Consumers are learning fast that social media is a powerful ally in persuading companies to honor claims or stand behind their products. Companies should take the same accelerated course.
Progressive Insurance is the latest company to discover this new reality in consumerism as it was buried last week in a Twitter storm of protest over its handling of a claim involving Katie Fisher, who died in a car accident. A provocative post by the woman's brother on Tumblr went viral and Progressive faced a torrent of tweets. It responded with a canned statement.
"The original response sounded genuine," said Jason Falls, a digital marketing consultant who helps insurance companies with social media programs. "That they auto-responded the same statement to multiple people showed it was just a copy-and-paste job." Falls attributed the rote response to "legal and compliance teams saying, 'You can say this and only this.' It makes you look cold and insensitive."
The New York Times went to the effort of finding out what was behind the family's Tumblr claim, "My Sister Paid Progress Insurance to Defend Her Killer in Court." What Ron Lieber, the Times' Your Money columnist, found was that Progressive was doing what most insurance companies do when there are disputed facts and jumbled liability. They settled. Because the Fisher family went to court to sue the driver of the car that killed their daughter, Progressive found itself in the awkward spot of defending the other driver because of its settlement.
Lieber said "Progressive sure seems to have done absolutely everything wrong here" by paying out claims based on disputed evidence, then siding in court with the driver who wasn't covered by their insurance. A Progressive spokesman told Lieber the insurance company was acting in the best interests of their insured, not in bad faith. Nevertheless, the online uproar prompted Progressive to settle with the Fishers to avoid a hearing before a state insurance commissioner on its conduct.
It's all very complex. But so is life. That doesn't excuse defaulting to the lowest common denominator of a minimalist statement written by someone in the legal department. Lawyers are assigned the task of minimizing legal risk. Companies need to recognize reputational risk can be as or more devastating than any legal judgment.
Social media sites are full of consumer complaints, spurring comments — and occasionally harsh commentaries — from other consumers. The headaches these complaints cause may make some CEOs wish they could hide from social media. No chance. All you can do is hide from what others are saying about you and miss the opportunity to respond in an authentic way.
As Falls points out, many companies monitor the Web to track consumer behavior. Insurance companies patrol the Internet to see, for example, if someone who has a disability claim is posting pictures on Pinterest of his recent triathlon.
Social media in its continuously evolving forms is here to stay. And it is breeding a new form of consumer activism that companies must acknowledge and ultimately embrace. They must accept negative comments as a cost of doing business — and a unique opportunity for one-on-one marketing, with a very large audience.