The first in a series of blogs discussing sales practice issues.
My neighbor’s son was learning to drive a few months ago. During a short conversation I had with him, he indicated that he didn’t think it was a big deal to go over the speed limit because everyone does it, there aren’t “that many accidents” and the worst that can happen is getting a ticket and paying a fine.
I felt compelled to discuss the other consequences that he hadn’t considered – increased insurance costs, being cited for reckless driving, being punished by his parents, losing his driver’s license, the increased potential to harm himself or others (inside or outside of his car), and how having an incident may affect how others view him.
Producer advertising may be seen in a similar light by many insurers. So what if one of our producers has some non-compliant advertising? Who cares? It’s no big deal and everyone does it. In fact, it’s necessary to drive sales because compliant advertising doesn’t work and producers need to have something that works in order to be competitive. And if it’s an independent producer, then isn’t that their problem and not the insurer’s problem? Just like speeding, however, advertising that seems harmless can lead to bigger problems – fines, policy or contract rescission, loss of an insurance producer’s license, insurers having to dedicate resources to conduct oversight of a producer, reputational harm, etc.
Advertising creates many risks for the insurer. It’s very visible (obviously), but not just to prospects. Regulators and litigation attorneys also see advertising and once they start looking, they are likely to dig deeper in an effort to uncover other issues. In addition, the sale of the insurer’s product was the result of the advertising so it’s difficult to separate the advertising from the sale.
Advertising also creates expectations in the minds of consumers – and that can create a misrepresentation on its own. Keep in mind that advertising is also a form of documentation that will help or hurt the insurer when dealing with a complaint, regulatory investigation, or plaintiff counsel.
Producer advertising (whether insurer-specific or generic) can create many consequences for insurers, but there are practical solutions to mitigating these risks. Periodically reviewing a sample of producer advertising, providing education to producers on advertising guidelines, and having a formal method of addressing issues are just a few of the concepts that insurers can use to mitigate the very real, and sometimes overlooked, risks associated with producer advertising.