Sponsors seeking a Jess effect take out 'disgrace' insurance

Shaming of Woods and Rooney prompts rush for cover against scandal

A series of celebrity scandals has produced a boom in insurance policies bought by multinational companies fearful that disgraced stars could tarnish their sponsors' reputations.

Recent high-profile embarrassments suffered by the likes of Tiger Woods and Wayne Rooney – who both cheated on their wives – have left sponsors worried that other multimillion-pound deals signed with stars could backfire.

Woods is said to have lost an estimated £20m in sponsorship money when he admitted cheating on his wife, with AT&T dropping its sponsorship. While he held on to contracts with Gillette – worth £7m – the company distanced itself from the star.

Rooney also suffered damage after allegations about his private life. Coca-Cola, which pays him £600,000 a year for endorsements, plans to remove him from its campaign in America next year.

Mark Symons, an underwriter at the insurance provider Beazley, said: "Because there have been some very high-profile cases in the past few years there has been an uptake in interest in this type of insurance. We have probably seen an increase of about 30 per cent in the last couple of years. Either you lose the money [spent on the campaign] or you get a policy that will pay the cost of you restarting a campaign."

A spokesman for Lloyds said the cost of the policy depends on the worth of the deal and the image of the celebrity. Premiums generally vary between half and one per cent of the sum insured, up to £10,000 per £1m. "If someone is squeaky clean and seems unlikely to cause a scandal – such as [tennis player] Roger Federer, then the premium would be quite low," he said.

This extra cost has prompted companies to question whether they should be doing sponsorship deals at all, said Robert Barron of the insurance broker Lockton. "If you start buying disgrace insurance there's a cost, so people are starting to look at types of promotion that are not to do with a certain individual."

But branding experts argue that it is very hard to prove if a star's transgression damages a brand. According to insurance industry insiders, many policies depend on whether a scandal can be said to be out of character. Most agree that companies are better off vetting celebrities so they ended up with safe bets like Jessica Ennis, Britain's heptathlete champion.

Stephen Cheliotis, chief executive of the Centre for Brand Analysis, added: "It's difficult to quantify how much damage a scandal has caused. It would require a robust tracking method of the brand performance before and after the scandal, and proof of a direct causal link."

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