In a world where even the smallest insurance company can advertise its wares to a global audience, some new and not-so-new compliance issues arise.Compliance specialists play far too limited a role in the development of insurers' Internet strategies, says Gary Hernandez, an insurance regulatory specialist with Sonnenschein Nath & Rosenthal, a San Francisco-based law firm.

"Until recently, this has been a province primarily of the marketing department and the IT folks, and we have been left out of the loop," he says.

Compliance issues can arise, however, because in nine states, an insurance company's home page constitutes a solicitation for insurance, Hernandez notes. Furthermore, 24 states consider an insurer's page a solicitation when specific product information is introduced.

"One of the most important things to remember is that insurers may be making solicitations to people in jurisdictions where their products may not be approved, or they may not have a license to do business," Hernandez notes.

Use of disclaimers

The use of disclaimers-which Hernandez says many companies do not pay enough attention to in marketing materials-takes on a new importance in the Internet era.

"It is critical that disclaimers be linked to all viewable pages," Hernandez says.

And, although it is not yet clear what constitutes "licensable" activities on the Internet, insurers have to consider that issue when establishing their Internet strategies.

For example, product-specific marketing and issuance of binders, certificates and endorsements require a license in virtually all states, but state regulations vary concerning issues such as providing rate information for a specific risk and recording application information.

Industry experts believe such Internet-related licensing issues need to be resolved so that carriers understand what constitutes a solicitation of insurance.

Neil Levin, New York's insurance superintendent, addresses these issues. "What are the affirmative obligations of a financial services entity operating a Web site to avoid being deemed to be illegally `doing business' in a jurisdiction where it is unlicensed?" he asks.

Related to this issue are questions of what constitutes a solicitation for insurance, Levin says, and whether a non-licensee can put an advertisement on its Web site-such as a hyper-text link to a licensee's site.

The National Association of Insurance Commissioners is working to increase the coordination of databases, Levin says.

"This will facilitate more efficient communications and access to information for consumers, while at the same time reduce compliance costs," he says.

The Internet is inundated with Web sites that generate leads for carriers, including agency networks, portals such as Yahoo! and Alta Vista, and marketplaces such as Ebix.com and InsWeb. Defining those relationships to determine just what constitutes licensable activities is something carriers tend to overlook, Hernandez says.

Privacy is a concern

And with the increased number of partners providing data, new concerns about privacy emerge. "When a dot.com makes its customers available to an insurance company, the insurer might get a great list but come to realize the list was passed on with information the insurer did not have a right to see," Hernandez says.

Clear notices of privacy policies, along with opt-out clicks for consumers, are critical for compliance in an age when concerns about privacy will mount in direct proportion to the number of new threats to it, says Mike Koziol, senior counsel to the Chicago-area based National Association of Independent Insurers.

Compliance officers must scour not only the traditional legal media but those dealing with technology as well if they want to make a meaningful contribution to the bottom line, says Michele Kemper, vice president and compliance officer for Seattle-based Safeco Corp.

Steven Tuckey, associate editor, Insurance Accounting, a Thomson Financial publication.

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