Catherine Stagg-Macey and Craig Beattie

Leveraging Social Networks

An In-Depth View for Insurers

April 2010

Content

3 5 7 7 7 10 11 11 13 13 14 15 17 17 19 21 22 22 24 25 27 29 29 31 33 34 34 34 35

Executive Summary Introduction The Social Networking Buzz What Is Social Networking? Social Networks as a New Channel A Fragmented Channel Dominant Social Networks Differ by Country Social Networks as Multiple Distinct Channels Benefits and Risks of Social Networking Why Are Organizations Interested in Social Networking? Unintended Consequences Organizational Risk Insurers and Social Networking Insurers in the United States: A Consistent Multinetwork Approach Lessons from the United Kingdom iPhone Apps Insurer Social Networks Financial Services Aggregators as Social Networks Social Networking Trends Social Networkers in the Future Social Networks Start Seeking Revenue Embracing the Digital Change How to Adopt Technology Solutions Conclusions Leveraging Celents Expertise Support for Financial Institutions Support for Vendors Related Celent Research

Executive Summary

According to news reports, in March 2010 Facebook was the most visited website in the US, having more visits than Google for the first time. This announcement heralds the arrival of social networks. Celent believes that social networks will grow in usage and become central to the Internet experience for most people. While the number of users of social networks continues to increase apace, an understanding of the types of social networkers will help insurers to better understand their target market. Rather than the current model of searching for content and pulling it, relevant content will be pushed to Internet users through recommendations from their friends and targeted advertising. Many insurers are already testing the waters in the world of social networks, and best practices are only beginning to emerge. In the United States, nine of the top ten nonlife insurers have at least one Twitter account, and eight of those have at least one Facebook page. These social media websites are both active and have an engaged customer community involved. By contrast, only seven of the top twenty life and nonlife insurers in the UK have a presence on Twitter, with fewer on Facebook. In the UK, the interaction is rare and adoption is just starting. In the future we will see a growing population of social networkers who are used to seeing friends comments in search results for financial services products and who expect to be able to engage with their chosen insurer through the channel of their choice. In addition social networkers will be comfortable with the concept of sharing information about their behavior and their location and also paying small amounts for key premium services. These key concepts will allow new innovative insurance products to come to market leveraging this data, new payment methods, and the on-demand requirements of the customers. Perhaps the most surprising result is that spending effort now in seemingly frivolous activities on social networks can drive real business value. The huge popularity of comic mascots in social media has paid dividends to insurers who have invested in them and executed them well.

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This report aims to provide an overview of social networks and their use by businesses and reviews current trends, influences, and the future of social networks. In the final chapter, the report provides a set of guidelines on how insurers should use social networks and social media.

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Introduction

A social network is a group of individuals and organizations that are linked to each other in some meaningful way. Early social networks offered a way to get back in touch with people. There are many such websites now, and the most well-known are Twitter, LinkedIn, MySpace, and Facebook. Many studies highlight how popular these sites have become. A study by Anderson Analytics on the demographics of social networkers and nonusers in July 2009 found that 110 million Americans had used a social networking website within the last month60% of the online population. The study found the average user logs on five days a week, four times a day, for a total of about an hour a day. This popularity raises interesting questions for insurers about how this channel can be leveraged. Today, insurers are heavy users of emails, paid keyword searches, and video ads as digital marketing channels. And there is broad consensus on the effectiveness of these channels. But that said, recent Celent research (Digital Marketing in Insurance, April 2010) shows that 85% of respondents said that spending in social networks would increase in the next three years. This is a resounding thumbs up to a commercially nascent channel. Many insurers are already testing the waters in the world of social networks, and best practices are only beginning to emerge. In the United States nine of the top ten nonlife insurers have at least one Twitter account, and eight of those have at least one Facebook page. These social media websites are both active and have an engaged customer community involved. By contrast only seven of the top twenty life and nonlife insurers in the UK have a presence on Twitter, with fewer on Facebook. In the UK the interaction is rare and adoption is just starting. What is an important and as yet unanswered question is why insurers should take social networks seriously; i.e., what is the business case, and if there is one, what might the execution of such a strategy look like?

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This report aims to provide an overview of social networks and their use by businesses and reviews current trends, influences, and the future of social networks. In the final chapter, the report provides a set of guidelines on how insurers should use social networks and social media.

Copyright 2010 Oliver Wyman

The Social Networking Buzz

What Is Social Networking?

