Diving into Social Media

Appearing on the popular comedy showThe Colbert Report in earlyApril, Twitter co-founder Biz Stone got a gentle ribbing from the eponymous host when he chided the technology guru: “I assume that ‘Biz’ in ‘Biz Stone’ does not stand for ‘business model.'” In a later posting, Stone acknowledged Stephen Colbert’s remarks were a “home run.”

Up until April 13, Twitter had resisted introducing a traditional Web advertising model in its quest to emphasize “value before profit,” in Stone’s words. However, with the launch of Promoted Tweets through a handful of advertising partners such as Starbucks, Red Bull and Best Buy in mid-April, Twitter is now well on its way to establishing a revenue-driven business model.

Switch gears to the property and casualty insurance industry, and the issue of “business model” becomes equally apt for brokers and insurers alike. Does a business reason exist to invest time and money in social media? If so, how do you actually do it?

“With the insurance industry, there is a sense that they know they have to do it, but they don’t know how to do it,” says Catherine Stagg-Macey, senior insurance analyst at the Boston-based financial research and consulting firm Celent. “I would say in many ways, we are currently with social media where e-commerce was about 10 years ago. There is a lot of study, but not a great deal of investment — yet.”

This reluctance, or even skepticism, is something consultant Rick Morgan sees regularly. As president of Rick Morgan Consulting, he works closely with the Independent Insurance Agents and Brokers of America and has done several seminars on social media for brokers and agents in the United States and Canada.

“I still get a lot of the same questions from agents and brokers, such as: ‘Is this all just a lot of hype? How can I make sales out of it? Where is my return on investment? Will this become a time vampire for my staff?'” he notes. “However, I do think it has changed a lot, even within the last nine months or so. People are intrigued by the opportunities.”

Leveraging Social Media

‘Social media’ is the label applied to a technological medium that links individuals or organizations in a meaningful way. The most popular Web sites and forms of communication are Twitter, LinkedIn, MySpace and Facebook. A study by Celent released in April, Leveraging Social Networks: An In-Depth View for Insurers, showed that in March Facebook was the most visited Web site, registering more visits than Google for the first time.

“This popularity raises interesting questions for insurers about how this channel can be leveraged,” the Celent report states. “What is an important and as yet unanswered question is why insurers should take social networks seriously; i.e. what is the business case, and if there is one, what might the execution of such a strategy might be?”

These questions are slowly playing out in the insurance industry. Celent notes nine out of the Top 10 property and casualty insurers in the United States have at least one Twitter account. Eight have at least one Facebook page and social media Web sites that are “both active and have an engaged customer community involved.” Most of these social media experiments have focused on brand awareness and customer loyalty. By contrast, activity in the United Kingdom “is rare and adoption is just starting.”

The same can be said for Canadian insurance companies. Some have made some tentative initial forays into social media, such as Aviva Canada’s “Let’s Change Insurance” Web site and campaign. Other companies are either nonexistent on social media or playing their cards close to their vests.

“There have been some examples of huge social media followings, such as the ‘Compare the Meerkat’ advertising campaign in the U.K. and the ‘World’s Greatest Spokesperson in the World’ by Nationwide in the U.S.,” says Stagg- Macey. “But there have been few home runs. I think there is likely space for only so many of these early adopters, perhaps five or so.”

Celent cites the fictional ‘meerkat’ character Aleksandr Orlov, used by BISL Limited in the comparethemarket.com advertising campaign in the U.K., as an example of social media success — particularly in the Twitter and Facebook space. “The implication is that a strong multi-format advertising campaign, based around a central fun character or mascot making significant, frequent and relevant use of social network services, can dramatically increase brand awareness, provide a method to engage with a large group of customers and increase business volumes.”

Canadian Brokers and Social Media

In Canada, brokers have picked up on the potential value of social media. Organizations like the Insurance Brokers Association of Ontario have been active in informing brokers of opportunities in social networking. Morgan says distributors of insurance products are open to demystifying the buzz around social networking and applying it to their customer base.

“Social networking is something brokers have been doing for years in the community, whether it is working with the local chamber of commerce, volunteering or sponsoring local sports teams,” Morgan says. “The social part is the same, but the medium is different.”

It’s not just technology that has changed, but also a “cultural transformation among consumers,” he adds. “Instead of focusing on the technology, brokers should look at the shift in how customers want to be contacted.”

