Social media such as Facebook provides a huge
opportunity for US life insurers to communicate interactively with
their customers. However, lingering concerns about reputational
risk and regulatory compliance have prompted most life insurers to
adopt a cautious approach. Robin Arnfield
reports.

 

Facebook’s explosive popularity has forced the US life insurance
industry, like other industries, to turn its attention to social
media. Life insurers are finding innovative ways of using Facebook
to build connections with their customer base, for example by
highlighting their role as a force for social good in the
community. They are also monitoring Facebook for adverse comments
about their brand and products and for defamatory rogue Facebook
pages. However, because of stringent financial services advertising
regulations, they are generally not using social networks as a
sales channel.

Pull quote by Clark Troy, Aite GroupSo far, life
insurers’ digital media spending has been predominantly focused on
established methods such as online display ads. Globally, social
media spending accounted for just 10% of the life insurers’ digital
media marketing budgets in 2010, according to US-based consultancy
Celent. However, this will change, Mike Fitzgerald, a senior
analyst at Celent, told LII.

“Over the next three years, US life
insurers’ social media budgets will grow much faster than their
other digital media spending such as online display ads, keyword
searches, and video ads,” Fitzgerald predicts.

 

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By GlobalData

Brands

“Social media has changed the way
that brands are defined,” says Stephen Selby, director of
regulatory services at financial services organisation LIMRA. “In
the era of broadcast media, a brand was managed by the company and
communicated to the audience. Now, with social media, customers
define a brand, and it’s important for companies to enter into
online conversation with customers in order to influence their
brand.”

According to Selby, life insurers
are primarily engaged in managing their brand on social networks,
rather than using Facebook as a marketing tool.

“Brand management on social
networks has two aspects: a defensive mode, where insurers monitor
what is said about them; and a proactive – or offensive – mode,
where insurers define their brand and get into conversation,” he
says.

“All major US tier 1 life insurers
are at least monitoring social media,” says Fitzgerald. “The
monitoring could be as basic as using simple search tools, or it
could involve the use of automated workflow tools for handling
incoming and outgoing Facebook posts.”

 

Regulation

The biggest challenge for US life
insurers wishing to set up a social media presence is dealing with
US financial services regulations, under which social media
postings are regarded as advertising.

“Compliance with regulations and
confidentiality issues are major deterrents to life insurers
becoming actively involved with Facebook,” says Clark Troy, a
senior analyst at US-based consultancy Aite Group.

The regulations apply not just to
life insurers’ own social media presence but also to Facebook pages
set up by their affiliated agents, advisors and broker-dealers.

“It’s a massive challenge to comply
with the regulations for all these areas of activity on social
media,” says Selby.

There are three classes of relevant
federal and state-specific regulation that insurers need to comply
with, Selby added. These comprise:

  • federal securities
    regulations from two bodies – the Securities and Exchange
    Commission and Financial Industry Regulatory Authority
    (FINRA);
  • regulations provided by the
    securities department of each state, governing the advisory area;
    and
  • regulations issued by the
    insurance department of each state.

“You need to have clear disclosures
on your Facebook page as to which states you are licensed to sell
products in,” Troy says. “For example, in South Dakota unlicensed
soliciting to sell insurance is a felony.”

In 2010, FINRA published

Regulatory Notice 10-06
,
providing
guidelines to securities firms seeking to communicate with the
public using social media.

“The notice clarifies the
responsibilities of firms using social media to ensure that
[product] recommendations are suitable and their customers are not
misled,” FINRA says.

Firms are required to supervise all
their social media postings to ensure regulatory compliance and
also to archive all social media communications.

“The good news about FINRA’s
guidance is that all the old regulations about advertising life
insurance apply to social media,” says Selby. “Regulatory
Notice 10-06
is a key document on the use of social networks
in financial services, and it’s been referenced by the Investment
Industry Regulatory Organization of Canada and the UK’s Financial
Services Authority.”

 

New work
patterns

The need to monitor and manage
brands on social media and to comply with regulation is leading to
the creation of new work patterns within life insurers.

“In some cases, life insurers
create dedicated teams to handle social media, but the more
prevalent model is to have people from different departments
working in virtual teams that use social media monitoring tools,”
says Fitzgerald. “A customer’s post on the life insurer’s Facebook
page might come to the marketing team, but then the legal and
compliance teams would get involved. Any post by marketing has to
be vetted by the legal team, particularly if it involves lines of
business which FINRA regulates such as annuities and securities
products.”

Social media monitoring tools are
able to search the mass of unstructured text on Facebook in
real-time, identifying negative comments as soon as they appear.
According to Celent, vendors – which include Alterian, Attensity,
Lithium and Socialware – generally provide their software on a
hosted basis.

Fitzgerald says social media
monitoring tools make information more actionable and accountable
than just using a simple search engine to check Facebook pages.

“Most tools use automated workflow
technology which decides in real-time what to do with an incoming
Facebook post by a customer, for example where to send it within
the organisation. They also handle outgoing Facebook posts from the
insurer, and can aid in setting up Facebook marketing
campaigns.”

Some tools are able to identify
people with a big Facebook following, so-called “key influencers”.
Engaging with key influencers enables life insurers to build
positive brand awareness, says Fitzgerald.

In the study
Mining the Chatter, Optimizing Social Media
Monitoring
, Celent comments: “These individuals
[key influencers] have the type of visibility that can be valuable
to a brand, and they represent an important segment to target with
marketing offers.”