Early social networks offered a way to get back in touch with people. Examples include classmates.com in 1995, with sixdegrees.com in 1997 as a more general service. Today social networks are a way to measure public opinion, a way to find, engage with, and increase your customer base, and a growing source of innovation. There are many such websites now, and the most well known are Twitter, LinkedIn, MySpace, and Facebook. The creation of Facebook is the subject of both a book and a film that are under production at this writing. A social network is typically defined as a group of individuals and organizations that are linked to each other in some meaningful way. A social network service is a system that enables a social network to interact, although the term social networks has become synonymous with social network services. A study by Anderson Analytics on the demographics of social networkers and nonusers in July 2009 found that 110 million Americans had used a social networking website within the last month60% of the online population. The study found the average user logs on five days a week, four times a day, for a total of about an hour a day. Most social networking sites offer their services for free. The business model centres around allowing third parties to pay for targeted advertising to customers of the social networking websites, and this is why they are so relevant to digital marketing and insurers.

Social Networks as a New Channel

Organizations already rely on a wide variety of channels to reach their customers. Social networks are emerging as another channel by which communication and business can be undertaken. Social networks differ from channels such as e-commerce, phone, email, and mail in a number of important ways, summarized in Table 1.

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Table 1: Social Networks Differ from Conventional Channels

Difference Automatic filtering Shared subscription information Social interactions are affecting search results Comment Similar to email spam filters, but filters are based on interest and timeliness Information about who subscribes to what is shared or even public Public comments, subscriptions, and friends are all being used to personalize search results Communication between parties on social networks is rarely private. Complaints and praise are shared equally. Unlike email, social media is a multimedia experience with video, images, audio, and text content all expected. Unlike other channels, interactions through social networks are expected to be more human, rather than with a corporate entity. Most social networks allow individuals and organizations to appear and interact on the website for free.

Shared communication

Multi-media is encouraged

Appearing authentic and human is more important Joining is free, for now

Source: Celent

Automatic filters choose the content. In a similar way to search engines selecting relevant content, social networks use automatic filters based on timeliness, engagement, and interest to filter out messages the customers have chosen to subscribe to. If a customer subscribes to an organizations fan page on Facebook, they can also choose to mute updates if they are too numerous, or Facebooks filter may filter out results based on whether these updates were of interest in the past. Twitter, by contrast, doesnt filter results, but customers tend to only read recent or timely updatesprompting some companies to repeat messages. The subscription to an organizations messages and subsequent communication is frequently public or visible to friends on the social network. For instance, the friends of a Facebooker can see if they are a fan of an organization. Anyone can go to Twitter and see the organizations a person is following on Twitter. This public visibility goes both ways; social media websites frequently clearly show the number of fans, followers, or interested parties an organization has in real time. Engagement or lack thereof is usually public information. Social search is affecting search engine results. These public connections to organizations are now being leveraged by search engines. Google in particular has launched social search, which uses a customers social network online to make the search results more relevant. This means if a large number of your customers friends and

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contacts are following an organizations Twitter feed, then relevant information about that organization is more likely to appear in that customers search results. This has massive implications for search engine optimization, which forms a significant part of todays marketing budgets. All communication in these channels should be assumed to be at least shared if not completely public. Tweets are frequently public, as are the replies that are given through Twitter. Comments from customers on items posted on Facebook fan pages are public to all and are actively pushed to the customers network. This means that right now, and increasingly in the future when a customer searches for your products or brand, they will see search results including their friends and colleagues comments. In effect, social media is automating word of mouth marketing. Using a variety of content types is actively encouraged. Sharing of content in rich and various forms is actively encouraged in this channel. This is incredibly important for leveraging video assets. While TV is an expensive route for advertising with little feedback as to who saw the advert and the response to it, it is entirely possible to host a video on social media websites and let your customers publicise and share it. Other channels to market dont have this flexibilityit is still unusual and inadvisable to email video content to customers, for instance. Again, if a customer likes your video, then this will be reflected in their friends social search results. Joining is freefor now. The good news is that an organization can make use of most of social media for free. As for any channelfor it to stay up to date and be useful to customers, a team of people must be assigned to maintain the channel. Increasingly, businesses are being asked to pay for premium access, which may include improved search capabilities or authenticated pages (these are discussed below). It is likely that the cost of joining social networks will increase over time. Social networks expect an authentic and human interaction. There is a need for an organization to be involved through real people. This is a common trend across all social networks, and there are examples of public and shared angry responses to apparently automated responses. Interactions that are personal and appear human are typically the most successful.

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A Fragmented Channel

In the early stages of the Internet, access was fragmented. America Online had a large market share, and only users of the service had access to AOL keywords. Other Internet service providers (ISPs) and portal sites provided similar unique and closed views of the Internet. In the last decade or so, the Internet has become more open, with ISPs offering access to a common, open set of information and commerce applications. The arrival of social networks and to some degree mobile applications has brought with it content only visible to members. Experian Hitwise reported that Facebook was the most visited website in the US for the week ending March 13 2010, having more visits than Google for the first time. This is important because to utilise the vast majority of content on Facebook, you must be a Facebook user. It is a closed network unless you go through the free sign-up process. Other popular social media sites are similarly closed. If an organization creates a Facebook fan page, those who dont use Facebook may be able to see it, but wont be able to interact with it, and this is similarly the case for MySpace and the majority of other social media applications. Twitter and Google Buzz, by default, allow public access to the bulk of the data, including who is connected to who. Public data on the Internet is searchable for all, although those who have signed up can receive regular updates and interact directly through the channel. In short, the channel is not one channel but many. Some use Facebook, some Twitter, and others use no social networks at all. There is no one easy method to engage with customers via social networks.