The old “mass media” model involved pushing information out to consumers in the form of outbound messages such as telemarketing, direct mail, trade shows, print, radio or TV advertisements and even email blasts — a form of marketing Morgan calls “interruption.” New media emphasize gaining consumer “permission” through social media in such areas as search engine optimization, blogs, free trials/tools, Really Simple Syndication (RSS) and viral marketing.

“I see social media as another way of communicating and networking with our clients and prospects,” says Cory Young, chief operating officer of Rhodes & Williams Insurance Brokers. “Where it becomes a game-changer is that you can no longer tell everyone how good you are (traditional marketing). You need to participate in the forums, be a source of knowledge. Most business relationships in this environment will start out as a referral from a trusted source.”

Rhodes & Williams has been experimenting with social media for about one year, making use of Twitter, Facebook, LinkedIn (social network for business professionals) a blog and even YouTube. Young observes a big plus of social networking is greater access to a wider customer base, but there are other advantages as well.

“The obvious benefit is attracting clients and prospects,” he says. “The less obvious ones are crowd sourcing, test marketing, brand monitoring, search engine optimization and recruiting. This is definitely not an overnight process. It takes time to build trust and relationships. It probably took six months before I received my first recommendation through Twitter.”

Lead generation is also a prime focus for the brokerage Beyond Insurance Brokers, which has used online quoting engines as well as ad words programs through Google. In ad words programs, advertisements are displayed alongside search results that use keywords selected by program participants.

“As a new brokerage, we are in ‘growth mode,’ so we needed to take every opportunity to get our brokerage name out there and social media was one of the most cost-effective,” says Beyond Insurance Brokers’ office manager Judy Bell. “Allowing the brokers in my office to use Facebook and Twitter to notify friends about their position as a broker here has allowed them the opportunity to attract lots of new business. Adding clients as ‘friends’ has lead to many referrals from friends of their friends, and so on.”

She notes the number of “free” social media l eads for the brokerage is now equal to that of online quoting engines.

A steady flow of referrals or soft leads may be one of the most promising outcomes of social media experimentation for brokers. Dan Lawrie Insurance Brokers recently redesigned its Web site to include a blog and Twitter account. While Bob Lawrie, vice president of Dan Lawrie Insurance Brokers, says the brokerage is still in the early stages of its use of social media, there are clear signs of potential.

“A number of our staff use LinkedIn and I see a lot of opportunities here for business social networking,” Lawrie says. “Depending on the client, you can share expertise on insurance for certain industries. . . and be recognized as an expert in insurance. This may be the most powerful tool for brokers. It could be a great stream for referrals.”

In addition to client prospecting and referrals, social media tools can be used for client service, Young says. “To date, I have mostly used these channels for attracting new clients,” he notes. “I would really like to use it more as a forum for servicing existing clients, and interacting with them to find out how we can serve them better.”

Young adds social media might also be effective for recruiting new talent into the brokerage profession, a point echoed by Judy Bell. “An opportunity would be attracting new entrants into the industry,” she says. “Young people have a means of communication that works for them. Whether we like it or not, in most cases, it does involve social media. By embracing this new concept, we will be able to encourage fresh new young ideas to come to our brokerages through these new employees, which will help us continue to be a viable distribution method.”

Tracking Success

One dilemma posed by social media, often referenced by skeptics, is the difficulty in tracking and measuring investments in non-traditional marketing. It is difficult, brokers concede, but not impossible.

“It is not easy to measure your investment in social media,” Lawrie says. “But then you look at an ad in a magazine: can you track the effectiveness and total ROI from it? Do you know how many people contacted you or purchased insurance because of it? In many ways, it is the same thing with social media. But that doesn’t mean you ignore advertising or other types of marketing.”

The issue of measurement is “a tough one,” Young observes. “Most social media doesn’t cost much, if anything, except time — which is a very valuable resource. I am not aware of how to measure return on investment. But you can certainly measure the number of clients obtained through this source, your retention for those clients, as well as the number of referrals and closing ratios on those referrals. What is more difficult to measure is better brand awareness — client retention through communicating with clients in ways that they want to be communicated with.”

