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September 23, 2011updated 13 Apr 2017 8:47am

US insurers explore social media

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

By Robin Arnfield

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.

 

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.

 

 

 

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