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Dominant Social Networks Differ by Country

This report mostly discusses Twitter and Facebook as example social networks used by insurers. It is worth observing that the dominant social networks vary by country, as shown in Figure 1. Figure 1: Dominant Social Network by Country (June 2009)

Faceb ook Zi ng

Odnoklassniki Li de

QQ Hyve s

Orkut One

Hi5 Mixi

V Kontakte Cyworld

Nasza -kl asa Frien dster

Ma ktoob Wre tch

Iwiw Skyrock

MySpace Unide ntified

Source: Celent, Google Trends, Alexa

Clearly the social networks an insurer targets should be informed by both the target geography and the target demographics. It is clear that large organisations may need to target multiple social networks.

Social Networks as Multiple Distinct Channels

If a customer contacts an organization by email, then they typically expect a response in email unless they explicitly request an alternative. So it is with social networks. Customers are increasingly talking about organizations using social media and sharing stories. Customers are also seeking to engage with organizations via social media and specific social networks. If an organization wishes to respond to a comment from a customer, answer a query, or put some useful information out there, then it must be done through the social networks the customer is using. In the same way an organization will evaluate the total cost of ownership to have an e-business website as a sales channel, so now organizations must evaluate the value of social networks as a channel. Not only thateach social network needs to be considered, since the

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usage on the different networks is distinct. This has clear impact on any strategy and execution plan to monitor and update social network sites. The phrase social networks hides a great deal of complexity. Social networks describe a set of fragmented and discrete channels. Each social network service has a particular set of features and expected behaviours. Different social networks are popular in different geographies and demographics. A social networking strategy must take each of these factors into account if it is to be successful.

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Benefits and Risks of Social Networking

Why Are Organizations Interested in Social Networking?
Social networks have yet to prove that they can break even, let alone make money. So why are organizations and insurers interested in social networks and social media? Today there are three principle reasons for participating in social networks: they are a cheap method of advertising; they are growing as a communication channel to customers; and they are increasing in influence. It is Celents view that not only are social networks here to stay, but they will grow to define most peoples experience of the Internet in the future. Much more of the media that people are exposed to, including advertisements, will be tailored based on their social networks. Even comments and reviews will be prioritized so that friends reviews appear first. The principle promise of social media and social networks today is free, automated word of mouth. Ten years ago, successful TV advertising campaigns would be discussed at water coolers in offices and between parents when picking up children. Now TV adverts are posted on YouTube and Facebook for freeoften by customers. The public can vote for them, share them, and share comments on the material. Popular adverts are pushed to people by their friends and with their friends recommendation. Advertising schemes using social networks have demonstrated much higher engagement. Nationwide is currently pursuing a campaign based around a character called The Worlds Greatest Spokesperson in the World, which is looking to leverage social networks and social media to make up for a limited marketing budget. In the UK, the advertising campaign compare the meerkat has used extensive social media, and the increase in traffic for comparethemarket.com is demonstrated in Figure 2 on page 14.

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Figure 2: Impact of the Meerkat Advertising Scheme on Search Volumes for comparethemarket.com

Search Volume Index

6 5 4 3 2 1 0 Dec 9 2007 Nov 9 2008 Oct 14 2007 Aug 19 2007 Mar 30 2008 May 25 2008 Aug 16 2009 Oct 11 2009 Jun 24 2007 Mar 1 2009 Apr 26 2009 Jun 21 2009 Dec 6 2009 Feb 3 2008 Jul 20 2008 Jan 4 2009 Sep 14 2008 Jan 31 2010

compare the market

Source: Celent, Google Trends

compare the meerkat

meerkat

Social networks have become the place to broadcast what people are doing and how theyre feeling. The acronym TMI or too much information is often used in reference to social networks. Social networks have become the place to vent ones frustrations and to share stories of positive experiences. Only by actively engaging with the social networks that customers use can an organization discover current sentiment and address concerns or complaints voiced through these channels.

Unintended Consequences
Historically information held within social networking websites was private. There is a trend of more of the information available on social networks becoming public. The default setting on Googles Buzz and on Twitter is that anyone can see the customers followers and who follows themtheir network, in effect. It is quite plausible that a customers network could be used in the future to offer discounts or as part of a credit check if they are connected to known fraudsters. Owners of popular web logs or blogs already receive promotional items and incentives to write about new products. Insurers already look for patterns in customer behaviors, and individuals involved in claims to spot fraudulent activities. It is reasonable to assume these services will include data from social networks in the future.

