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AIG unveils celebrity 'scandal insurance' policy

Tiger Woods wearing a Nike cap.
Getty Images
Tiger Woods wearing a Nike cap.

It's a whole new world.

American International Group released on Thursday its Celebrity Product RecallResponse, an insurance product aimed at helping companies hedge against a celebrity's "fall from grace, scandal, or unexpected death," the company said. The product is provided through Lexington Insurance, AIG's excess and surplus carrier, and is available with stand-alone policy limits up to $5 million, or by endorsement limits up to $1 million.

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"In this age of social media and instant news, reports of indiscretions by celebrities or high-profile athletes can spread worldwide instantly, with swift, adverse implications for products or brands associated with the individual," said Jeremy Johnson, CEO of Lexington Insurance.

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The insurance policy would be activated by a number of different scenarios, Johnson said. For example, if a professional athlete endorsing a water bottle brand becomes embroiled in a substance abuse scandal, the policy would be triggered and all the promotional and marketing materials would be removed from the market, he said. These materials range from billboards to TV commercials, Johnson added.

Policy costs also vary widely because of all the factors taken into consideration, Johnson said. Some of those factors are the size of the company, the specific products subjected to the endorser and the endorser himself. The endorser is evaluated based on his or her past behavior and previous endorsements, among other factors.