201211 IASA theInterpreter: Social Media - Beware the Iceberg


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Article discusses the hidden risks of social media and how all companies, even those not consciously participating in social media networks, already face risks that have to be managed.

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201211 IASA theInterpreter: Social Media - Beware the Iceberg

  1. 1. A publication of the Insurance Accounting & Systems AssociationtheInterpreter®FALL 2012Vol. LXXXIIIssue II®SocialMediaBeware theIcebergFeature Story p. 12Actuarial AcumenAssociation News p. 24Leadership Developmentp.10Special Section:Executive Education in Focus
  2. 2. columns departmentsfeature storyspecial section8 President’s MessageEmbracing Mystery9 From the Executive DirectorMalala’s Story14 IFRS UpdateTo IFRS or Not To IFRS16 The Trend TowardSelf-ServiceR&D Priorities Driven byIndustry Demands4 Editorial Opinion6 About IASA6 Members Only Benefits23 Association News• Career Skills Development Track Recap• National Volunteer Profile: Celeska Fredianelli• Leadership Development• Industry Pulse• Top Tech Trends from San Diego• Committee Spotlight:Marketing & Communications• The Lighter Side12 Actuarial Acumen: Tips for EffectiveGovernance over Loss Reserve ValuationIn today’s competitive business environment, effective corporate governance is paramount. Govern-ing insurance loss reserves (typically the largest liability on an insurance company’s balance sheet)requires management and the Board of Directors to understand key actuarial elements to interactefficiently with and govern the actuarial function. In fact, it is critical for directors and others chargedwith insurance company governance to understand loss reserve valuation and effectively navigatethe actuarial reporting process.15 Executive Education in FocusThe IASA Executive Education Program continues to evolve to serve the changing educational needsof insurance executives across the country and across the industry. Included in this special section ofthe Interpreter is extended coverage of recent Executive Education Program events, and details aboutwhat you can expect in the future.cover story p. 10Steve Callahan of the Robert E. Nolan Companybelieves social media has moved “from a fad to adeep-rooted part of the fabric of our society for notonly business, but our personal lives as well.” In thisarticle, he details the “arrival” of social media interms of legitimate impact on our society as a wholeand the insurance industry in particular. According toCallahan, “the final stamp of arrival was the October3rd live streaming of the second presidential debateof the season on YouTube, marking a milestonesimilar in magnitude to the now-recognized impactof the first televised debates in the 1960s betweenJohn F. Kennedy and Richard Nixon.”FALL 2012 x Vol. LXXXII x Issue II Fall 2012 3A publication of®®contents®PUBLISHED BYInsurance Accounting& Systems Association, Inc. (IASA)3511 Shannon Road, Suite 160P.O. Box 51340, Durham, NC 27717-3409Phone: (919) 489-0991, Fax: (919) 489-1994Email: info@iasa.orgVICE PRESIDENTMarketing & CommunicationsMarketing & CommunicationsLinda PaolucciTIAA-CREFLinda.paolucci@tiaa-cref.orgINTERPRETER/E-INTERPRETERCOMMITTEE CHAIRKen Zieden-WeberXChange Benefits LLCKzieden-weber@xbllc.comEDITORJennifer Overhulse-KingSt. Nick Media Servicesjen@stnickmedia.comART DIRECTORChristina Alta LuboskiStudio607Designscluboski@studio607designs.comSUBSCRIPTION INFORMATIONTricia StillmanDirector – Member & Volunteer ServicesIASA International Office(919) 489-0991 x202tstillman@iasa.orgPUBLICATION INFORMATIONIASA’s Interpreter is published quarterly andis available at the general subscription rate of$35.00 per year for members and $45.00 peryear for non-members.REPRINT INFORMATIONNo part of this publication may be reproducedwithout written permission of the publisher.Reprints of Interpreter articles are available fromthe publisher and may be coordinated throughthe editor of this publication.Copyright 2012 by IASA. All right reserved.Note: The views expressed in Interpreter articles andcolumns reflect the opinions of individual authors andshould not be construed as carrying the endorsement of theInsurance Accounting & Systems Association (IASA) or itsstaff. Additionally, use of this publication, the name IASA,or the name Insurance Accounting & Systems Association,Inc. for personal promotion or recruiting purposes is strictlyforbidden. Violations will be reported to the NationalAssociation of Personnel Consultants and appropriatelicensing authorities. Violations will be published for theinformation of our member companies.SocialMediaBeware theIceberg