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Data held on social networks has been used in court cases in the US. In 2007 a Santa Barbara Superior Court Judge cited pictures posted on MySpace as showing that a defendant had no remorse for the incident of which she was convicted. There have been cases of people having their probation revoked based on videos, pictures, or text on social networks describing them doing something in breach of their conditions. In short, seemingly innocent use of social networks is now being used by law enforcement agencies in building cases. Another trend centres around the now wide availability of mobile devices with GPS facilities. More and more people are sharing their current location publicly. This allows for the serendipitous meeting in an unexpected location to become more automated; however, it is clear to anyone on the Internet who knows their ID when they are not at home. A mock website was put together to highlight the issue, called pleaserobme.com, which pulls real location information from Twitter and foursquare to inform would-be burglars of empty homes. There is speculation in the UK that insurers will start looking at customer behavior and what they share when pricing their insurance. This is not without challenges, however, since it is difficult to get a confirmed match between a customers account on a social networking site and the details they share with an insurer. An insurer must then ask for the customers account name in order to get the match, and this clearly may not be offered if it becomes known that the information could increase the premium.

Organizational Risk
Organizations are now actively using social networking websites to engage with customers of their services. Previously, allowing customers to share stories, pictures, and information was activity reserved for bands and celebrities. Now this powerful method of word of mouth marketing is increasingly being used to share information about organizations and their services. Changes in how customers find information and how search engines such as Google deliver information will increase the importance of this channel. Social networks bring a number of risks with them. Since it is frequently free to sign up and there is no vetting of the person behind this, it is difficult to tell if the account is legitimate. This is a problem for organizations wanting to communicate with customers and also for customers in identifying real accounts for organizations. In addition, interacting through social networks is a written form of communica-

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tion and is therefore subject to legislation and regulation. This presents increasing challenges to organizations and particularly financial services organizations.

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Insurers and Social Networking

In the United States, nine of the top ten nonlife insurers have at least one Twitter account, and eight of those have at least one Facebook page. These social media websites are both active and have an engaged customer community involved. By contrast only seven of the top twenty life and nonlife insurers in the UK have a presence on Twitter, with fewer on Facebook. In the UK, the interaction is rare and adoption is just starting.

Insurers in the United States: A Consistent Multinetwork Approach

The approach taken in the United States to Twitter, Facebook, and YouTube is very similar across the key players. In each case content is posted to each social network consistently. Comments made publicly through Twitter and Facebook are responded to swiftly and through the channel by which they arrived, although it is not possible to see if additional private communication was also made. The most frequent updates to Twitter from insurers are replies to other Twitter users regarding queries or comments made about the brand. Twitter is also a popular route for sharing links to news articles and adverts for Insurers. Since Twitter messages are public, this also increases the likelihood that these links are found by search engines. Some insurers also take the opportunity to repeat other Twitter messages that say positive things about their brand or products, referred to as re-tweeting on Twitter. Facebook interactions are not limited to 140 characters like Twitter. All the top ten insurers had posted multiple forms of media, including links to their content, relevant pictures, and videos from their advertising campaigns. In many cases there was Facebook-specific content, such as Facebook applications, items that could be shared on Facebook, and games to play.

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Figure 3: Twitter and Facebook Fans for US Insurers

40000 35000 30000 25000 20000 15000 10000 5000 0

ut ua l AI G h te Be Tr av rk el sh er i re s Ha th aw ay Na tio nw Ha id rtf e Pr or og d re Fin ss an i ve cia lS er vic es Fa rm Zu ri c Al lst a

St at e

Lib er

ty

Twitter followers

Facebook fans

Source: Celent

The most popular US page reviewed (in terms of combined Facebook fans and Twitter followers) in this research belongs to a comedy character at the heart of an advertising campaign, in this case in Nationwides Worlds Greatest Spokesperson in the World campaign. The model uses amusing social media content on social networks along with other advertising media. Figure 3 on page 18 and Figure 5 on page 20 include the fans of the mascot. The character was launched in February 2010 with a television advertising campaign, although it is too early to tell if the social media exercise has been effective. The peak on Figure 4 on page 19 is associated with the television advertising. Its worth noting the characters name is so complex it is not regularly searched for; greatest spokesperson and spokesperson were the most common terms.

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Figure 4: Search Figures for Nationwide and Spokesperson in the US

45 40 35 30 25 20 15 10 5 0
De c De 6 2 0 c 1 09 De 3 2 0 c 2 09 De 0 2 0 c 27 09 20 Ja 09 n Ja 3 2 n 01 1 0 Ja 0 2 0 n 1 7 10 Ja n 201 2 0 Ja 4 20 n 10 31 Fe 20 10 b Fe 7 2 0 b 1 10 Fe 4 2 0 b 2 10 Fe 1 2 0 b 28 10 M 20 ar 1 M 72 0 ar 01 1 M 42 0 ar 0 21 10 20 10

Search Volume Index

spokesperson
Source: Celent, Google Trends

nationwide

Some insurers had made use of a YouTube channel with their adverts and some other informational videos hosted. Also some insurers had a presence on the photo sharing service, Flickr. In all cases, updates were consistent between the different social media websites used. For instance, videos posted on YouTube could be found on Facebook, and articles linked from Twitter were also shared through Facebook.

