The modern insurance industry has been around for hundreds of years. Insurance advertising has been around for almost as long. Despite that, navigating the do’s and don’ts of insurance advertising is a constant source of confusion for agencies. And, that is most true when agencies advertise on social media. Despite what you might think, there are no special rules for advertising on social media. However, it does present some unique challenges.
A hypothetical illustration of these challenges
The Kenobi Insurance Agency is located on Tatooine, which—remarkably—has all the same insurance laws as Connecticut, New Hampshire, New Jersey, New York and Vermont. The agency owner, Obi-Wan (Ben for short), wants to run a contest, and creates an advertisement that reads, in “Anyone who gets a quote from Kenobi Insurance Agency on Life Day is entered into a chance to win 5,000 credits!”
As most producers know, state (and Tatooine) insurance law prohibits rebating. Rebating is when an insurance producer gives something of value to a customer—or a potential customer—to entice that customer to purchase a policy.
Exceptions to the rebating rule
An exception to the rebating laws is what I call the free-and-open-to-all exception. Under this exception, any offer that is open to the public and does not require the purchase of a policy is not considered rebating.
If we apply that exception to the above hypothetical, it would qualify, because the promotion is open to anyone, and it is free.
Marketing rebates
Scenario one: Kenobi Insurance Agency wants to advertise the Life Day promotion through the mail. The agency contacts PIA Design & Print, and PIA’s team of writers and designers make a postcard for the agency’s promotion. Then, PIA Design & Print sends the postcards out using a mailing list that Kenobi Insurance Agency purchased from the Mos Eisley Post Office. The whole process takes about a month, start to finish.
Scenario two: Kenobi Insurance Agency wants to advertise the Life Day promotion on its Facebook page. The agency’s social media specialist develops the copy and design of the Facebook campaign, and the Life Day promotion is posted to Kenobi’s Facebook page. The whole process takes about a day, start to finish.
Which scenario would you choose? Likely the faster process, right? But, are both scenarios legal? The first one almost certainly is. The second one? I don’t know.
This is the issue with advertising on social media. Like I said—there are no special rules for advertising on social media.
Advertising on social media is risky
Advertising on social media is risky, because social media is instantaneous—an advertisement can go from an idea to reality on social media quickly, and often with little or no time spent thinking about insurance law. While social media is fast, it’s imperative to slow down.
Back to scenario two: The Kenobi Insurance Agency advertised the contest on its Facebook page. However, the Facebook page happens to be a private group page, for current agency customers only. It was set up that way when the page was first created, and the page was never made public. Because the page isn’t public, the advertisement is illegal.
The free-and-open-to-all exception requires the offer to be open to the public and it can’t require the purchase of a policy. Since the Kenobi Insurance Agency Facebook page is closed to the public, it fails this exception.
It’s easy enough fix, though. Just open the page to the public.
But consider this: What if the social media specialist makes a mistake when he or she writes the post? What if the post accidentally reads, “Anyone who buys a policy with Kenobi Insurance Agency on Life Day is entered into a chance to win 5,000 credits!”? Now, even if the post is visible to the public, it’s requiring the purchase of a policy instead of getting a quote. That small change in language makes that advertisement illegal.
My point here is that social media is fast and unforgiving. Mistakes like these can be made quickly. And, your state’s insurance department will hold you accountable. But, this doesn’t mean your agency should avoid social media advertising. Actually, that would be a huge disservice to your agency because social media can really benefit your agency. However, just with traditional advertising, insurance producers should take their time with social media advertising.
This is just the tip of the iceberg when it comes to protecting your agency when advertising on social media. Do you want to learn more? Swipe Right: Rules and Regulations to Advertising on Social Media will teach you the do’s and don’ts of advertising your agency online. This class is available on demand in Connecticut, New Hampshire, New Jersey, New York and Vermont.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
