Brokers that encourage their commercial customers to create strategies to deal with social media risks are making their clients more attractive to underwriters and consequently boosting their profits.
But according to law firm Barry Nilsson, few brokers are taking the time to ask clients about their social media activities.
Just over 10% of brokers surveyed by the law firm routinely make enquires about such risks when writing and renewing policies and only a similar proportion routinely ask if their clients have a social media policy in place. This figure increases to 33.3% when specific circumstances, such as the nature of a client’s occupation or primary activities, dictate it.
However, asking the right questions and ensuring the client has a social media strategy in place can save the client and the broker time, trouble and risk.
“Engaging clients in conversations about the prevalence and reach of social media risks today... raises client awareness of their prospective exposures and need to consider additional coverage options,” Special counsel Megan O’Rourke, pictured below, told Insurance Business.
Commercial clients have endured a series of loss events in recent years, she explained, stemming from social media activities that have included defamation cases, harassment, misleading and deceptive conduct, business interruption claims and contempt of court.
The businesses most at risk are in the media, technology, retail and other consumer goods, but “they don’t have a monopoly on those risks”, O’Rourke said.
“All of this suggests that brokers could more routinely ask informed questions about social media risks and social media policies and practices, not only where it might be considered relevant to specific situations or risk categories.
“Such policies make a broker’s client an attractive proposition to underwriters, but it can translate into a boost in the productivity and efficiency of both the client and the broker.”
But as social media risk is still a relatively new concept, few brokers have recognised the potential risk it presents to clients.
“We’ve not seen a major risk event in social media yet,” O’Rourke said, “so it has not yet dawned on brokers that the speed and reach of social media means it is a lurking tiger that can impact any business at any time.
“However, there is a slow realisation in the market that social media has fundamentally changed the way we interact and that change has organisational risk,” she added.
Preparing for the social media storm
- Understand social media and its parameters. “It is a good idea for the broker to incorporate social media into their own company so they understand how it works for their client,” O’Rourke said.
- Educate. “Educate yourself on the risks and exposures. There is a plethora of examples where a social media event has caused reputational damage or a disrupted a business.”
- Talk to clients. “Advise them to monitor what is being said about them, to formalise a social media strategy and train their staff around that strategy. Advise them to create a crisis response plan to be implemented when a potentially damaging social media event takes place.”