A Double Dose of Exposure:
Harnessing the Power of Social Media Holds Promise but Comes with Peril

By Frank J. Coyne

Viral videos. Flash mobs. Astroturfing. Flogs. Tweets and peeps. The social media phenomenon is revolutionizing the way we communicate. Successfully leveraging new communication technology provides an opportunity to reach mass markets at a fraction of the cost of traditional media outlets and can generate buzz no advertising dollar could ever buy. However, as with any high-reward potential, significant risk can develop if an organization doesn't carefully map out its social media policy and procedures and understand the pitfalls.

We've all seen examples of social media put to good use. During the recent volcanic-ash-induced airline crisis in Europe, several airlines used Twitter and Facebook to post updates about flight plans and availability — an efficient way to keep a large customer base informed about constantly changing conditions and options. An advertising idea can also go viral. A recent personal hygiene product on YouTube garnered two million hits in its first weeks, leading to broad coverage in mainstream media, reaching a younger audience, and becoming one of the most popular ads online. Traditional advertising outlets can't garner such coverage.

Sadly, there is a darker side to social media. Flash mobs have cropped up in some cities and towns, drawn by instant messaging to attract large, spontaneous crowds. While some of the gatherings are harmless, other instances have resulted in violent sprees. Tragically, social media has also been implicated in cases of murder and suicide.

Case law regarding potential social media liability continues to develop. Several corporate executives were recently convicted in an Italian court because they hosted a platform used to upload videos, violating an individual's right to privacy.

Historically, traditional media outlets receive some leeway under the banner of journalism shield laws. However, the availability of social media, from Main Street businesses to Fortune 500, is testing the boundaries of those laws. At what point does journalism become advocacy and/or criticism?

Any organization looking to harness the power of social media must understand the potential for negative consequences and address them through sound guidelines. Without strict policies in place, employees could unwittingly signal the marketplace (and competitors) about upcoming product plans, problems with existing products, or internal debates over business models.

Social media policies address such issues as protecting private/confidential information, respecting copyright, and identifying the intended target audience while recognizing anyone can view a posting. Transparency in authorship and sponsorship is critical to protect an organization's goodwill and standing with the public, while using false identification to promote a cause can have severe repercussions. Recognition of consumer protection regulations and protecting against libel/slander of individuals and competitors are critical components of a sound policy.

Social media issues will become clearer in the future as they are addressed through the courts and through legislation and regulations. Insurers must recognize customers are becoming increasingly exposed to social media risk. They should determine how best to address such exposure from an insurance coverage perspective — whether by expanding traditional media-outlet policies, directors and officers liability, or cyber risk products. The demand is there. Meanwhile, a sound enterprise wide social media policy will ensure a positive experience for organizations and minimize potential risk.

Frank J. Coyne is chairman and chief executive officer of ISO.

Best's Review, July 2010. Copyrighted A.M. Best Company, Inc., 2010.
All rights reserved. Reprinted with permission.