Social media is a fascinating and exciting new technology – but every solution needs to solve a recognized problem. Clearly, social media plays a strong role in interpersonal communications and photo sharing, but how relevant is it for insurance? What problem does it address?
Let me take a stab at a problem, possibly best articulated by Rick Pitino while he was the coach of the Boston Celtics. After one especially disconcerting loss at home, Pitino ranted at the assembled media, imploring them to recognize the new realities in Boston.
His quote that night was,
“Larry Bird is not walking through that door, fans; Kevin McHale is not walking through that door; Robert Parrish is not walking through that door. And if they do, they will be gray and old.”
How is that relevant to the insurance industry? Quite simply, consumers are no longer walking through the door of the insurance agent, and if they do, they are gray and old. The industry has long relied on agents to identify products and services consumers need for financial security. Without the advice and guidance of the agent, consumers, with minimal knowledge of insurance and even less interest in purchasing, are blissfully unaware of the risks they may be taking. The result is record-low levels of insurance – especially life insurance, with policy ownership at a 50-year low.
How can social media solve that problem? In two ways. First is the standard maxim “Fish where the fish are,” and social media is one place we know consumers are spending their time – we get that Facebook is big. The second is complex but even more critical: social media is a set of interconnected networks of people. Consumers are more influenced by friends, family, and total strangers than by marketing materials, television ads, and even agents. Insurers need to use these channels of influence to educate and apply soft pressure. Existing followers and fans are already at least partially convinced; the goal is to develop more understanding and recognition of need within their extended networks. Influence by proxy is the new game leveraging the implicit trust of close relationships. Word of mouth has always been powerful; social media is simply supercharging the process.
Insurance is and has always been a relationship business, but with relationships becoming increasingly remote, this requires new skills and new ideas. Some agents will struggle, but just as many new agents will flourish.
The industry problem is not necessarily competitive pressure, but a growing lack of consumer knowledge and a breakdown in trust. This has led to the record level of underinsurance. Social media can reconnect consumers to carriers – albeit by proxy – but, as with any disruptive technology, we will see winners and losers.
