Social networking discussions tend to focus on technology, as in “What is our Facebook strategy?”; “How should we use Twitter?” and “Who should own the company’s LinkedIn page?” This leads many senior executives to look at social activity and regard it as a waste of time and money, prompting them to ask that dreaded question, “Where’s the ROI?”

What can get lost is the significant role that social networking is likely to play in evolving customer attitudes toward insurance and the inevitable changes to product distribution.

To consider social networking strategically, focus on the fundamental change in how people connect and communicate with each other and with brands, and how dramatic that change has been in just a couple of years. In place now is incredibly efficient plumbing for capturing and transmitting word of mouth, which is becoming so voluminous that it is starting to drown out other messages — in particular, corporate marketing.

Just to pick a couple of chilling statistics: direct mail response rates are down 29 percent since 2008, and email conversion rates crashed 33 percent between 2011 and 2012. Marketers tend to hold on to a romantic idea of how people learn about and buy our products, but this is all changing, and we must adapt.

As individuals, many of you will have changed how you communicate personally. Some of you may have vowed never to join Facebook, yet there you are, happily posting your summer pictures directly from your smartphone and stalking your kids at college. Speaking of kids, when was the last time you spoke to them on the phone? To gain their attention, you're now more likely to text them. In fact, there are senior executives with graying (or no) hair in your company texting “LOL” right now. We adapt quickly as people, but more slowly as marketers.

Social networking is causing us to look at all content very differently. According to AT&T, 88 percent of smartphone users now use it as a “second screen” while watching TV. While that number seems high, it is becoming increasingly rare to see retail ads that do not promote a hashtag. Hashtags extend ad life as viewers discuss what they see. A case in point is GEICO’s “Hump Day” ads — now responsible for 90 percent of the company’s YouTube views, in part because they are being discussed and shared as they appear.

If social networks are plumbing in this analogy, then mobile devices are adding faucets at an alarming rate, creating constantly connected consumers who demand a speed of response that the insurance industry is frankly ill-equipped to meet. People are talking about insurers and insurance. While some comments might be irrational, fast-moving word-of-mouth, in this context, facts are sometimes overlooked in favor of sentiment. Across all industries, 47 percent of socially connected consumers now acknowledge having attempted to gain customer service via social media, and this number is growing at a worrying pace. Insurers in the P&C world are already feeling some of the pain, with Progressive and State Farm both engaged with individuals over 85 percent of the time on their Twitter feeds.

There’s no question that insurers have constraints, be they compliance-driven or privacy concerns, but social networking is not going away. USAA, one of the first insurers to adapt to social networking, can now respond to most, if not all, social messages within two hours. Social media for USAA is about extending their brand and reputation, and using it to build trust. USAA is, according to J.D. Power, the most trusted brand in the industry, and this is important because while most insurers rely on agents to develop local relationships, it is a direct carrier that’s winning the trust game. There is no doubt consumers seek choice when they research and buy insurance, and two threats to the established industry are the growth of direct sellers and the entry of nontraditional channels. The question has always been whether consumers will buy online, and trust is a significant factor.

MetLife is already experimenting with selling life insurance through Walmart. In the U.K., Google operates as an aggregator for auto insurance, and Tesco supermarket, together with its three biggest competitors, sells insurance. In Thailand, 7-Eleven sells insurance, and it is rumored that Amazon is about to launch insurance products in Italy. What would make a consumer buy through these channels? Convenience and price. But much will come down to trust and personal referrals, and for that social networking will play a huge role.

The discussion about social networking should not be all about ROI. It must be about adapting to the changing insurance world in which social networking has a major role to play.

Think back on recent predictions for new technologies. According to a Western Union memo from as late as 1976, “[T]he telephone has too many shortcomings to be seriously considered as a means of communications.” What about an InfoWorld column in 1995 that predicted that “the internet will soon go spectacularly supernova and in 1996, catastrophically collapse”? As recently as 1999, Barron’s, in a cover story titled "Amazon.bomb," predicted that the company had no chance against established players like Walmart.

Discussion about social networking should ignore the technology — this will continue to change at a breathtaking pace. The insurance industry will change in the next three to five years as consumers seek and find alternative and more convenient ways to buy policies. Social networking will be instrumental in this paradigm change, and at that time, it may be too late to ask “Where’s the ROI?”

This blog was posted with the permission of the Customer Respect Group.

Terry Golesworthy, president of The Customer Respect Group, has covered technology issues and innovations in the insurance industry for many years.

Readers are encouraged to respond to Terry using the “Add Your Comments” box below. He also can be reached at

The opinions of bloggers on do not necessarily reflect those of Insurance Networking News.

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access