Instant messaging, electronic newsletters, online gaming, discussion forums such as chat rooms and online dating Web sites just to name a few — these are the new ways we communicate and interact with one another.
Social media can be defined in a variety of ways, but most simply it is the use of any web-based and / or mobile technology that turns communication into interactive dialogue.
Social media sites, like LinkedIn, Twitter and Facebook, have infiltrated the business world at a rapid pace. Everyone is using them, from employees of Fortune 500 companies to those in local mom and pop hardware stores.
Marketing appears to come at a fraction of a cost of previous years, and these new tools yield worldwide reach in seconds. This two-way portal between the consumer and the company seems priceless as it allows consumers the ability to critique products and services instantly. It also allows companies to make quick fixes if needed. Companies can even use social media for branding of their company and their products for potential new customers.
However, with this new information platform, companies are exposed to new and greater risks.
Social media has the potential to increase claims for multiple exposures due to the very same reasons that makes the social media format so impressive. The worldwide reach, with practically a couple of clicks of the mouse, reaches a far larger audience in minutes, compared to past marketing techniques, which touched a much smaller audience, at a slower pace. In the past, slower pace and smaller audiences allowed companies to address controversial issues before they went “viral” and that helped minimize legal costs and liabilities.
Now, companies are faced with the potential of liability costs reaching hundreds of thousands of dollars more than in the past because of the larger scale. These costs could actually bankrupt a business if exposures are not properly addressed and insured.
What happens if an employee posts instructions on how to complete a particular task and an individual gets injured while following the posted instructions? Would a company’s general liability policy cover it? Or what if those posted instructions are determined to be inaccurate and someone suffers a financial loss? Would a professional liability policy pick up the loss? It’s unclear, maybe yes, maybe no. However, those who suffered the bodily injury or the financial loss could sue the company for posting the faulty instructions.
The extent of the legal exposure a company will face when exploring the opportunities of social media may be unclear, but companies will undoubtedly need more than just basic property and casualty insurance. Company owners, risk managers and officers must ask themselves: are they covered for these liabilities when — not if — they occur online?
User-generated content and online distribution seem to be the major gaps in most insurance policies these days, which presents a great opportunity for brokers and agents to save the day by selling a social media package product that provides coverage for all of their online transactions.
With that future in mind, insurance companies have responded, offering solutions to the exposures that the social media opportunity has presented. Carriers have given wholesalers, agents and brokers the ability to customize coverage for each individual company for the different risk exposures teach of them faces.
Along with the user-generated content and online distribution gaps found in most professional, general and property policies, social media package policies also address some of the more standard exposures. Among these are defamation, including libel and slander; intellectual property, including copyright infringement; and invasion of privacy.
The social media package policy also can include some of the newer insurance products including cyber liability, privacy liability, including breach notification costs and comprehensive media liability with coverage for user-generated content and online distribution.
Some of these exposures existed prior to social media, but now thanks to social media, they have a faster, longer lasting and broader reach and can wreak unimaginable damage to a company’s reputation, its overall financial success and even threaten its existence. Which is why, more than ever, companies need to be protected against the unimaginable.
Agents and brokers should counsel their clients about the potential risks and exposures of social networks. When calling on clients who operate community-based Web sites, online retail stores, online gaming, web publishers, bloggers, music and even video sharing Web sites, brokers should highlight the benefits of a social media package to help protect them.
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