  3. 3. Social media hasmoved from a fad toa deep-rooted partof the fabric of oursociety for not only business, butour personal lives as well. Thefinal stamp of arrival was theOctober 3rdlive streaming of thesecond presidential debate of theseason on YouTube, marking amilestone similar in magnitudeto the now-recognized impact ofthe first televised debates in the1960s between John F. Kennedyand Richard Nixon.So, in terms of social media,recent developments makeasking “Where are we today?”extremely relevant and timely.Just consider:• Over two-thirds (66 percent)of individuals in U.S. use socialmedia, including over 50 percentof senior citizens, with 900million plus on Facebookand approximately 140 millionon Twitter.• According to theIndependent Insurance Agentsof America (IIA), over 60percent of independentagencies are using Facebookand LinkedIn, primarily for leadgeneration, brand advertisingand customer engagement.• Nearly 80 percent ofsurveyed insurers are eitheralready using, or are planningto very shortly start using, someform of social media, with 80percent listing their number oneconcern as compliance.• Over three-fourths (75percent) of carriers involvedin social media are activelymonitoring their agents usingcustomized software systems,while over two-thirds (66percent) also require pre-approval of all content.• Budgeting for 2013, overthree-fourths (75 percent) ofthe companies surveyed will beincreasing their investment inthe use of social media.Like the infamous iceberg,the issues surrounding socialmedia run deep and far exceedthe obvious surface levelmarketing and collaborationaspects getting all the attention,and the portion underwateris not only vast, but it can bedeadly. Companies face anentirely new assortment of risks,including reputational damage,First and Fourth Amendmentsuits, slander, defamation,misrepresentations, intellectualcapital theft, data breaches,business interruption, humanrights violations and invasionof privacy. And, each risk isamplified by employee and agentuse of social media.These days, it’s easy fora tweet to go viral and doimmeasurable damage to acompany’s reputation. Evena Facebook post can generatetens of thousands of “likes,”bringing negative attention to adecision. In essence, social mediaeffectively internationalizescomplaints. YouTube videospersonalize issues and cantranslate across platforms totweets and a Facebook page. Twovery recent examples stand out:• Progressive’s recent socialmedia-driven settlement overthe handling of Katie Fisher’sautomated claim in August ofthis year, potentially settingthe stage for future claimspractices; and,• Aetna’s reinstatement ofArijit Guha’s policy covering hiscancer treatments after a barrageof reputation-harming tweets,creating an exception that couldbecome a precedent.According to Symantec’s2011 State of Security Survey,social media ranked number twobehind mobile computing on thelist of “somewhat” or “extremelysignificant” industry trendsaffecting the security of IT. TheWorld Economic Forum profiledthe extent of the exposure bylisting cyber security as one ofthe top five risks to watch alongwith demographic challengesand weapons of mass destructionin its 2011 Global Risks Report.No longer simply a marketingdebate on whether or not thereis adequate ROI, social mediarepresents a significant businessrisk as well, with roughly 35percent of businesses investing incyber insurance as part of theirrisk management programs.Managing exposures remainsa complex and unclear process.There are many unresolvedlegal questions about balancing10 Fall 2012 theInterpreter x www.iasa.orgcover storySocialMediaBeware theIcebergby Steven M. Callahan, CMC®
  4. 4. theInterpreter x www.iasa.org Fall 2012 11cover storyconstitutional rights to free speechand privacy against a wealthof laws preventing damagingstatements or actions by others.Open questions include:• Can an employer be heldliable for an employee or agent’sdefamatory comment?• Who is liable if damagingpersonal information about acustomer, employee or agentis exposed on an employee oragent’s personal Facebook page?• When do insurance carriercompliance guidelines apply toemployee or agent postings ortweets?• If a company is liable, howdoes it monitor its employees’and agents’ private postingswithout violating their rights?The total exposure issignificant, crossing to employees’personal lives, customer andex-customer posts, and agents’comments and pages. Whereverthe company may be mentioned,usually outside of any control,there is the potential ripple effectthroughout the social mediacommunity.Recently, there have beena number of solutions put onthe market that help companiesmonitor the social media space,as well as control what theiragents or employees say ordo – at least on work computers.Some of these tools are even ableto measure the overall “sentiment”of the comments being madeacross the various social mediaplatforms, giving the company asense of how their brand is beingviewed at a given point in time.These