Social Media’s Challenge to Underwriters

Panel tackles social media challenges and implications for human resources, risk management.

Insurance Networking News, November 4, 2011

Pat Speer

It’s no secret that the trials, tribulations and opportunities presented by social media affect insurers in unique and challenging ways. The technology has been heralded as a marketing tool and cursed as a dangerous avenue to brand destruction.

Less attention has been paid to commercial lines’ ability to property guide their clients in its use in order to manage this risk, much less underwrite to an efficient and profitable end.

A panel of distinguished insurers and attorneys took up this discussion yesterday during the Professional Liability Underwriting Society’s International Conference in San Diego.

Moderated by Mercedes Colwin, Esq., managing partner, Gordon & Rees LLP, the panel comprised Sarah Goldstein, Esq., Partner, Kaufman Dolowich Voluck & Gonzo, LLP; Los Angeles, Catherine Padalino, VP, EPL product manager, Chubb Specialty Insurance, Warren, N.J.; Lisa Turbis, Esq., senior corporate counsel, litigation & marketing, Autodesk Inc., San Rafael, Calif.; and John West, Esq., partner, Allred, Maroko & Goldberg, Los Angeles.

In their discussion, however, similarities between how insurers are using social media and how they are advising their clients to use it became clear.

“You need to have a social media policy in order to harness its power, and you have to train employees on how to use it,” said Turbis. “The policy should cover insider trading, confidentiality, etc. so people know the boundaries of their voice. Including a code of conduct is important, too.” The panel agreed that too broad of a policy can be as big of a challenge as a non-existent one.

At Chubb Insurance, noted Padalino, social media is not relied on when looking at a client’s employment practices liability as much. “Social media can color an organization and it’s sometimes negative, but it’s not strong enough as a single piece of information that underwriters can rely on. It’s taken in more the larger context.”

The panel agreed that social media is quickly evolving to a medium tied to privacy issues. “The question needs to be asked: Does the use of social media cause employers to exclude certain types of people? Discrimination is also part of this discussion,” said West, whose practice covers the plaintiff.

According to Turbis, companies need to strike a balance. “Invest in training. It’s about knowing your boundaries.”

Paladino asserts that the issue is one of capacity. “We look at it in terms of employment. Did the use take place using a company-owned piece of equipment? Was it on a Blackberry that was work-issued? For now we see more complaints about supervisors, so we believe there will be more case law created from that.”

With regards to improper discovery of personal information, Colwin shared results of a survey that revealed that 70% of recruiters use social media as background. If the employer sees pictures on social media sites of candidates that they do not like, they admit that candidate is not hired.

“If you have a sophisticated Hr department, hiring practices are usually good,” responded Paladino. “We look at companies of all sizes, but the bigger question: is it fair? Do you check back with an employee after they are hired? Is everyone treated the same?”

Colwin noted that 10-12 years ago, “there were a ton of negligence hiring cases. Now, there is just too much information out there… employers have to filter what they should be looking at and what should be kept out of the hiring decision.”

Colwin also noted that clients rely on the National Labor Relations Board and the National Labor Relations Act, which creates a right for private-sector employees to engage in concerted activities for the purpose of mutual aid or protection, for guidance.

West agreed, stating that there is evaluation to conduct against the laws, especially when it comes to employee rights. “Religious expression, political activism and communication—away from work—you have to evaluate this in its context.”

The evaluation of employee online conduct and how that relates to company liability is another issue to consider.

Goldstein asserted that consideration must be given to an employee who uses social media to post messaging about compensation.

For more information on related topics, visit the following channels:

• Underwriting
• Technology & IT Management