It’s become a cliché to say that the use of social media is growing rapidly, but by 2017, it’s expected that the global social network audience will reach 2.55 billion. Unfortunately for insurers, the threats presented by social media are developing faster than their risk management capabilities can handle.
Platforms for social media, including blogs, photo and video sharing sites, social networking, search engines, auction sites, business sites and message boards all offer insurers a tremendous amount of value in the areas of branding, marketing, advertising, corporate communications, servicing and grievance resolution. But research strongly implies that companies are at times overconfident and inadequately prepared to take the risks seriously and handle them methodically.
Insurers should not take social media threats lightly. Financial institutions have had to shut down social media forums due to unanticipated negative feedback, stock markets have been buffeted by fraudulent social network postings, businesses have had to change or rescind strategies in response to the force of social media, and other businesses have suffered brand damage due to social media’s power to send negative impressions around the world almost instantly.
Although much has been written about the reputational and brand risks that social media present to corporations, underlying these are several other types of serious risk that insurers need to consider:
- Strategic risk.
- Business risk.
- Regulatory risk.
- Legal risk.
- Market risk.
If not effectively mitigated, these risks can lead to serious negative consequences, including fraud, intellectual property loss, financial loss, privacy violations and failure to comply with laws and regulations.
When insurers start to evaluate their vulnerabilities to social media risks, they typically encounter a number of organizational weaknesses, including ambiguous policies, unclear roles, inconsistent processes, system vulnerabilities and the misuse of data by employees and non-employees. In our next post, we’ll discuss our recommended approach for tackling these vulnerabilities and managing risk.
In the meantime, to learn more, read A Comprehensive Approach to Managing Social Media Risk and Compliance.