This document is a quarterly publication from the Insurance Accounting & Systems Association (IASA) that includes the following: 1) The cover story is an article about the rise of social media and the risks it poses to insurance companies, including reputational damage from comments on platforms like Facebook and Twitter. 2) Other sections include association news, articles on topics like actuarial acumen and loss reserve valuation, and information on IASA's executive education programs. 3) The publication provides updates on insurance industry trends, regulatory issues, and educational opportunities for insurance professionals.

1. A publication of the Insurance Accounting & Systems Association
theInterpreter®
FALL 2012
Vol. LXXXII
Issue II
®
Social
Media
Beware the
Iceberg
Feature Story p. 12
Actuarial Acumen
Association News p. 24
Leadership Development
p.10
Special Section:
Executive Education in Focus

2. columns departments
feature story
special section
8 President’s Message
Embracing Mystery
9 From the Executive Director
Malala’s Story
14 IFRS Update
To IFRS or Not To IFRS
16 The Trend Toward
Self-Service
R&D Priorities Driven by
Industry Demands
4 Editorial Opinion
6 About IASA
6 Members Only Benefits
23 Association News
• Career Skills Development Track Recap
• National Volunteer Profile: Celeska Fredianelli
• Leadership Development
• Industry Pulse
• Top Tech Trends from San Diego
• Committee Spotlight:
Marketing & Communications
• The Lighter Side
12 Actuarial Acumen: Tips for Effective
Governance over Loss Reserve Valuation
In today’s competitive business environment, effective corporate governance is paramount. Govern-
ing insurance loss reserves (typically the largest liability on an insurance company’s balance sheet)
requires management and the Board of Directors to understand key actuarial elements to interact
efficiently with and govern the actuarial function. In fact, it is critical for directors and others charged
with insurance company governance to understand loss reserve valuation and effectively navigate
the actuarial reporting process.
15 Executive Education in Focus
The IASA Executive Education Program continues to evolve to serve the changing educational needs
of insurance executives across the country and across the industry. Included in this special section of
the Interpreter is extended coverage of recent Executive Education Program events, and details about
what you can expect in the future.
cover story p. 10
Steve Callahan of the Robert E. Nolan Company
believes social media has moved “from a fad to a
deep-rooted part of the fabric of our society for not
only business, but our personal lives as well.” In this
article, he details the “arrival” of social media in
terms of legitimate impact on our society as a whole
and the insurance industry in particular. According to
Callahan, “the final stamp of arrival was the October
3rd live streaming of the second presidential debate
of the season on YouTube, marking a milestone
similar in magnitude to the now-recognized impact
of the first televised debates in the 1960s between
John F. Kennedy and Richard Nixon.”
FALL 2012 x Vol. LXXXII x Issue II
Fall 2012 3
A publication of
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contents®
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Social
Media
Beware the
Iceberg

