Although websites such as Pinterest, Facebook and LinkedIn can help make a business more successful, insurers, producers and other insurance entities need to protect themselves from the risks social media can create. Social media sites raise a diverse group of business risks that need to be addressed in a good social media policy.

Privacy and Intellectual Property Concerns

The consumer's right to privacy in internet activity is a paramount issue for insurance companies who are subject to the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), among other federal and state laws. Insurers and producers need to carefully consider how personally identifiable information may be intentionally, or even unintentionally, collected about insureds and consumers through the use of social media platforms; how this information will be managed; controls to assure that this information is not publically disclosed; and the implementation of robust data security protections.

While it may be often overlooked, the opposite also holds true. Insurance organizations should ensure that their employees and representatives are not disclosing too much information about their company or compromising their company's intellectual property rights on social media sites. Companies may lose their proprietary trade secret or confidentiality rights depending upon the information they make publically available. This could occur through a simple well-meaning or unintentional internet posting. Generally, trade secret protection of sensitive business information only applies so long as the owner maintains appropriate safeguards to keep the information private. Privilege and third party rights can also be compromised even if only partial information is disclosed. 

Advertising and Marketing

Social media governance needs to be carefully tailored and enforced based on diverse advertising and marketing implications. There are numerous issues to consider including: (1) what social media activities are considered advertising; (2) licensure of designated personnel; and (3) testimonials.

What Activities are Advertising?

Social media advertisements are subject to the same legal and compliance standards as traditional insurance advertising. While social media are a fluid and interactive platform, good policy would provide for prior internal review of all static social media advertisements and prior regulatory approval, if required by state law. Those within an insurance organization engaging in business-related interactive social media activities should be properly trained and supervised and postings should be monitored under a well constructed risk-based protocol.

Of course, many nuances apply. States often require that all advertisements include the insurer's name. This can apply to social media content. Also, if social media advertisements direct consumers to a particular webpage, both the advertisement and the webpage may need to properly identify the carrier. Additionally, depending on the circumstances, an insurer or producer may be liable for misstatements on a linked third party webpage.

Obviously, social media cross state lines. Thus, postings should provide time and geographic parameters to avoid confusion and accommodate compliance and legal standards that apply to social media postings.

Licensure of Designated Personnel 

The laws of most states prohibit people from “selling, soliciting or negotiating insurance” unless the person in question is licensed for the lines of business involved. This can implicate subtle nuances for many who have access to and actively use social media and want to encourage business-related contact with prospects.

This becomes especially problematic for unlicensed agency staff, as an example, which may be incented to attract business prospects to an agency. Thus, careful attention must be drawn to assuring that unlicensed personnel are properly restricted from discussing insurance products or engaging in what may be considered licensed activities on social media.

Testimonials

The Federal Trade Commission previously adopted a set of guidelines relating to testimonials in advertising which require disclosure of material connections between advertisers and endorsers.  Under the guidelines, an employer may be liable in an FTC enforcement action for its employee postings that comment on the employer's products or services without properly disclosing the employment relationship.  The employer could also be the target of a class action lawsuit under state consumer fraud laws for this type of conduct, depending on the circumstances involved.  However, employers may be able to protect themselves by creating a social media policy that includes instruction on testimonials and rogue postings.

Employment-Related Concerns

Social media have blurred the lines between professional and personal communication, causing a recent onset of employment-related legal disputes under the National Labor Relations Act. In the right situations, employee activity on social media may be protected under federal law.

The National Labor Relations Board's Division of Advice issued two advice memoranda this year discussing social media-related claims. Essentially, the Division appears to draw a line between scenarios in which employees try to engage their colleagues in discussions on social media sites about working conditions, which is protected activity, and electronic communications that are not related to an employee's wages, hours or other terms or conditions of employment. The latter is generally not protected under the National Labor Relations Act.

There is a fine line between protected communications intended to engage other employees and disparaging employee communications that would normally be prohibited by an employer's social media policy. As a result, careful attention must be paid to crafting a social media policy that provides for legitimate limitations on business-related communications, while not improperly interfering with an employee's protected labor-related activities.

Establishing a social media policy is an important step to mitigate against the myriad of legal and compliance risks associated with the use of social media. Many companies simply block employee access to the Internet, or certain Web sites. However, with the growing popularity of smartphones and other handheld devices, insurance organizations need to take additional precautions against the risks posed by social media. Developing a social media policy and training all employees and agents is a good first step. Entities in the insurance industry should carefully roll out their social media programs with appropriate training and restrictions to ensure a compliant platform and concerted team effort to manage corporate messaging in a highly regulated environment.