same tools are usedto generate exception alertsthat escalate to a responseteam for handling, like whena legitimate complaint thatshould be addressed is tweetedor posted somewhere. However,the assumption that damagingcomments will be directed to acompany contact point is naïve.In fact, companies are constantlybeing talked about acrossthe Internet. Absent effectivemonitoring software, companiesare unaware of all that is beingsaid about them.Even with good monitoringtools, a company must havewell-established policies andpractices, and staff trained onthem both, so that any actionstaken will be consistent withpre-approved and legitimizedresponses. This is reinforced by astrong social media policy, agreedto by all employees and agents,along with a well-preparedcontingency plan for addressingthe inevitable criticism – one thatincorporates speedy responseand rapid decision-makingescalation. Industry best practicesbreak down the steps to goodrisk management of social mediaas follows:1. Identify the key playersfor managing and makingdecisions or recommendationson social media uses and policies,and make sure there is a seniorexecutive with broad decision-making authority assigned to theteam. This person must be ableto make rapid decisions in timeto handle sensitive emergencies.2. Formally assess theorganization’s social mediaactivities, maturity, existingpractices and policies, anddisparate uses across the variousdepartments, employees, anddistribution channels. Identifythe applicable laws and guidelinesand engage expert counsel toreview them with an eye towardhow they apply to your business.Understanding the current stateof the business and social mediais critical to moving forward.3. Evaluate social mediainsurance needs, making surethat there is adequate coveragefor the various areas of risk, fromdowntime to being hacked toleaked personally-identifiableinformation (PII) to litigation.Note that commercial generalliability may not cover onlineactivities, nor possibly covercyber-attacks or extortion,data corruption, specific leaks,inadvertent defamation, privacyviolations, or employee andagent actions.4. Develop a social mediastrategy for the company andthen build a comprehensive setof guidelines and policies thatsupport it. These guidelines andpolicies will be integral to alldepartments, and will ensurea consistent set of practicesenterprise-wide.5. Train staff and fieldpersonnel on social media risks.Provide reminders and schedulerefresher courses to ensureeveryone is aware of, and watchingfor, any potential problems.6. Designate responsibilityfor monitoring and responding topostings, tweets, and complaints.Also, ensure the team has a rapidresponse charter and a well-vettedplan of action. Quick, coherentand informative responses willhelp mitigate the damage andpossibly even benefit the brand.Social media remainsunchartered waters in many ways,with unanswered questions anduntested legal ground. Some ofthe challenges are deeply rootedin values and beliefs:• What is an individual’s rightto privacy when it comes totheir personal accounts, friends,and postings and at what pointshould it be accessible by societyor a given business?• What about free speechversus the perception of sharingproprietary information anddamaging commentary? Arepeople not allowed to say whatthey want on their own personalmedia pages?• When is a social mediaaction by an employee ontheir time and equipment aterminable offense?• Was a proper releaseobtained before using an outsideinvestigative vendor? Does theinformation collected represent aconsumer report under the FairCredit Reporting Act (FCRA),requiring advance consent?• Are adequate measuresin place to ensure nodiscrimination, civil rights,Americans with DisabilitiesAct (ADA), or other regulatedprohibitions are violated?• Does all monitoring activitycomply with state and federalprivacy laws, including theElectronic CommunicationsPrivacy Act, and is it appliedconsistently and equitably?Regardless of whether acompany is using social mediafor marketing, customer service,or claims, the risks and exposuresocial media represents forreputation and profitabilityare significant and requirecontinuous management. Whatis being said about your company,and what your employeesand agents are saying, are notoptional concerns. In fact, theyare critical elements of growthand success. Make sure yourcompany is addressing the rest ofthe iceberg before it’s too late.Steven M. Callahan CMC©is a practicedirector for the Robert E. Nolan Companyand a regular contributor to IASA’sInterpreter. He can be reached for furtherinsights or comment via emailat Steve_Callahan@RENolan.com.‘‘Even with goodmonitoring tools, acompany must havewell-established policiesand practices, and stafftrained on them both,so that any actions takenwill be consistent withpre-approved andlegitimized responses.”