Related to concerns about tracking investment, some see a danger of brokers trying to implement social media strategies that are better suited to traditional marketing. “There is the risk of using social media like the mass media,” Morgan says. “So a brokerage sends out 1,000 flyers and gets 10 responses, and knows it has a .01% hit rate, Social media is not like that. It is not about immediate tracking of sales per day, but instead it’s about building relationships, gaining trust, getting referrals and then generating sales in the long-term.”

Stagg-Macey notes measurement may have to involve some “lateral thinking,” borrowing from other industry sectors that are farther down the social media path. This could range from more detailed analysis of click-through rates from ads on social networks to “micro-transaction models” used for online gaming.

For insurance companies and brokers, however, tracking and measuring what people are saying about them and their brand can be done easily and cheaply, according to Stagg-Macey. Various services, such as hootsuite, tweetdeck and Google buzz, allow companies to monitor consumer reaction to their brand. And yet many are not taking advantage of these tools.

“There is a great deal of data aggregation and convergence on various social media sites,” Stagg-Macey says. “It seems to be this is a social media opportunity missed by the industry. It is an option available right now for little cost, but I don’t think many companies are doing that.”

Morgan agrees brokers can capitalize by monitoring trends and observations in social networks. “If someone in insurance has had a bad experience, that is out there for everyone to see on a social network,” he says. “A smart broker can turn that into an opportunity. Similarly, if online communities are sharing information about their good experiences, who they trust and who they recommend, is that not a huge opportunity for agents and brokers?

Given the increasing use of social networking channels, many believe the future will open up in terms of potential applications for the insurance industry. One major trend is the willingness of the public to share significantly more data than they do today, according to Celent. This data could be used to improve product design, augment underwriting information or aid in fraud detection. The prevalence of mobile technology will likely mean insurance applications for mobile devices such as iPhones, or potential geo-tracking or location-based services for repair shops, for example.

“A key challenge for insurers will be persuading their customers to share this data and then using it effectively in producing new products and improved pricing,” Celent’s report states.

Catching Up

For some, realizing the potential of social media is still very much in the far future for the Canadian insurance industry. The main challenge for a sector traditionally slow to adopt new technologies is an unwillingness to experiment with new media, according to sources.

“With regard to social networking, compared to other industries, the insurance industry has some catching up to do,” says Lawrie. “If you look at the example of the travel industry, where people send comments in about experiences with hotels, there is a great deal of social media sharing and networking. This is a trend that has already had a big impact on other industries. Ours just may be a little bit behind, but I think it’s coming.”

Bell says she has talked to industry people about social networking and has come to the following conclusion: “My opinion would be that social media awareness and action would be ranked very low at this time. I feel there is a fear that allowing these interactions in the day-to-day workflow of their staff would lessen productivity.”

Rick Morgan says abuse of social media by employees is one of the main fears he hears expressed by brokers, agents and insurers. The solution, he contends, is to create a company-wide social media policy that sets out clearly what is and what is not allowed.

“This policy should reflect company culture and management philosophy; there is no one-size-fits-all,” Morgan says. “But it should be transparent and clearly list the expectations for and responsibilities of employees. The real choice for managers and owners is to act intelligently or ignore the social Web altogether.”

As for a revenue-driven business model for social media, many are still trying to discover the right amount of time and resources to justify the return on investment. Out of necessity, the business case may need to be flexible to evolve with changing customer preferences for how they search for and buy insurance.

“Social media doesn’t replace other forms of marketing, ” notes Bob Lawrie. “You have to put the resources in and then combine it with all your marketing strategies. You have to look at things like search engines, how people look for insurance, what kinds of information they are looking for, what kinds of services they want in a brokerage and how they actually buy insurance. Then you have to create the right kinds of social media tools.”

” The question [about a business model] sounds very official, but my answer definitely will not,” says Young. “Just try it.”

Start out by observing, Young adds. “Learn the ropes, the etiquette and nuances of these new mediums. Then slowly start to interact with the audiences. If you immediately start self-promoting without building some credibility, you will not be successful. Once you are comfortable, develop a plan and act on it.”

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With the insurance industry, there is a sense that they know they have to do it, but they don’t know how to do it.

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I would say in many ways, we are currently with social media where e-commerce was about 10 years ago. There is a lot of study, but not a great deal of investment — yet.

———

There have been some examples of huge social media followings, such as the ‘Compare the Meerkat’ advertising campaign in the U.K. and the ‘World’s Greatest Spokesperson in the World’ by Nationwide in the U.S. But there have been few home runs.