Fitzgerald says that life insurers
need to be clear about social media monitoring objectives for the
different products they offer.

“A low-value, mass-market product
such as term life will get more value from social media monitoring
than a high-value niche product such as whole life,” he says. “Life
insurers need to be deliberate about how much effort they put into
monitoring and the value they get out.”

According to Fitzgerald, the social
media monitoring activities involving the least effort are
automating the cleaning of spam from Facebook pages; assessing
sentiment in customers’ postings; and real-time monitoring. The
functions requiring the most effort are compliance management;
identification and targeting of good risks among existing clients
and competitors’ customers; and management of key influencers.

“However, it’s not necessary to
aspire to the top-level functions,” says Fitzgerald.

 

Negative
comments

A key issue for life insurers
setting up a Facebook page is responding to negative comments. On
New York Life Insurance Company’s Facebook page, for example, one
person was repeatedly leaving the same negative message. Another US
life insurer which cannot be named for legal reasons was the victim
of someone who created a defamatory Facebook page called “X
Insurance sucks.”

“An insurer can try to push a
negative comment off the page by adding more posts,” says Troy.
“But putting up too many posts is annoying for the firm’s Facebook
fans, each of whom will receive the posts on their Facebook
pages.”

“If there is a negative comment,
the best practice is to post on the public network, acknowledge the
issue, and say you’re going to be in touch,” says Fitzgerald.
“Then, off the social network, email or phone the dissatisfied
customer and try to resolve the issue.”

An example of a firm with a good
Facebook communications policy is United Services Automobile
Association (USAA), which provides life and auto insurance, banking
and investments to the US military. In September 2011, the USAA
Facebook page had 190,000 fans. USAA’s Facebook page is lively,
with a large number of participants airing their grievances and
comments.

 

Creating
interest

Life insurers work hard to create
points of interest on their Facebook pages in order to attract
fans. New York Life’s Facebook page, which had 111,000 fans in
September 2011, offers planning tools and keeps fans interested
with questions such as:

  • What do you look forward to
    most in the next month?
  • Agree or disagree: with
    respect to a career, happiness is more important than
    money.
  • Fill in the blank: “The
    funniest person I know is _____.”

Thrivent Financial for Lutherans,
with 41,000 fans, sparks off Facebook comments with questions
relevant to its members. For example: “What is your favourite
[church summer] camp memory?”

While some life insurers have
relatively high numbers of fans, in reality, the number of visitors
to their Facebook pages are very low. This is because fans can read
an insurer’s Facebook postings on their own Facebook pages. So an
insurer needs to create special content that makes fans actually
visit its site.

“To bring people back to our
Facebook site, we offer three free downloadable Christian songs a
week on the page,” says Gene Smaciarz, director of creative
services at Thrivent.

Several life insurers are promoting
projects on Facebook as a means of connecting with various customer
segments. For example, New York Life’s Facebook page runs a
campaign collecting and distributing used baseball and softball
gloves.

Allstate Insurance Company recently
ran a promotion encouraging Facebook users to get an insurance
quote on its page, with no obligation to make a purchase. In
return, Allstate donated $10 per quote to a charity providing up to
a maximum of $200,000.

“Social engagement and doing good
are natural fits with life insurers,” Selby says. “The companies
recognise that doing business and doing good are connected.”

Life insurers should use social
media for building community, not for marketing, he added.

“People can see through marketing,”
he notes. “What life insurers should do is find an issue that
resonates with people and get genuinely involved.”

“We’re not trying to do customer
service on Facebook, as we’re not ready to go down that path yet,”
Smaciarz says. “We channel complaints on our Facebook page to
traditional channels. Our goal is to create a community.”

Thrivent has had an active Facebook
page since 2009, and its policyholders account for 91% of its
Facebook fan-base. As Thrivent is a fraternal benefit society,
policy-holders own a stake in the insurer and are referred to as
“members”.

“We want to create dialogue with
our members and encourage them to be advocates for our
organisation,” says Smaciarz. “Facebook is also a good way to reach
a younger audience so they will consider Thrivent for their
financial needs.”

  • Thrivent posts in four
    categories:
  • product information and
    education;
  • corporate news and
    information that is valuable for people to know;
  • social causes;
    and
  • fun and
    entertainment.

“Our social causes postings spill
over into volunteerism, and many people are interested in this,”
Smaciarz says. “We try to create as much engagement as possible, to
generate conversation and to hear our members’ voice. We’ve done
fundraising on Facebook, and have donated to Lutheran camps that
had a funding need.”

 

Agents

“Traditionally, the role of
insurance agents is to be involved in their local community,” says
Selby. “Facebook provides an opportunity to demonstrate that agents
are engaged members of the community.”

Thrivent is currently extending use
of Facebook to its 2,500 tied agents across the US, to enable them
to build connections with their customers and local
communities.

“We’ve been running a limited
Facebook pilot with our top-producing agents, many of whom were not
familiar with Facebook,” says Smaciarz. “We’ve created libraries of
compliance-proof posts that they can use. As social media is a big
challenge for producers, we’re coaching them in the use of
Facebook.”

In October 2011, the trial is to be
extended to brokers who are from the “Facebook generation and are
therefore already Facebook-literate”, says Smaciarz.

The approach taken to Facebook by insurers such as Thrivent, New
York Life, USAA and Allstate can be seen as laying the foundation
for widespread adoption of the all-pervasive social media
phenomenon. Love them or hate them, Facebook and variations on the
theme are here to stay.