As the regulatory landscape continues to grow in complexity, marketing compliance in the insurance industry is critical. If an organization fails to maintain the necessary compliance requirements, it risks not only losing customer confidence due to bad press, but also serious financial implications.
To illustrate the steep consequences of noncompliance in insurance, consider these examples: One New York insurance company was charged with deceptive advertising when its domain names and branding were found to be nearly identical to the state-run health insurance exchange. Such an infraction came at a cost of $50,000 in fines. Two marketing companies also ended up in hot water, this time due to mailers delivered to senior populations that appeared to be coming from a government agency. The mailers contained no information about the insurance company or any mention that the data collected may be shared, sold, or otherwise transferred to a third party. The cost of this transgression — violating the Consumer Fraud Act — was $40,000.
These are fairly egregious acts. However, even something as seemingly benign as telling customers that your insurance coverage is at the lowest possible rate could be classified as a misleading statement and result in financial penalties. In New York alone, these types of claims have cost insurance companies a total of $15 million in fines. With insurance divisions on the lookout for insurance marketing compliance violations, you must ensure your marketing materials meet all current regulatory requirements.
How to Be Compliant in Insurance Marketing
Thankfully, understanding how to be compliant with insurance marketing regulations doesn’t have to be complicated. If the marketing doesn’t seem ethical, it probably isn’t. That said, it’s still important that every team member — from marketing staffers to agents — understands the facets of marketing compliance in the insurance industry to keep your organization above board.
Include the following in your insurance company’s compliance requirements checklist:
- Avoid false, deceptive, or misleading statements: With insurance marketing, it’s always wise to err on the side of caution. Stretching the truth (even by just a small amount) could easily catch the eye of the DOI and lead to substantial fines.
- Keep branding consistent: Brand consistency is simply good business, as it makes a company easily recognizable to customers. It also safeguards insurers from appearing to be something other than what they are (such as a government program), which can draw the attention of regulators looking for issues with compliance in the insurance industry.
- Maintain transparent messaging: Often, one of the biggest challenges of insurance marketing is making sure to include all the necessary details in your materials. Clearly state the full name of the carrier, the type of insurance coverage, and the product reference number (if applicable) to maintain compliance.
- Update staff regularly on any regulatory changes: Part of the challenge of insurance marketing is that regulations are always changing. As such, make sure marketers meet with the compliance department regularly to keep current on insurance company compliance requirements. Do the same with agents and any other customer-facing team members.
Leadership Is Key to Compliance in the Insurance Industry
Beyond keeping your compliance guidelines up to date, the challenges of insurance marketing become easier to manage with proper leadership in place — namely in the C-suite. A Deloitte survey found that 21% of companies had yet to create a chief compliance officer role. Of those that did, only 43% said their CCO held a seat on the executive management committee.
An insurer’s compliance capabilities are only as good as its compliance program, and that often requires support at the executive level. This ensures compliance will be top of mind at the start of all insurance marketing strategies. Further, should something fall through the cracks, your company will be better prepared to manage the situation and protect its bottom line.
If you’d like to learn more about how to be compliant with insurance marketing, join PIMA’s legislative and regulatory community. Learn about the benefits of PIMA or contact us today.
Published on June 3, 2021.
PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the group-sponsored benefits market.