrity ambassadors or production companies who have worked with stars before their fall from grace could benefit from taking out an insurance plan with the company that has already entered 27,000 public figures in their database.

Now losses due to working with public figures on the downfall are apparently quantifiable and can be reimbursed in a similar to costs associated with disasters.

Following a scandal the level of public outcry is determined when research firm Kantar conducts a number of polls containing about 25 questions to see how well the the event is remembered over the course of 30 days and how the reaction differs as time goes on.

The payout amounts fall into five tiers, with Tier 1 being $2million and Tier 4 $8million. 

Before the event, risk data is collected by workers in India who scan celebrity news and the information is used by data scientists in Boston who work with an algorithm to determine the ‘single parametric trigger with a 7-day payout’. 

The database has already applied 224 attributes and risk factors to the likes of Kim Kardashian and rapper Lil Xan, Vulture reports.  

Using a 0-to-100 points system for both their risk score and reaction score, Spotted Risk comes up with their ‘Public Outcry Index’ and figures out a payout, backed by Lloyd’s of London.

While the other insurers in the niche ‘disgrace insurance’ market tend to put a $5million cap on payouts, the Spotted Risk website states that a policy with them is attractive to businesses due to its high limit of $10million. Brands with ambassadors would be expected to opt for a lower limit.

Premiums range from between 0.7 to 2 percent, which would make the highest premium amount $200,000.

The website targets companies working with actors, athletes, musicians, executives, comedians, models, chefs, writers and directors saying they have a ‘sophisticated disgrace rating system built by PhDs in data and behavioral science’, namely Steve Hutchinson.

The idea came from Janet Comenos, 33, who worked on a trading floor and in digital marketing before starting Spotted Inc with celebrity sports fan Dana Lampert, who founded an education software company in college before selling it. 

Founded four years ago, they used to work with the likes of Nike, Neiman Marcus, and H&M to tell them what celebrities they were best suited to work with out of a list provide. 

But Comenos noted to Vulture that the brands ‘were pissed off’ because ‘our scores would show that the majority, if not all of them, scored really low in terms of trust and likability and appeal with the brand’s target customers’.

They decided to appeal to companies by focusing on the risk and their data.

Spotted works with ‘public intoxication, cultural insensitivity, child pornography, animal abuse, gang affiliation, bribery, physical attacks, ethnic discrimination, racially charged commentary, cocaine possession, bullying, extortion, sexism, DUI, tax evasion, sexual assault, possession of a deadly weapon, ageism, transphobia, child negligence, arson, child abuse, solicitation, body shaming, infidelity, and bankruptcy’.

In the case of Tiger Woods’ 2009 car crash, his cheating scandal came into play. He lost around $22million but it’s estimated brands he worked with such as AT&T, suffered more.

The company even takes into account whether they are under the age of 35, if they have recently gone through a breakup and even whether they are a firstborn child.

Spotted claims that the number of scandals increased by 29 percent from 2017 to 2018.

‘Disgraceful events are increasing at an alarming rate and have never been so publicly visible — they can cripple your production, campaign, tour, team or company, both financially and reputationally,’ a blurb on the Spotted Risk website warns.

‘Spotted Risk has completely reinvented the decades-old disgrace insurance product in order to meet the needs of today’s market.’ 

With outposts in Los Angeles and New York, its data and algorithms are audited regularly by a third-party ‘to ensure best practices and data objectivity’.

While ‘disgrace insurance’ has been around since the 1980s is has for the most part remained under claims for rare events and it’s notoriously difficult to receive a payout.

Disagreements have ranged from whether a legal matter will be covered if it took place before the policy start date to the act of disgrace not being a felony.

Brokers Gallagher Entertainment and HUB International have worked a number of lower budget reality TV shows over the years.

But insurers have been reluctant to cover companies working with big budget personalities after the Harvey Weinstein and Kevin Spacey sexual misconduct scandals emerged and demand for insurance on cancelled productions rapidly increased.

After a domino effect of allegedly disgraces being revealed, insurers have avoided policies to cater for it due to ambiguity on what determines a disgrace and difficulty saying what it’s worth in many cases.

But Spotted’s first underwriter, Nicholas Hanes, told Vulture: ‘The highest predictor of future disgrace is occurrences of past disgrace.’

Comparing disgrace insurance to something that was rare in Hollywood’s Golden Age but something likely to snowball out of control in the age of social media, Hanes continued: ‘Something like the college admissions scandal: That is a snowstorm in California in June.’ 


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