Casualty Actuarial Society

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As Insurance Company Use of Social Media Continues to Grow Actuaries Urged to Identify Trends and Future Risks

06/06/2011 —

PALM BEACH, FL – Social media is gaining importance in helping insurers connect with policyholders and prospects, with social media tools valued for producing voluminous metrics ripe for expert analysis. However, actuaries currently do not have a place at the social media table, and they were urged to pull up their own chair at the Casualty Actuarial Society’s Spring Meeting, held May 15-18, 2011.

It may only be a matter of time before actuaries are invited to lend their expertise to the inner circle of social media strategy, but they should not wait for a formal invitation, said panelists at a general session on the effects of social media on property-casualty insurance.

Analytical data generated from social media is nearly boundless, and while marketing and communications departments may not know what to make of all of it, actuaries do.

Brian Sullivan, editor of Risk Information, Inc., served as moderator for the session and pointed out that insurers are dealing with the implications of a seismic shift from having a one-to-one chat with a single customer to one-to-many discussions that bring an entire network of friends and foes into a conversation.

In this digital age, people are more likely to ask friends and family for advice first through social media tools, such as Facebook, Twitter, or a personal blog, which gives any question, misunderstanding or grievance a wide audience often before an insurer is aware that a problem may exist, he said. And, because social media users report back to their networks, discourse and dialogue have a much longer life than individual conversations of the not-too-distant past.

For this reason, insurers first got into social media as a defensive maneuver, said Terry Golesworthy, president of The Customer Respect Group. Insurers began listening to what customers were saying online, and then decided that since they were listening, they ought to start responding, so company marketing and communication departments assumed responsibility for social media channels.

The most basic approach to social media engagement is to get people to become online fans, something which is often not that easy for insurers, Golesworthy said. He explained, “Not many people want to be a fan of an insurance company. It works better for retail, but not as well for insurers.”

Golesworthy said incentives may make a difference in growing a fan base, citing The Hartford’s strategy of donating a dollar to the U.S. Paralympics for every fan of their Facebook page.

Golesworthy said there is a “land grab for fans” because when someone clicks the “Like” button on a company Facebook page, it is broadcast to their social network, and their online friends may be inclined to do the same.

A second strategy for social media is to build trust through ratings and reviews, since people trust reviews from peers over the advice of presumed experts. He cited USAA’s success in increasing the number of new insurance policies written due to online ratings from current policyholders. Additionally, Golesworthy suggested a third step for social media is to identify brand advocates who will speak on your behalf and come to your defense against critics.

Patrick Sullivan, a writer with Risk Information, Inc., said he is part of the generation that grew up with social media as a constant presence. He suggested insurers can engage their online audiences to create conversations with either a customer service focus or a content focus.

Sullivan said an example of a customer service focus would be to provide case-by-case scenarios to help people anticipate problems, such as explaining certain insurance coverage issues. A content focus engages people in a more timely and active way, such as by offering tips on hurricane season preparedness as the storms approach.

Roosevelt Mosley of Pinnacle Actuarial Resources observed that other industries look at social media analytics to get ahead of an issue, paying close attention to what customers are saying so they can respond appropriately. Because actuaries by nature are on the lookout for the next big trend, they can add value to the social media discussion, he said.

Mosley said the actuary’s skill at measuring potential future risk can be applied to social media, and he encouraged conference attendees to seek opportunities outside traditional actuarial risks.

“The social media trend is just beginning, and the winds are changing,” said Mosley. He said company marketing and communication departments can no longer be the sole owners of social media processes because it impacts the entire range within a company, and everyone seems to be on the planning committee except the actuary.

When asked if Facebook would be a lasting social media tool, Patrick Sullivan said people are wedded to the idea of social media, but that does not necessarily mean Facebook will remain the standard. Some companies are hesitant about getting on the Facebook bandwagon due to concerns over privacy, and panelists thought privacy may become less of an issue with the very notion of privacy changing as the digital environment makes it harder to hold something back.

Insurance is a complex industry, and other industries have an advantage elusive to insurers, according to Brian Sullivan.

He explained that it is a simple process for an entity such as to recommend new purchases based on past shopping habits, and insurers have not yet learned how to take their data to similar advances. “Nothing is that easy for insurers,” said Sullivan. “With different products in different states, we will never be able to deliver what others deliver with their data,” he said.

Still, the industry needs to start somewhere, said Mosley. “We can begin to understand the techniques to start the process and refine it,” he said. “The business purpose for social media analysis would be to understand if it drives long-term customer value or retention.”

The Casualty Actuarial Society fulfills its mission to advance actuarial science through a focus on research and education. Among its 5,400 members are experts in property-casualty insurance, reinsurance, finance, risk management, and enterprise risk management.

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