Insurers need to face up to social media risk

Matt Fisher posted details of the events surrounding his sister Katie’s death to Tumblr with the catchy title “My Sister Paid Progressive Insurance to Defend Her Killer In Court”. Source: mattfisher.tumblr.com

There has been a lot of discussion recently about the importance of social media to the insurance industry. It is, after all, an industry built on networking and reputation.

An approach for insurers is to enter into social media as soon as possible and seek to build customer relationships based on trust and the exchange of information, rather than focus too much on selling products and services. Through developing relationships and improving market presence, they can win over new customers. Basic social media brand management, in other words. It’s one of the basics that US insurer Progressive is wishing it had in place recently.

A policyholder at Progressive, Katie Fisher, was killed in a tragic collision with another driver. It seemed clear that Katie was not at fault, and the other driver’s insurer settled immediately. But that driver was underinsured and the payment was small. Katie’s policy meant that Progressive would pay the difference. That is where things got interesting.

Progressive operated “by the book”, refused to pay, and chose to dispute in court the circumstances surrounding the accident. Unfortunately for Progressive, these corporate practices offended Katie’s brother, Matt Fisher, who decided to post a pretty persuasive account of events to Tumblr with the catchy title “My Sister Paid Progressive Insurance to Defend Her Killer In Court”.

Progressive learnt its practices didn’t meet the public’s standards either. Things got considerably worse when the story went viral. It was repeatedly retweeted, and when Progressive finally got around to responding, its response was mechanical (the same message was sent out to numerous Twitter accounts), impersonal, and failed to take into account the sentiment around the story.

Progressive never took the time to really understand social media and how to use it in a personal way. It didn’t understand the risks it was running by not having a clear social media strategy, and that it cannot control communication in traditional ways. Perhaps most fundamentally, though, Progressive is a mass-market, low cost insurer. A firm that pushes insurance at the lowest possible price is probably going to have poor claims handling services. In the age of social media, this model may become increasingly hard to maintain.

Not all social media stories are negative. For example, American Family Insurance established a YouTube channel to provide useful content – such as information about identity fraud – to potential customers. Between October 2010 and January 2011, video views rose from 5967 to 44,467 and the company was able to engage with people early in their decision-making process.

Other forward-thinking insurers are incorporating social media into core processes. Some are monitoring social media to check for insurance fraud – we predict that data mining will continue to be an area for insurers, although much will depend on how insurers handle it and whether consumers and regulators view this as a breach of privacy. Others are capturing product and brand sentiment, or have found social media provides effective channels to contact and communicate with policyholders in post-catastrophe events.

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