The team developing social media guidance for the National Association of Insurance Commissioners (NAIC) should define terms and avoid references to specific social media service providers.
Commenters give that advice in reactions to a draft white paper developed by the Social Media Working Group at the NAIC, Kansas City, Mo.
Drafters call for state insurance regulators to ask insurers to adopt policies and controls that cover use of social media by associated entities as well as by the insurers’ own employees.
If the current draft is adopted and implemented as is, an insurer could be held accountable for social media content posted to the sites of affiliated companies as well as to company-sponsored sites. An insurer might have to prohibit associated entities from engaging in business communications via social media venues that were not subject to the insurer’s supervision.
The Compliance & Ethics Forum for Life Insurers (CEFLI), Bethesda, Md., a group formerly known as the Insurance Marketplace Standards Association (IMSA), helped organize a social media regulatory meeting with NAIC officials in December 2009.
The Financial Industry Regulatory Authority (FINRA), Washington, then developed FINRA Notice to Members 10-06, which sets rules member firms are supposed to use when overseeing employees’ and others’ use of blogs and social networking sites.
Kelly Ireland, a senior counsel at the American Council of Life Insurers (ACLI), Washington, say they, and welcome, evidence that the NAIC white paper drafters are trying to take an approach that will be consistent with the FINRA approach.
But Ireland and other commenters have asked the white paper drafters to add a section defining terms such as “associated entity” and “related entity.”
“It is important that these terms be defined in order to better understand the white paper’s discussion, particularly as that discussion relates to the liability and responsibilities of insurers for these entities,” Ireland says.
In the draft white paper section that covers an insurer’s responsibility to oversee other entities’ social media efforts, the drafters say regulators would use concepts such as “entanglement theory” and “adoption theory” when deciding when an insurer had a connection with another company’s activity.
FINRA and the U.S. Securities and Exchange Commission have issued a great deal of guidance on those concepts, Ireland says.
“The application of these theories in social media communications is complicated and very fact-dependent because of the interactive and always changing nature of social media sites,” Ireland says. “If the NAIC or individual states will be applying these theories within the insurance regulatory framework, additional guidance will be required to fully understand its applicability to social media content subject to state insurance laws and regulations and appropriate citations should be included in the white paper.”
CEFLI President Donald Walters says he likes a draft white paper provision that calls for state insurance departments to give employees official permission to visit social media sites.
“Many state insurance departments have outright prohibitions against access to social media which limit the ability of a regulator to identify possible inappropriate uses of social media,” Walters says. “Given the importance of this practical element to facilitate regulatory oversight of social media activity, the draft white paper may want to provide greater prominence to its recommendation to encourage state insurance departments to explore establishing appropriate social media access for state insurance regulators within existing state technology systems.”
Stephen Selby, director of regulatory services at LIMRA, Windsor, Conn., recommends that the NAIC avoid referring directly to specific websites or services in any glossary or definitions list.
“General terms should be used instead,” Selby says. “For example: Instead of referencing ‘Twitter,’ define and use the term “micro-blogging.’ Instead of referencing ‘Facebook,’ define and use the term ‘social media.’ Instead of referencing ‘LinkedIn,’ define and use the term ‘business network.’”