Although websites such as Pinterest, Facebook and LinkedIn canhelp make a business more successful, insurers, producers and otherinsurance entities need to protect themselves from the risks socialmedia can create. Social media sites raise a diverse group ofbusiness risks that need to be addressed in a good social mediapolicy.

Privacy and Intellectual Property Concerns

The consumer's right to privacy in internet activity is aparamount issue for insurance companies who are subject to theGramm-Leach-Bliley Act and the Health Insurance Portability andAccountability Act of 1996 (HIPAA), among other federal and statelaws. Insurers and producers need to carefully consider howpersonally identifiable information may be intentionally, or evenunintentionally, collected about insureds and consumers through theuse of social media platforms; how this information will bemanaged; controls to assure that this information is not publicallydisclosed; and the implementation of robust data securityprotections.

While it may be often overlooked, the opposite also holds true.Insurance organizations should ensure that their employees andrepresentatives are not disclosing too much information about theircompany or compromising their company's intellectual propertyrights on social media sites. Companies may lose their proprietarytrade secret or confidentiality rights depending upon theinformation they make publically available. This could occurthrough a simple well-meaning or unintentional internet posting.Generally, trade secret protection of sensitive businessinformation only applies so long as the owner maintains appropriatesafeguards to keep the information private. Privilege and thirdparty rights can also be compromised even if only partialinformation is disclosed.

Advertising and Marketing

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

What Activities areAdvertising?

Social media advertisements are subject to the same legal andcompliance standards as traditional insurance advertising. Whilesocial media are a fluid and interactive platform, good policywould provide for prior internal review of all static social mediaadvertisements and prior regulatory approval, if required by statelaw. Those within an insurance organization engaging inbusiness-related interactive social media activities should beproperly trained and supervised and postings should be monitoredunder a well constructed risk-based protocol.

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

Obviously, social media cross state lines. Thus, postings shouldprovide time and geographic parameters to avoid confusion andaccommodate compliance and legal standards that apply to socialmedia postings.

Licensure of DesignatedPersonnel

The laws of most states prohibit people from “selling,soliciting or negotiating insurance” unless the person in questionis licensed for the lines of business involved. This can implicatesubtle nuances for many who have access to and actively use socialmedia and want to encourage business-related contact withprospects.

This becomes especially problematic for unlicensed agency staff,as an example, which may be incented to attract business prospectsto an agency. Thus, careful attention must be drawn to assuringthat unlicensed personnel are properly restricted from discussinginsurance products or engaging in what may be considered licensedactivities on social media.

Testimonials

The Federal Trade Commission previously adopted a set ofguidelines relating to testimonials in advertising which requiredisclosure of material connections between advertisers andendorsers. Under the guidelines, an employer may be liable inan FTC enforcement action for its employee postings that comment onthe employer's products or services without properly disclosing theemployment relationship. The employer could also be thetarget of a class action lawsuit under state consumer fraud lawsfor this type of conduct, depending on the circumstancesinvolved. However, employers may be able to protectthemselves by creating a social media policy that includesinstruction on testimonials and rogue postings.

Employment-Related Concerns

Social media have blurred the lines between professional andpersonal communication, causing a recent onset ofemployment-related legal disputes under the National LaborRelations Act. In the right situations, employee activity on socialmedia may be protected under federal law.

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

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

Establishing a social media policy is an important step tomitigate against the myriad of legal and compliance risksassociated with the use of social media. Many companies simplyblock employee access to the Internet, or certain Web sites.However, with the growing popularity of smartphones and otherhandheld devices, insurance organizations need to take additionalprecautions against the risks posed by social media. Developing asocial media policy and training all employees and agents is a goodfirst step. Entities in the insurance industry should carefullyroll out their social media programs with appropriate training andrestrictions to ensure a compliant platform and concerted teameffort to manage corporate messaging in a highly regulatedenvironment.