Social media in the insurance industry has advanced beyond the experimental phase and reached a tipping point. The early appeal of Facebook and Twitter as a tool for virtual socialites and an experimental platform for company mavericks has proven valueable and important as a presence in these realms. Lessons learned include the surprising appeal across generations as well as the amazing market reach. That said, reach can be a double-edged sword.

Companies know all too well that proclamations of poor service are often “twittered” or blogged to thousands in real time, and that customer-created videos of poor service experiences sometimes go viral on YouTube. An excellent example is David Carroll’s infamous “United Breaks Guitars” video, posted on YouTube in retaliation for the airline damaging his Taylor guitar. Shortly after, The Times of London reported that “…within four days of the song going online, the gathering thunderclouds of bad PR caused United Airlines’ stock price to suffer a mid-flight stall, and it plunged by 10%, costing shareholders $180 million.”

While Carroll’s video was probably not the sole source of the stock drop, damage control against that kind of exposure is difficult at best. Customers have been greatly empowered by social media forums, putting pressure on companies to deliver consistently good service and become proactive with image management.

Within the insurance industry, innovation leads the way. Progressive has more than 2.5 million Facebook “fans” following Flo, their famous insurance girl, while Farmers has accumulated more than 130,000 fans. These are only two examples of the many companies with a strong presence on Facebook. USAA leads the way on Twitter with 12,000 followers, joined by Allstate and State Farm at about 9,000 followers. Another example is American Family, which is one of several companies having implemented a multi-faceted approach across sites including Facebook, LinkedIn and Twitter. And let’s not forget the viral power of YouTube, where GEICO’s caveman commercials have drawn over one-million viewers and the new R. Lee Ermey – Therapist Sarge commercial boasts 2.8 million viewers. Allstate’s 'Mayhem' series is gaining in popularity as well.

LinkedIn’s sites are subtler but still have a strong presence. These sites host general, career and product information with the intention of gaining a network of potential job applicants and followers interested in a company’s community and leadership activities. LinkedIn is also a good source of subject-specific polls among professional groups with a common interest, like contact center managers or HR specialists. Regardless of method or intent, integrating social media strategies into a company’s overall plans is no longer optional. Staying visible and relevant to an important target market (social media cognoscenti) requires it.

Unfortunately, popularity brings formality, and with that comes the attention of regulators and the imposition of compliance requirements. FINRA (the Financial Industry Regulatory Authority) passed several regulatory notices and communications throughout 2010 to set the stage for appropriate use of social media, as have the SEC and other regulatory agencies. Still, the challenge is not so much the company-controlled presence—since most companies have a rigorous oversight program for managing external content—the real challenge exists in how to enable and simultaneously regulate the thousands of company agents and representatives; most of whom are independently contracted yet subject to regulatory oversight.

Salespeople may have their personal Facebook pages, a page for their agency, a Twitter account for their customers, a LinkedIn profile for recruiting new agents, self-made informational and advertising videos on YouTube and maybe even a blog. By definition, each of these presences can and probably does fall under regulatory oversight and is subject to a litany of compliance requirements. (Not to mention the reputational impact that can be caused by a company representative’s personal position statement in a post or embarrassing party photograph.) Dealing with these thousands of points of presence without impeding sales force effectiveness is a major challenge facing many companies.

This new challenge has resulted in new technology solutions coming to the market. Socialware, a successful startup, has lured New York Life and other financial customers to its hybrid middleware approach, incorporating features such as disabling the “like” function on Facebook accounts when a company deems it a form of endorsement. A fast-growing competitor, Hearsay Social provides control via APIs; a different approach that they claim is more effective and flexible. They have already signed up State Farm as a client and companies in other industries. The competitive positioning between these two key players is intense—Hearsay argues the API approach is more seamless, while Socialware takes the position that their approach provides stronger compliance control. Both represent a growing segment of technology solutions that insurance companies will have to evaluate for fit and effectiveness.

The bottom line is that social media has become a necessity for companies to adopt and integrate into their operations. Consumers expect reputable companies to have a presence across the Web, and they are relying more upon these presences for research, education and even communication. Absence and non-participation are not viable options because competitors, consumers and customers all participate in putting company names out there with or without the company’s support. Silence can easily be interpreted as ignoring the importance of the medium or being out of touch.

This pressures companies to establish an effective, relevant and compliant presence—fast. Though the complexities can seem overwhelming, careful planning, market analysis and measured steps forward will reveal what’s best for your company. Avail yourself of outside resources to speed up the process and to learn from the experiences of others. As you develop your unique strategy, tailor it to your brand strengths and operational capabilities so you can capitalize on the exposure with positive follow-through. The world is watching!

This column originally appeared in Insurance Networking News.

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