Lessons from the United Kingdom

Two alternative approaches in the UK have yielded up to 10 times the number of Twitter followers and 20 times the numbers of fans through Facebook, although one is a meerkat toy character and the other is related to the iPhone application Stuck (from Axa/Swiftcover). Figure 5 shows the Twitter followers and Facebook fans for these sites compared to Nationwide in the US.

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Figure 5: Engagement Figures for Alternative Approaches in UK

800000 700000 600000 500000 400000 300000 200000 100000 0 comparethemarket.com stucknow Facebook fans Nationwide

Twitter Followers

Source: Celent

Although UK insurers are not as active in using social networks services as their US counterparts, the insurance pricing aggregators are showing increasing interest. Of the insurers and insurance aggregators reviewed, the Facebook page with by far the greatest number of fans belongs to Aleksandr Orlova fictional meerkat character used by BISL Limited in the comparethemarket.com advertising campaign. Comparethemarket.com has an advertising campaign based around a mock similar website at http://comparethemeerkat.com/. Originally the name was selected to highlight the market element of the website, since compare is a common term now in UK aggregator websites. The meerkat character has appeared in television, print, and online media adverts. A team of people are operating Twitter and Facebook accounts in Aleksandrs name, providing amusing commentary on world events and replies to people on the Internet. The amusing content has been shared widely and is spread quickly through social networks. Fans of Aleksandr are even generating their own meerkat content and sharing this online. While the content is not directly related to car insurance or comparethemarket.com, the pricing aggregator website has seen a significant increase in usage since the advertising campaign (see Figure 2 on page 14).

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The implication is that a strong multiformat advertising campaign based around a central fun character or mascot making significant, frequent, and relevant use of social network services can dramatically increase brand awareness, provide a method to engage with a large number of customers, and increase business volumes.

iPhone Apps
Swiftcover (AXA) in the UK is behind the iPhone application Stuck. The application allows iPhone users to share information about their location with friends and to see updates from other users. The application is itself a social network, although it also updates friends via email and can update Twitter. While the application is of use to drivers in sharing traffic jams, at this writing there are no links to insurance or any mention of the Swiftcover brand. The reason it is mentioned here is that the application has more followers on Facebook and Twitter than any of the insurerbranded pages, and is second largest of those polled behind Aleksandr Orlov. Due to the lack of affiliation, Swiftcover hasnt seen the increase in customer activity that comparethemarket.com has. Swiftcover must be careful how it repositions the application in future versions if it is to leverage the fan base.

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Insurer Social Networks

A few insurers have made early attempts at building their own social networks. The social networks tend not to focus on insurance topics, although they do advertise their sponsor (with the exception of Stuck). Good Hands Community. The website is principally focussed on community-based volunteer work but also includes sections on driving and personal finance. Each page features an advert for Allstate in the United States. The Responsibility Project. Not really a social networking site but worthy of mention here. The website is focused on discussing what it means to behave responsibly. It is strongly affiliated with its owner, Liberty Mutual in the United States. Stuck or Stucknow. As discussed above, Stuck is a social network based around an iPhone application and is operated by Swiftcover in the UK. Keep Britain Biking. This site is owned by Devitt Insurance in the UK, part of RBS Insurance, which specializes in Motorcycle insurance. Kontsurnous.fr. This is group insurance scheme where tribes of up to 15 people join together. For each policy in the scheme, the tribe earns points which can be redeemed as lower premiums or not having to pay the excess in the event of an accident. Celent believes that insurers should seek to use existing, established social networks such as Facebook or LinkedIn where possible. The investment to create a new social network is significant and wont attract usage unless it has a specific target audience. With the exception of kontsurnous, the examples given demonstrate building social networks around topics not directly related to insurance.

Financial Services Aggregators as Social Networks

Financial services-focused websites have existed for a number of years offering consumer advice on a variety of products including insurance. Moneysupermarket.com, for instance, was launched in 1999. Other

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examples include mint.com, wesabe.com, and lovemoney.com. Some websites target specific audiences, such as saga.co.uk, which is aimed at people over 50so-called silver surfers. These websites offer the customers the ability to log in and share information, experiences, and reviews regarding financial institutions and insurers. These aggregators are in a strong position for creating social networks because they are positioned as advising the customers, and many already have a community of followers. This neutral position lends them more credibility and allows for continued interaction even if the customer changes their provider.

