Reputational risk can hurt a company just as much as or more than any other type of traditional risk, especially in a digital age where social media can spread news and rumors like wildfire. Howard Mills of Deloitte L.L.P. discussed how companies and their insurers can and should protect their reputations.

Let's stipulate from the beginning that reputational risk is not necessarily the result of anything a company does. Let's also stipulate that insurers are among the most honorable of businesses and have an enviable track record of paying claims and fulfilling their contracts with policyholders.

That and $2.25 will get you a ride on the New York City subway. It certainly won't get any insurer protection from the harm that a few loud complaints can cause, whatever their merits. Especially when 1 million consumers can use the social media megaphone to amplify their reasonable-sounding complaints, or when regulators need to demonstrate their consumer protection bona fides.

Insurers now are faced with moving beyond what is legal or even what is right to what will look right in order to minimize reputational risk.

Reputational risk sometimes has nothing to do with the merits of a complaint, or with legal correctness or regulatory rules or any of the guidelines that normally form the basis of good business practices. What was yesterday's good and reasonable business practice may turn out to be today's reputational risk.

It would be hard to argue that insurers do not, almost universally, live up to the terms of the deals they make with policyholders. Normally, an insurer refusing to pay is so rare as to be fodder for every consumer reporter looking to be the lead story on the six o'clock news.

This relationship of trust has been based on contracts that spell out exactly what is covered and what is not, that let policyholders know exactly what to expect. But that rules-based relationship has been somewhat shaken in recent years by a more principles-based approach that applies a certain flexibility that may damage insurers in the short run and not help consumers in the long run.

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Post-Hurricane Katrina, for example, insurers were painted as villains for not covering damage homeowners policies clearly said was not covered. More recently, insurers who signed legal, binding contracts with the federal government allowing the use of retained asset accounts for life insurance payouts found themselves under attack in the press and on Capitol Hill. Life insurers using the Social Security Death Master File and insurers providing lender-placed insurance with rates approved by state insurance departments have seen their share of reputational risk in the past few months.

I thought of this as I read the latest study on auto insurance rates from the Consumer Federation of America. That study found that while consumers favor using driving-related factors, including age, to determine auto insurance premiums, they are opposed to using various non-driving-related factors such as education, occupation or marital status.

The study says only 45% of consumers surveyed found it very or somewhat fair to use location of residence and only 33% found it very or somewhat fair to use occupation as factors determining how much someone will pay for auto insurance. The study also says that using these non-driving factors could cause premiums for low- or moderate-income drivers to double or go even higher.

As economist Bob Hartwig, president of the Insurance Information Institute Inc., said in one press report on the survey, “Every one of these factors that they? attack is correlated, and highly correlated, with loss.”

Very true, but as Stephen Colbert first pointed out, and as we all know intuitively during election season, “truthiness” doesn't necessarily yield to logic. As Mr. Colbert said, “We are divided between those who think with their head and those who know with their heart.”

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So, here's the question. When you're a careful driver with a clean driving record living in a moderate-income neighborhood with no college degree and find out the CFA study said the latter two factors may have resulted in substantially higher premiums, what are you going to think? Are you going to believe, as the facts argue, that these factors beyond your control that seem to have nothing to do with your driving record are fair and good loss predictors, or are you going to wonder if insurers are biased against low- and moderate-income drivers?

In your gut, where truthiness resides, what do you think you'd think?

This is not to pick on auto insurers, even though it comes at a time when state regulators are becoming more assertive and the Federal Insurance Office has a mandate to look at the effect of auto insurance premiums on low- and moderate-income citizens. It is instead a challenge for all insurers. The truth, truthful as it is, may no longer be enough. Truthiness is a concern reputational risk management must consider. That may mean beginning to review current practices and incorporating or expanding metrics for reputational risk.

As Jonathan Copulsky observed in his recent book, “Brand Resilience: Managing Risk and Recovery in a High-Speed World,” “For the risk intelligent enterprise, investing in brand building is no longer enough … Brands are under constant attack, and brand stewards must systematically understand the risks that their brands face, the potential impacts, and the options for managing those risks.”

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Mr. Copulsky's point can be easily appreciated by the numerous companies, including insurers, whose practices have come under attack in viral videos or social network postings. A century-plus old quote often attributed to — though never verified — as originating with Mark Twain is far truer than it has ever been: “A lie can travel halfway round the world while the truth is putting on its shoes.”

Proper reputational risk management, including unwavering vigilance in monitoring and measuring reputational threats, may help mitigate any damage the next posting bashing an insurer may cause.

Defense is not enough though. Insurers also need to use the same social media and other tools available to everyone else to create communities that can provide the necessary support when a brand comes under attack. Insurers do a great job of helping people but have done a lousy job of letting people know how much they help and letting consumers become a part of their ecosystem. Some recent work by some insurers is trying to change that by communicating the shared values that can help build lasting relationships with consumers as opposed to simply transactional interactions.

As Mr. Copulsky told American Public Media's Marketplace, “Starting to build that ecosystem of individuals who can help you get the word out and start to be your advocates is as important as the people who would be saboteurs.”

Because though reputational risk sometimes has nothing to do with the merits of a complaint — or with legal correctness or regulatory rules or economics or truth or any of the guidelines that normally form the basis of good business practices — when it comes to the bottom line in our connected society, it can hurt just as much as any other type of more traditional risk.

Howard Mills is chief adviser for the insurance industry group at Deloitte L.L.P. and a former superintendent of the New York Insurance Department. He can be reached at howmills@deloitte.com.