Catastrophic Event
On 1st May 2016, a
wildfire was reported in Fort McMurray, which rapidly spread through the forests
and the neighboring communities leading to the destruction of several buildings
and displacement of many residents. It is said that within two months, the
disaster had consumed approximately 590000 hectares of land and caused damages
estimated to be more than 9.9 billion Canadian Dollars. Although the property
was insured, the magnitude of the losses was so enormous than the insurance
company had predicted. It was a costly adventure to pay the insurance claims
from such a natural disaster. Economical Insurance was making losses at the
time of the fire crisis, but the insurer had to cover the incident leading to
more losses.
Communication Strategy
Despite the hard
financial times, the Economical Insurance displayed a communication strategy
that proved its commitment to the policyholders. It ensured it did not loss
neither confidence nor trust of its stakeholders because of the unsatisfactory
business performance. In the company’s statement, CEO Karen Gavan made it clear
of their primary focus of protecting their stakeholders after the catastrophic
fire. The CEO observed that the devastating effects of the catastrophic fire
incident did not undermine their corporate responsibility of restoring the
customers to their former immediate state after an unexpected event. The
communication was clear and addressed the present challenges while maintaining respect
to the public and stakeholders (Reynolds, 2010). The management
followed the principles of delivering negative news. Effective communication
was vital for company to overcome the crisis with fewer negative impacts.
The main concern of the
organization was its policyholders since they were the most affected by the
crisis. Economical Insurance was careful about how it approached and
communicated with the target audience. The company was open and honest with the
stakeholders which promoted trust. In a situation of an unexpected event, the
main attribute at risk is trust because of the deep feelings of insecurity,
fear and rage associated with the massive losses (Siegrist, Gutscher & Keller, 2010). Economical Insurance did not hide its troubled
finances. Instead, its financial records were open to the public. For example,
it made it known to all its customers that it was reporting losses estimated at
30-40 million Canadian Dollars. The actual financial outcomes demonstrated the
company’s transparency even in turbulent circumstances. It helped to regain the
trust of its customers since they were assured of that the company would still
compensate them even if it was performing poorly.
The communication
strategy protected the interests of the key stakeholders who were bound to make
significant losses in case the firm did not have to pay the claims. The CEO’s statement
did not predominantly focus on the interest of the company by only addressing
the loss-making spree. It contained information about the intentions of the
insurer to pay the claims. The firm demonstrated its accountability and ability
to meet its policyholder’s expectation which is a central theme in crisis communication
and management (Coombs, 2010). Achieving stakeholders’ expectations is a standard legitimacy
central in crisis management. The communication was customer-centered because
they were the most affected stakeholders by the catastrophic event. Although
the crisis exposed the unpreparedness in the organization to mitigate such a
crisis, the CEO’s statement reassured the policyholders on the efforts of the
company to help them recover from the loss.
The company used a
single communication channel when addressing its policyholders after the
incident. The CEO acted as the company’s spokesperson, who delivered the
statement to the customers. There were no other employees communicating
on-behalf of the insurance firm or commenting on its challenges in compensating
the affected persons. In the statement, the CEO informed the policyholders of
the company’s position and progress as it grapples with covering one of the
country’s most substantial insurance claims. The single communication channel
played a significant role in limiting confusion and distortion of the company’s
statement. Crisis communication should come from a senior person in the organization
hierarchy (Forrest, 2011). Often, an executive-level spokesperson is designated when
dealing with highly sensitive issues of great public concern. The CEO who is an
essential figure in the insurance firm helped to limit unnecessary speculations
or false accusations from the policyholders and the general public which could
have caused irreversible effects on the company’s reputation.
Different Approach
The catastrophic event
revealed that the organization was unprepared to handle such a high magnitude
crisis. The insurance firm lacked a crisis communication plan since its
statement to the public was not exhaustive. The public statement did not include
the magnitude of the problem, how it was reported, the response progress and
available resources. An appropriate approach would have been the use of a
crisis management plan. This is a scenario document containing information on
the lines of communication and responsibilities of each individual before a
crisis (Sellnow &
Seeger, 2013). The existence of a
well-designed plan is essential in effective communication and response to an
emergency. It is because it acts as a standard reference document for all the
employees and helps each person in the organization to understand their roles
leading to a swift response. Economical Insurance entirely relied on the CEO
for communication and direction after the catastrophic fire incident.
The major components of
a crisis communication plan are crisis team members, media plan, designated
spokesperson and meeting place. The communication team is composed of
individuals responsible for deciding actions to be taken when responding to a
crisis, performing the actions and also educating stakeholders including the
public, policyholders and employees on relevant areas in delivery and
management of negative news (Frandsen
& Johansen, 2011). The communication
plan would have a designated spokesperson who is responsible for regular update
of the policyholders on the more details about the crisis and the compensation
progress. The spokesperson also determines what messages on post on the social media
regarding the crisis (Agozzino
& Kaiser, 2014). The person ought to
have in-depth knowledge of the company’s values and can withstand pressure from
the public.
Media plan would have
helped to determine which information to disseminate and how to structure it
before sharing it to the target audience. The plan would have been in
instrumental in determining which aspects of the financial outcomes to share to
the public without disclosing irrelevant issues. For example, the company was
supposed to disclose its losses thereafter explain its recovery plan to gain
more confidence from the policyholders. The media plan would have helped to
clarify information from the public without speculations. The official
responses would be useful in the clarification of the catastrophic event.
Since a crisis
communication plan contains a crisis contingency location, the insurance firm
would have designated a suitable place for coordination of all the communications
and activities about the tragedy. The location could have contained
professionals responding to queries from policyholders and preparing the
spokesperson on what information to deliver to the stakeholders. The
professionals would help in protecting the company’s reputation by only
providing relevant information to the policyholders to ensure transparency and
trustworthy. The communication team promotes an effective crisis communication
strategy that is clear, concise and maintains trust. It is a sure way of
avoiding legal liability because the organization knows what aspects of
negative news to share to policyholders, employees and the public. The
practical implementation of the crisis communication plan would have helped the
insurance firm attain its expected business outcomes and solve the crisis
within a short duration with minimal negative consequences.
Once the crisis hit, the organization ought to have worked with the crisis team to limit its duration and also prevent its spread to other unaffected areas (Coombs, 2014). The crisis team would have collaborated with both the internal and external stakeholders to combat the crisis. Some of the external stakeholders are the firefighters. The insurance firm could have supported the efforts of the firefighters in tackling the razing fires to ensure that it is contained within a short period. Also, ensure the affected policyholders are compensated within a short period. The internal stakeholders, majorly comprising of the crisis team, would have facilitated the collection and processing of information for decision making on addressing the catastrophic event. Social media would have been used to reach out to numerous stakeholders and gather enough support in responding to the crisis before spreading beyond control.