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Catastrophic Event

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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.

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