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Insurers Adopt Solutions to Enable Compliant Agent Social Networking

Solution capabilities range from monitoring, filtering and archiving, to content suggestion to help agents engage customers, and analytics that measure the effects of distributor and other social networking efforts.

Insurers have been distributing their products via the networking of their agents since time immemorial, and social media sites such as Facebook, LinkedIn and Twitter are natural adjuncts to distributors' traditional activities. However, these sites raise new compliance and liability challenges that carriers are seeking to control through emerging automated social networking management platforms.

"Because of their digital nature, social networking platforms present interesting challenges to regulated industries," comments Craig Beattie, a U.K.-based analyst with Celent. "These applications allow personal meetings where the message is recorded and almost etched in stone."

In fact, until recently regulators such as the SEC and the Financial Industry Regulatory Authority (FINRA) treated these communications as if they were printed on paper, which made it practically impossible for insurers to manage efficiently. As a result, New York Life ($18 billion in surplus) was not alone in prohibiting agents from using social networking sites in the course of their work, in part because of the state of regulation, acknowledges Gerard Rocchi, SVP and COO, U.S. Life Insurance and Agency, New York Life.

FINRA, however, made clear in 2010 through its regulatory notice 10-06 and other communications that it understood the importance of social networking for financial product distribution and would work with the financial services industry to find solutions. But even before such assurances, New York Life chairman Ted Mathas had insisted that the New York-based carrier find a compliance solution to enable agents and other employees, inclduing recruiters, to use social media, according to Rocchi.

Following a search that began in mid-2009, New York Life engaged Socialware (Austin, Texas) to conduct a "mini pilot" involving both agents and corporate recruiters, recalls Tom Shea, First VP, Agency, New York Life. "We ended the pilot in February 2010, and after negotiating with Socialware as to the direction we wanted to take, we signed an agreement in May 2010," Shea reports.

Leveraging Socialware's ability to customize how different parties may use social media, New York Life has attempted to preserve as much of the social networks' functionality as is consistent with compliance, according to Shea. The insurer blocks some capabilities, such as the "Like" function on Facebook, which could be construed as an endorsement. But, "For the most part, we don't block -- we capture," says Shea.

Shea describes Socialware as functioning as a proxy server between the social media site and New York Life. "It's sort of a regulator sitting on the Internet that watches and captures, stopping content that's not allowed," he explains. "The vendors are also moving to connect with the APIs of sites such as Facebook and Twitter." In addition, Socialware currently provides archiving through both the proxy and the application programming interface (API) route, which, Shea says, "gives us an extra layer of protection."

Newark, N.J.-based Prudential also is attempting to "say yes" to social media while remaining compliant, says Debbi Corej, VP of compliance at Prudential ($750 billion in assets under management) who also is a member of FINRA's taskforce on social media and a participant in Socialware's industry advice council. "We need the ability to allow [representatives] to use social networking within our firewall," Corej says. "Our plan is to adopt an automated solution that allows us to comply with the requirements as we see them, to monitor what we need to on both a preapproval and post-review basis, and to restrict certain functionality."

Prudential currently is doing due diligence on the third of three vendor solutions that Corej declines to name. But she acknowledges that it may be a year before the process is complete. "We have been at the leading edge of doing this, but we also want to make sure we have the right approach, the right policies and the right solution," she insists.

Other carriers that already have adopted social media management platforms include Bloomington, Ill.-based State Farm ($32 billion in 2009 earned premium) and Los Angeles-based Farmers ($16 billion in 2009 gross premium income), both customers of Hearsay in San Francisco. Hearsay CEO Clara Shih describes the platform as being fully integrated with the APIs of Facebook, Twitter and LinkedIn. "API is seamless from Day One," Shih says.

In addition to compliance-related functionality such as filtering, flagging and archiving content, Hearsay also provides marketing and engagement features. "Compliance had to be addressed first, but compliance is not the end game," Shih says. "The end game that we're focused on is customer engagement, relationship building and loyalty."

The platform includes content workflow that enables insurers to suggest content from which agents can select what they consider best suited to their personal style and location. Hearsay also creates real-time analytics and modeling of all agent and brand pages that allow carriers to evaluate social media efforts by various parameters. "Our company was built on relationships, and our agents excel at this with their customers and in their communities" says Craig Allen, VP, Agency, State Farm. "Hearsay empowers our agents to strengthen these relationships on social media while engaging customers and prospects with useful and relevant content. Hearsay also allows us to address the important compliance requirements, which banking and insurance companies need to meet."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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