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Social Networking Trends

Social networking is a growing channel and will be key to brand awareness. Successful social media campaigns can drive increased customer traffic to the brand, solidify relationships with existing customers, and increase new business. The trend of customers seeking advice from friends and others in their community will increase. The introduction of social search capabilities in popular search engines will make these recommendations and comments easier to find in the future. It will be crucial that public negative comments and reviews are responded to publicly, allowing search engines to reveal the whole conversation and limiting the negative impact. In the UK, pricing aggregators make the best use of social networks, with some aggregators supporting their own social network. The financial services aggregator Mint in the US also demonstrates greater engagement than the insurers. As the number of social networks grow, we will see social network aggregation websites grow and more open standards form, allowing content to be shared and move between social network services. At this point, the number of general purpose social network sites will likely decrease in number through acquisition or failure, although those that remain will maintain greater influence than social networks have today. Many specialist social networks with existing communities will continue. A large proportion of the public in all markets will start sharing significantly more data than they do today. Even in emerging markets, the availability of mobile technology will allow for mobile-based social networks to continue to grow and increase the use of location-based services in these areas. A key challenge for insurers will be persuading their customers to share this data and then using it effectively in producing new products and improved pricing. Rewarding customers for avoiding dangerous roads and driving sensibly will become increasingly possible. The use of microtransactions or small, frequent payments will increase in social networks and be a common occurrence elsewhere. Products that can leverage paying for a service at small amounts at a

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time will appeal to a broader cross-section of the population in both developed and emerging economies. Pay-as-you-drive initiatives and per-hour car insurance policies will become commonplace. Insurance schemes based on popularity or the number of friends in the scheme will become more commonplace. Kontsurnous in France is ahead of its time, but insurers will increasingly experiment with social networks and group insurance policies. Current psychological research in how group behavior influences individual behavior will drive this, and insurers will look at how social networks can be used to make their customers safer drivers and better risks in general. Finally, insurers will increasingly use public shared data to inform pricing decisions and aid in fraud detection. Customers with large networks and a significant amount of influence may benefit from preferential rates and better service since their comments will benefit search engine results for the brand. Customers who associate with poor drivers, criminals, and friends involved with fraud may find that they pay a higher premium or are not offered insurance.

Social Networkers in the Future

Some typical uses of social networking have started to form, and the introduction of Google Buzz sparked many discussions on how people use different social networks. Celent believes people will fall into one of five basic categories, as shown in Figure 6. Figure 6: Types of Social Networkers

Professional Sharers

Size of Audience

Over sharers Paranoid Groups

Paranoid Individuals Disconnected

Sensitivity of data (Size of bubble corresponds to volume of data)

Source: Celent

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Even in the future, there will remain disconnected individuals who are not connected to the Internet, although some data will appear on the Internet related to them, typically from oversharing friends. The group labeled paranoid individuals refers to the very privacy-conscious individuals who have elected to share very little data about themselves on the Internet and avoid social networks, but who do participate on the Internet. This group will use the Internet as most use it today, turning to search engines with specific queries. Paranoid groups refer to private groups on the Internet who share some data among themselves but have very little public information available. Social clubs and family groups would fall into this category. While very sensitive information is shared, it is done so only within a tightly specified group. This groups experience of the Internet will differ, content will be pushed to the members of the group by other members, and they will be presented with friends reviews when searching for services and products. Paranoid groups may pay for some services, although this will be limited. Social games and low-cost features may appeal within this group. Professional sharers refer to individuals who share a great deal of information publicly or within a broad audience for professional reasonssuch as networking, managing clients, etc. These individuals will share some location information as it relates to business trips, but otherwise very little sensitive information will be shared. Similarly to the previous group, content will be pushed to professional sharers, although they will make more use of location-based services and using their contacts for answering questions through social networks. Professional sharers will pay for additional services and for features that improve their profile. Finally, oversharers feel the benefit of sharing information greatly outweighs the risk and share as much information as possible on social networks, much of the information shared publicly. This group pays frequent, small sums of money for premium subscriptions, additional features, and location-based services. The challenge for insurers who wish to use data from social networks is twofold: what customer behavior on social networks should be rewarded, and what should be penalized? A topic actively discussed in the press at the time of writing is, Should individuals who actively overshare their location pay more for house insurance? If so, should this affect professionals who are likely to be affluent, good risks but who travel?

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It is common practice for bloggers and journalists with a broad readership to receive free samples in the hope that they write about the product. Should individuals with many connections receive better service? Would this favoritism help ensure the social search results in their wide network include their good will? In the future, people with a large network will have greater influence on spending, and Celent believes this will be taken into account when dealing with customer service issues. Finally, insurers will need to include disconnected customers in their future strategies. Such customers may be dealt with as they are today in face-to-face or phone channels and with paper documents. It is key that this group of customers are considered in any future strategy.

