Regulatory Reform and Advertising

I was lucky enough to hear Benjamin Gentry, (a graduate student in the Communication, Culture and Technology program at Georgetown University) speak at last year’s ACLI Legal and Compliance Section Conference. We have continued a dialog about issues related to insurance advertisements and social media. We are both preparing to speak at separate engagements in April and it has been helpful to bounce ideas off each other. He recently sent me this NYT article from November 2010.

As I read it, I couldn’t help but think of the many ways in which the social media management technology, as discussed in the article, could (and should) lead to changes in the way insurance advertising is regulated by state insurance departments. Much attention is being given to regulatory reform generally and reform of insurance regulation specifically, both at the state and federal levels. Reforming the ways in which insurance advertising is regulated should be on the agenda. Virtually every industry event I attend has some discussion of social media. These are always well attended, but most of the discussions deal with how difficult it is to use social media under the outdated advertising regulations currently in place.

The regulatory obstacles need to be removed because insurers and producers have to be able to use social media; that is where the audience is—that is where the consumers of insurance products are. But many mandates of the current advertising regulations make the use of social media almost impossible. States with prior approval requirements do make it impossible. Those requirements mean that companies and producers trying to do business in those states are effectively closed out of today’s most important advertising space.

Are insurance products too complicated for this new advertising media? Is it too risky? This NYT article provides glimpses of potential solutions. It is possible to revise regulations while retaining their effectiveness for consumer protection.

Regulators can permit the use of social media, then use technology to regulate the online content. If all of a company’s communications can be gathered via a web crawl and then archived in a way that would permit retrieval as needed by a variety of search queries, the information available to regulators would far exceed what is currently available. In the Times piece, Nextpoint CEO Rakesh Madhava, states: “Because of the explosion of content generated by the Internet, you need to have an Internet solution for it.” Similarly, regulation needs to be updated so that new advertising media can be effectively regulated rather than effectively prohibited.

For my upcoming speaking engagement at IAdCA I went through the NAIC model advertising regulation and annotated those provisions that either do not work at all or do not translate well to social media. Some are substantive and some are more procedural. It seems to me that between regulatory creativity and technology, all of the issues could be addressed. In today’s world effective advertising is social media advertising. Consumers won’t buy what they can’t see and if it isn’t on social media, increasingly it is not seen.

Any agenda for regulatory reform should include reform of the advertising regulations that govern our industry’s communications with the public. We can’t force the public to come to the insurance industry. Regulations must permit the industry to go where the public is; Facebook, Twitter or whatever new media next year brings. The technology exists to allow regulators to effectively monitor such communication, but the regulations are in desperate need of modernization to allow the communication to occur in the first place. Experts in social media, like Benjamin Gentry, are out there to work with those of us who are knowledgeable about insurance regulation. Companies and individual experts are out there with the technology to assist on that front as well. We all need to come together to change the way insurance advertising is regulated.