Insurance Industry Takes Tentative Steps to Embrace Social Media

12.13.2011

Eager to better connect with customers, insurance companies are becoming more savvy about social media, which includes household names like Facebook, YouTube, LinkedIn, and Twitter, as well as a host of lesser-known tools that enable users to connect and interact with each other online. Though insurance industry social media use is not yet widespread, that is likely to change.

“The insurance industry is finally realizing the significance of social media, and the insurance industry and regulators are trying to come to grips with it,” said Carlton Fields shareholder Kelly Cruz-Brown, who practices in the firm’s insurance group and chairs the ABA’s Tort Trial and Insurance Practice Section, Insurance Regulation Committee.

Ms. Cruz-Brown recently discussed the reasons why the insurance industry is both drawn to social media, and leery of it. An edited version of that conversation follows.

Q: What are some benefits of social media use for the insurance industry?

Ms. Cruz-Brown: The insurance industry is built on relationships, networking, and building a good reputation. For these reasons, insurers and producers see merit in using social media to increase visibility, enhance familiarity, and connect with customers. This is especially true for insurance producers because people buy from insurance producers they trust. Insurance producers learn sensitive financial or health information about their customers and customers will only open up if they trust the insurance producer. Even when dealing with sophisticated corporate buyers of insurance, the insurance producer learns about the workings of the corporate client and sensitive information is shared regarding the client’s business. With social media, insurance producers are not limited in developing face to face relationships based on geographical boundaries, which historically is the way insurance producers have had to develop networks.

Q: How is the insurance industry using social media?

Ms. Cruz-Brown: Insurance companies and producers are using social media to enhance networks and relationships in a way that doesn’t require face-to-face contact, provide information to educate consumers, and in limited ways to market products. During and after natural disasters, insurers are using social media as outreach for customers, such as tweets on where to find the location of a mobile claims center or the telephone number to call to make a claim. Insurers are also using social media forensically to discovery insurance fraud. For example, the company might check the Facebook page of a person who has made a claim for worker’s compensation. The company might learn that the claimant is engaging in activities that the treating physician has restricted or prohibited. Insurance companies have used social media during public relations crises to get quicker access to the public.

Q. What hesitations do insurance companies have about social media use?

Ms. Cruz-Brown: Generally, insurers are reluctant to fully embrace social media without regulatory and legal guidance and because of liability and technology issues. This cautious strategy is smart. While they may miss some short-term business opportunities, over time their social media use will expand. But not all types of social media will be appropriate for insurers.

Q. Which will be inappropriate?

Ms. Cruz-Brown: Well, for example, there are challenges regarding the use of social media to sell insurance arise particularly with the use of Twitter, which limits each tweet to 140 characters. Certain required regulatory disclosures about an insurance produce would not fit within that limit.

Q. What type of concerns do insurance regulators have?

Ms. Cruz-Brown: The manner insurers are monitoring and supervising their own use of social media. There are concerns about the delineation between static and interactive content. For example, third-party posts to a website. How should an insurance company deal with a negative comment about it, its products, or one of its agents? If the company doesn’t respond, has the company adopted the third party post as their own? Another concern is record keeping of social media given the inherent interactive nature of social media. These issues continue evolve.

Q. Is there any guidance on these issues?

Ms. Cruz-Brown: Some state insurance departments are addressing social media use and issues through data calls to insurers or through market conduct investigations. The New York State Insurance Department’s Office of General Counsel has issued an opinion stating that the use of a Linked-In profile page or similar website to promote an insurer, insurance products, or insurance producers is an advertisement, announcement, or statement under the New York Insurance Law. Insurance regulators are evaluating the Financial Industry Regulatory Authority’s (FINRA) guidelines, which are expected to be updated in Fall 2011. Finally, the National Association of Insurance Commissioners (NAIC) has formed the Social Media Working Group of the Market Regulation and Consumer Affairs (D) Committee. The Social Media Working Group is developing a white paper that will be discussed at the NAIC’s Fall 2011 meeting.

Q. How can lawyers help their insurance industry clients navigate social media?

Ms. Cruz-Brown: We can work collaboratively with clients and their IT staffs, web developers, or out-sourced social media management companies to help establish procedures for social media use. We can also help once problems arise in responding to regulatory inquiries, investigations, or actions.