Social Networks Start Seeking Revenue

There is some speculation about the future of social networks. Most social networks have followed the URL strategyUbiquity first, Revenue Later. The revenue model for websites such as Twitter and Facebook has not been proven, despite the significant investment these sites have gained and the lofty valuation figures. The key source of income was seen to be targeted advertising. It has been observed that the click-through rates from adverts on social networks are much lower than for Googles adverts on their search pages. While many organizations are creating free Facebook pages for instance, many are wary of advertising given the poor performance. That said, the scale of customers on Facebook perhaps makes up for the poor performance in terms of click-through rates, and Celent believes that advertising will still be a key source of income for social networks. Social networks will supplement this income by asking organizations to pay for new premium services. Social networking will increasingly borrow inspiration and revenue models from online gaming. Free online games have for some time relied on microtransaction models, where players can play for free or choose to pay small fees for virtual in-game items. In some cases these items provide an advantage in the game, and in other cases they are simply cosmetic, such as changing the color of the players hair ingame. Such models are already working well in Zynga Games Farmville, which is popular on Facebook. The social network hi5.com, which is popular in Central America and Eastern Europe, allows customers to spend hi5 coins on changing the color of their profile background. Coins can be bought or earned through revenue-generating behaviors such as using the hi5 search toolbar, and the click-throughs generate revenue for the social network.

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The proliferation of mobile applications supporting social networks will continue to grow, and consumer electronics will start to embed social networking technology. Sony already sells a television that is capable of showing your Facebook updates, for instance. Some consumer electronics items will be able to automatically share their state with social networks such as Twitter and Facebook. In short, Celent believes that social networks will grow in usage and become central to the Internet experience for most people. While the number of users of social networks continue to increase apace, an understanding of the types of social networkers will help insurers to better understand their target market. Rather than the current model of searching for content and pulling it, relevant content will be pushed to Internet users through recommendations from their friends and targeted advertising.

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Embracing the Digital Change

The use of social networks is a global phenomenon and is already affecting insurers. Use of social networks is a new phenomenon, although customers are increasingly crowd-sourcing opinions from friends through social networks. Customers will increasingly use social networks in pricing decisions and to engage with organizations for services. An insurer that fails to engage in social networks has little influence on this content and misses the opportunity to engage with customers.

How to Adopt
There are a series of steps insurers may go through in adopting social networks. Each step builds on the previous one and requires increasing commitment from the insurer. See Figure 7. Sharing existing articles and content through social networks requires minimal input and can usually be accommodated with current headcount. Figure 7: Stages of Social Network Adoption

Sharing

Repeati ng

Engaging

Prom otion

Mascot

Social Network

Customers re-share Increase website traffic Searc hable online content Reduce assistance calls

Content from other sources appears authentic Requires team Should not be seen to endorse linked content

Defend brand Answer customer com plaints Builds an on-line FAQ Increases customer engagement Requires team Regulation Audit Privacy difficult in public forum .

Promotes brand Rewards word of m outh Network specific voucher codes Sign up friends Analytics can be difficult

Strongest engagement Builds brand awareness Further increase web traffic Promotes engagement Consistent m ultimedia needed Unclear if effect rem ains without consistent input.

Control over network Full visibility of data Significant costs to set up and promote Needs an adjacent them e Why would your custom ers join an additional social network?

Source: Celent

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Sharing user-generated content such as Twitter messages commending customer service experiences is perhaps more effective. Such messages appear more authentic and can be verified by prospective customers. This, however, requires a team to seek such content and to share it. Engaging with customers through social networks, by contrast, requires a team of individuals and technology support to aid regulatory compliance and audit requirements. This approach has the side benefit of creating an online FAQ where customers searching the web for solutions may find the insurers responses on Twitter or other social networks, so it does not incur the cost of an incoming phone call or a call to the wrong department. Promoting the social network page is slightly different. Organizations in other verticals have used promotions and competitions on the social networks. The drive is to increase the influence of the organization, so repeating promotional messages or bringing in friends to be fans of the organization are typical goals. Those who complete the required activity receive at least a message from the organization and possibly a voucher or prize. Other organizations have used discount voucher codes to tempt people to become fans of their social network pages. This approach has the advantage of being able to track the effectiveness of publicizing promotions for free through social media. The word mascots here describes the use of fun characters in social media. This type of content is well suited to social media and is readily shared. This activity can pay significant dividends in brand awareness, as seen in Figure 2 on page 14. In the UK, an obvious mascot opportunity is the Churchill Dog from Churchill insurance. The Churchill Dog has a limited presence on Facebook and a respectable number of fans despite the lack of updates and lack of engagement. Similarly in the US, the Geico Gecko and Caveman characters already have a significant unofficial social media following that could be tapped to the brands advantage. These are perhaps the best examples of untapped potential in the scope of this report. With respect to the Nationwide campaign, its worth noting that simpler names such as meerkat are easier to search for than a phrase such as The Worlds Greatest Spokesperson in the World. Setting up a social network is another order of magnitude again in terms of investment and presents the question, Why would our customers join our network? It is Celents view that insurers should leverage existing social networks where possible, only choosing to create a new one where there is a specific application that cant be achieved elsewhere or there is already a strong target community. For

