Insurers Come To Grips With the Opportunities and Risks of Social Media

Given the strictures that insurance companies face with regard to what and how information must or must not be shared, it's understandable that executives' reaction to social media would be to just say, "No." But while some carriers continue to take that posture, most are embracing the phenomenon as an irresistible force with which one must come to terms and potentially use to competitive advantage.

Many companies ban the use of social media sites, such as Twitter and Facebook, outright in order to prevent both the uncontrolled circulation of information and the use of company time for personal purposes, according to Craig Lowenthal, social media strategist at Glatfelter Insurance Group in York, Pa., and the current president of the Durham, N.C.-based Insurance Accounting & Systems Association (IASA). That approach may deal with some aspects of social media risk, he notes, but not others.

Social media constitutes a new communications environment within which a company's brand may be impacted, for better or worse, Lowenthal cautions. For example, there are several Facebook sites about "Flo," a character from Progressive Insurance's television commercials. The largest of these sites has been "liked" by more than 520,000 people -- compared to about 14,000 at Progressive's main Facebook page. "A site not operated by the company is blowing away the company's site," Lowenthal observes.

Leaving aside simply blocking and banning social media sites, insurers can take either a defensive or offensive approach to social media, according to Lowenthal. "At a minimum, a company should have a defensive strategy that monitors and properly handles social media activity and has a policy about using the company's name," he says. "Just as we saw with the Internet in the 1990s, there are executives who don't understand this and prefer to think of social media as merely a marketing or IT issue."

But Lowenthal recommends an offensive strategy that begins with the formation of a multidisciplinary committee with senior executive representation from departments such as legal, human resources, public relations, marketing, customer service and IT.

To develop its social media strategy, in early 2009 Minneapolis-based Thrivent Financial ($67.4 billion in assets under management) built such a team, according to Stacy Eckes-Borys, the company's social media relationship manager. Thrivent's approach, she explains, was shaped by its social networking experience dating back to as early as 1990, at which time the company offered message boards and chat rooms to help its exclusively Lutheran membership interact. The company's current social networking site, Lutherans Online, receives more than 750,000 visits per quarter and has spawned 7,500 subsites created by members, Eckes-Borys relates.

Constructive Engagement

Thrivent sees social media more generally as a means to engage in dialogue with members and prospects, to foster community among members, and to "energize" them to become advocates for the organization, Eckes-Borys continues. "When our team first came together, we began to consider pilot projects with Facebook and Twitter and to develop external social media policy with employees, field reps and contractors," she says. "First and foremost, regulatory requirements were brought into account: content review, retention of the sites and their content, and how it would comply with regulatory requirements."

Thrivent's legal and compliance authorities responded in a spirit of collaboration, and the company issued its social media policy by June 2009, according to Erik Grinde, the carrier's manager of communications compliance. "There was an appetite to get this out and not wait around to see what everyone else in the industry was doing," he recalls, noting, "We are not allowing our field forces to use [social media] at this time, which makes it more manageable."

New York Life (more than $22 billion in annual revenue) enforces a similar policy, according to Ken Hittel, VP, corporate Internet, for the New York-based insurer. "We do tell our agents that they can identify themselves as New York Life agents -- we're not asking them to hide that in any way," he says. "We're just asking them to proactively stay away from attempting to do business on social media."

According to Hittel, New York Life formed a social media committee in November 2009 that delivered a report detailing the risks and opportunities of social media while setting broad goals and providing recommendations to achieve them. Those goals, Hittel relates, are to achieve more and better sales, to enhance marketing and branding, and to increase employee engagement and productivity.

The Risk of Antisocial Behavior

While New York Life avoids direct selling on social media, it sees the channel as a way to improve prospecting through online networking, increase the quantity and quality of leads, enhance existing customer relationships, improve the quality of agents recruited, and improve agent and field manager development, Hittel explains. The carrier is fully cognizant of the risks attending to the use of social media, he insists, but he implies that the risks are outweighed by both the opportunity of employing social media toward corporate goals and the risks of not doing so.

"It's very difficult to be the unquestioned manager of your brand in the social media world," Hittel asserts. "Whether you like it or not, people are talking about you, expressing judgments and talking to friends. If you choose not to participate, you have no hope whatsoever of managing your brand."

Hittel reinforces his point by noting that Facebook has more than 500 million users, and that about 40 percent of American adults use the social networking platform. "It's very much a boomer and senior thing and not just a Gen Y phenomenon," he stresses.

New York Life launched its Facebook page in February 2010 and has seen 92 percent growth month-over-month, Hittel reports. The carrier also has implemented a presence on Twitter, Flickr and YouTube, and has been active in various ways with LinkedIn, including use of the platform for targeted recruiting of professionals, for more than two years, he adds.

Understanding Regulators

Given the regulatory challenges, Hittel suggests, it helps that regulators recognize the inexorable character of social media. "It's very clear that they recognize the ubiquity of the phenomenon and that it makes no sense to tell companies that they should prohibit social media," he says of a guideline issued in January 2010 by the Financial Industry Regulatory Authority (FINRA). "They specifically say there are benefits to social networking that should not be denied to companies and their representatives. But they are still enforcing the same rules that apply to e-mail and advertising -- pretty much everything you say in LinkedIn is considered to be reviewable, monitorable and archiveable."

The regulator's intention, according to FINRA spokesman George Smaragdis, was "to ensure that, as the use of social media sites increases over time, investors were protected ... and firms are able to effectively and appropriately supervise their associated persons' participation in these sites. At the same time, FINRA is seeking to interpret its rules in a flexible manner to allow firms to communicate with clients and investors using this new technology."

Insurance companies' successful use of social media also is dependent on internal content regulators' understanding of the channel, Thrivent's Eckes-Borys suggests. "The success we have attained in social media would not be possible without the support and collaboration we enjoy from [the communications compliance] team," she says. "Social media is very real-time, and when we need content reviewed, they are adjusting priorities so that we will have that review."

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