More and more insurance companies, agencies and insurance producers are using the myriad of social media sites, such as Facebook, Twitter and similar websites as a marketing tool and advertising medium. A critical consideration for use of social media as an advertising venue are the individual state’s rules concerning advertising and marketing. Susan T. Stead, a partner in the law firm Nelson Levine de Luca and Horst, in an article published by The National Underwriter, says that “If insurance companies and agents do not use Facebook and Twitter carefully, they may find themselves not only in violation of insurance laws, but also with an increased risk of errors and omissions claims.”
Please read on for more information on this subject…
There are many good articles and other pieces of information out there that will help minimize the exposures associated with the use of social media sites and it would be prudent of the insurance professional to research the “rules” and abide by them carefully. All states have laws and rules that dictate how advertising is to be done and violation of these rules could easily result in license sanctions, monetary penalties and the potential loss of an insurer’s authority to operate in a particular state. This would obviously impact producers, their clients and potentially the insurance companies bottom-line if faced with litigation from a customer.
The Financial Industry Regulatory Authority (FINRA) has been considering the use of social media in the insurance industry for some time. In January 2010, FINRA issued Regulatory Notice 10-06, providing guidance on the application of FINRA rules governing communications with the public to social media sites and reminding firms of the recordkeeping, suitability, supervision and content requirements for such communications. Some questions are left unanswered in this notice, however it does provide a lot of information and guidance for use in the insurance industry. I heavily recommend reading this notice if you are using social media to promote yourself or your insurer(s).
UPDATE: FINRA has since issued Regulatory Notice 11-39: Since its (Notice 10-06) publication, firms have raised additional questions regarding the application of the rules. This Notice responds to these questions by providing further clarification concerning application of the rules to new technologies.
Some other quotes from the National Underwriter Article found interesting:
“Disclosures are commonly required in insurance advertising yet often are absent on Facebook pages and Twitter Tweets. One common requirement is that the full legal name of the insurance company as well as the location of the home or principal office must be disclosed.”
“There are agents who make statements on Facebook and Twitter such as ’save up to 25% on all your insurance policies’ or ‘I just saved Nancy $500 on her auto insurance.’ Sometimes, specific insurance companies are identified. There are insurance laws that restrict the use of such statements, and an agent or insurance company always runs the risk that a competitor will contact the insurance department and challenge the accuracy of such statements.”
“The age-old question of what constitutes an improper inducement or rebate surfaces when an agent’s Facebook page contains a posting that states, “We have free tix [sic] to ‘Guns & Roses!!!!!…first come, first serve…call Dave…”
The article contains many similar concerns that indicate potentially harmful actions if performed incorrectly by the agent, agency and carrier. If you would like to read the entire National Underwriter article on the Use of Social Media, click HERE.
Since the social media bandwagon is still in it’s infancy, it would behoove the financial industry professional to become educated in this area. Ignorance of the rules could create a problem that, if properly researched, would have never happened in the first place. This is an interesting area that is only going to get bigger as time moves on and it’s only a matter of time before we see the first regulatory sanction for improper use or a lawsuit filed by a disgruntled customer. Remember…the best way to overcome a problem is to make sure that the problem never occurs in the first place!