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instance, Kontsurnous.fr would likely be significantly more successful if it were better integrated to existing social networks rather than relying on customers entering in friends details. Regardless of the level of adoption, there are certain governance rules which should be implemented for organizations interacting with customers: The customer must be identified and verified as with any other channel. Move sensitive answers to another channel such as phone, email, or secure message. Use a tool to communicate through social networks that can log interactions. Actively search for fake social network pages. In the same way fake websites operate, these may be operating fraudulently in order to defraud potential customers.

Technology Solutions
This report will not cover technology solutions for social networks in detail, although this section will point to some example applications and provide a view on the kind of functionality an organization should be looking for when adopting tools. These are not recommendations, and any organization should execute its usual software selection processes before progressing. There are many free Twitter and Facebook tools. Most now feature supporting multiple accounts and scheduled posting. Hootsuite has some analytics capability beyond the common Twitter Search functions. Enterprise-ready tools for managing and analyzing social network interactions typically have full workflow and audit capabilities. They also typically have stronger real time analytics capabilities, although dedicated analytics solutions may be required for in-depth analysis. For social media analytics looking at return on investment of activities, a short list of tools is included. Table 2: Social Networking Aggregators and Analytics
Product TweetDeck Seesmic
Source: Celent

Aggregation Facebook, Twitter, MySpace, and LinkedIn Twitter

Workflow None None

Analytics Twitter search Twitter search

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Table 2: Social Networking Aggregators and Analytics

Product Hootsuite Aggregation Facebook, Twitter, LinkedIn, MySpace, ping.fm, and Foursquare At least Twitter and Facebook Facebook Workflow Multiple users, scheduled posts Analytics Link analytics through ow.ly integration, search facilities

Service Cloud 2 from Salesforce Social Marketing Suite from ContextOptional Social Relationship Management from Virtue SocialTalk from Syncapse Google Analytics

Integrated to CRM functions Multiple users, scheduled posts Multiple users, scheduled posts Yes Fan growth, user activity Link analytics Media play analytics Yes

Twitter and Facebook

At least Twitter, Facebook, MySpace, and Orkut N/A

N/A

Full analytics suite, linked to Google Adwords Web Analytics and ROI management tool Analytics on popular Twitter message by theme Analytics on popular messages by theme URL shortener with link analytics URL shortener with link analytics

Omniture Tweetmeme

N/A Twitter

N/A N/A

Postrank Analytics

Twitter, Facebook, FriendFeed, and many others N/A N/A

N/A

ow.ly bit.ly

N/A N/A

Source: Celent

Insurers looking to create their own social network may want to consider the vendors in Table 3. Table 3: Full Social Networking Solutions
Product Name SBS KickApps Platform Telligent Community BuddyPress Ning.com
Source: Celent

Company Jive Software KickApps Telligent Systems buddypress.org Ning, Inc.

Comments

Based on the popular WordPress blogging tool Cobranded networks

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Conclusions

Social networking activity on the Internet and other devices is a rapidly growing phenomenon and is here to stay. The top US Insurers have an established social media strategy that is increasing their engagement with customers and allowing them to interact with customers in their chosen channel. Some UK insurers have some social network presence but typically dont display the same strategic activity as US insurers. Social networks are themselves changing and are increasingly under pressure to prove their potential revenue streams. The low clickthrough rate of advertising on social networks has put some companies off, but with the ever-growing customer numbers, it is clear this will be a necessity in the future. The deals struck between search providers and key social networks have already brought changes in the Internet search results retrieved from the major search providers such as Bing and Google, something that will complicate search engine optimization, and which the marketing team must keep watch on. In the future we will see a growing population of social networkers who are used to seeing friends comments in search results for financial services products and who expect to be able to engage with their chosen insurer through the channel of their choice. In addition, social networkers will be comfortable with the concept of sharing information about their behavior, their location, and also paying small amounts for key premium services. These key concepts will allow new innovative insurance products to come to market leveraging this data, new payment methods, and the on-demand requirements of the customers. Perhaps the most surprising result is that spending effort now in seemingly frivolous activities on social networks can drive real business value. The huge popularity of comic mascots in social media has paid dividends to insurers who have invested in them and executed them well. As Aleksandr Orlov, the meerkat mascot and founder of comparethemeerkat.com, would say, Simples.

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Leveraging Celents Expertise

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Related Celent Research

Reaping the Benefits of Web 2.0: European Insurers' Strategies that Work June 2009

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Copyright Notice

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