3. S
ocial media has
moved from a fad to
a deep-rooted part
of the fabric of our
society for not only business, but
our personal lives as well. The
final stamp of arrival was the
October 3rd
live streaming of the
second presidential debate of the
season on YouTube, marking a
milestone similar in magnitude
to the now-recognized impact of
the first televised debates in the
1960s between John F. Kennedy
and Richard Nixon.
So, in terms of social media,
recent developments make
asking “Where are we today?”
extremely relevant and timely.
Just consider:
• Over two-thirds (66 percent)
of individuals in U.S. use social
media, including over 50 percent
of senior citizens, with 900
million plus on Facebook
and approximately 140 million
on Twitter.
• According to the
Independent Insurance Agents
of America (IIA), over 60
percent of independent
agencies are using Facebook
and LinkedIn, primarily for lead
generation, brand advertising
and customer engagement.
• Nearly 80 percent of
surveyed insurers are either
already using, or are planning
to very shortly start using, some
form of social media, with 80
percent listing their number one
concern as compliance.
• Over three-fourths (75
percent) of carriers involved
in social media are actively
monitoring their agents using
customized software systems,
while over two-thirds (66
percent) also require pre-
approval of all content.
• Budgeting for 2013, over
three-fourths (75 percent) of
the companies surveyed will be
increasing their investment in
the use of social media.
Like the infamous iceberg,
the issues surrounding social
media run deep and far exceed
the obvious surface level
marketing and collaboration
aspects getting all the attention,
and the portion underwater
is not only vast, but it can be
deadly. Companies face an
entirely new assortment of risks,
including reputational damage,
First and Fourth Amendment
suits, slander, defamation,
misrepresentations, intellectual
capital theft, data breaches,
business interruption, human
rights violations and invasion
of privacy. And, each risk is
amplified by employee and agent
use of social media.
These days, it’s easy for
a tweet to go viral and do
immeasurable damage to a
company’s reputation. Even
a Facebook post can generate
tens of thousands of “likes,”
bringing negative attention to a
decision. In essence, social media
effectively internationalizes
complaints. YouTube videos
personalize issues and can
translate across platforms to
tweets and a Facebook page. Two
very recent examples stand out:
• Progressive’s recent social
media-driven settlement over
the handling of Katie Fisher’s
automated claim in August of
this year, potentially setting
the stage for future claims
practices; and,
• Aetna’s reinstatement of
Arijit Guha’s policy covering his
cancer treatments after a barrage
of reputation-harming tweets,
creating an exception that could
become a precedent.
According to Symantec’s
2011 State of Security Survey,
social media ranked number two
behind mobile computing on the
list of “somewhat” or “extremely
significant” industry trends
affecting the security of IT. The
World Economic Forum profiled
the extent of the exposure by
listing cyber security as one of
the top five risks to watch along
with demographic challenges
and weapons of mass destruction
in its 2011 Global Risks Report.
No longer simply a marketing
debate on whether or not there
is adequate ROI, social media
represents a significant business
risk as well, with roughly 35
percent of businesses investing in
cyber insurance as part of their
risk management programs.
Managing exposures remains
a complex and unclear process.
There are many unresolved
legal questions about balancing
10 Fall 2012 theInterpreter x www.iasa.org
cover story
Social
Media
Beware the
Iceberg
by Steven M. Callahan, CMC®

4. theInterpreter x www.iasa.org Fall 2012 11
cover story
constitutional rights to free speech
and privacy against a wealth
of laws preventing damaging
statements or actions by others.
Open questions include:
• Can an employer be held
liable for an employee or agent’s
defamatory comment?
• Who is liable if damaging
personal information about a
customer, employee or agent
is exposed on an employee or
agent’s personal Facebook page?
• When do insurance carrier
compliance guidelines apply to
employee or agent postings or
tweets?
• If a company is liable, how
does it monitor its employees’
and agents’ private postings
without violating their rights?
The total exposure is
significant, crossing to employees’
personal lives, customer and
ex-customer posts, and agents’
comments and pages. Wherever
the company may be mentioned,
usually outside of any control,
there is the potential ripple effect
throughout the social media
community.
Recently, there have been
a number of solutions put on
the market that help companies
monitor the social media space,
as well as control what their
agents or employees say or
do – at least on work computers.
Some of these tools are even able
to measure the overall “sentiment”
of the comments being made
across the various social media
platforms, giving the company a
sense of how their brand is being
viewed at a given point in time.
These same tools are used
to generate exception alerts
that escalate to a response
team for handling, like when
a legitimate complaint that
should be addressed is tweeted
or posted somewhere. However,
the assumption that damaging
comments will be directed to a
company contact point is naïve.
In fact, companies are constantly
being talked about across
the Internet. Absent effective
monitoring software, companies
are unaware of all that is being
said about them.
Even with good monitoring
tools, a company must have
well-established policies and
practices, and staff trained on
them both, so that any actions
taken will be consistent with
pre-approved and legitimized
responses. This is reinforced by a
strong social media policy, agreed
to by all employees and agents,
along with a well-prepared
contingency plan for addressing
the inevitable criticism – one that
incorporates speedy response
and rapid decision-making
escalation. Industry best practices
break down the steps to good
risk management of social media
as follows:
1. Identify the key players
for managing and making
decisions or recommendations
on social media uses and policies,
and make sure there is a senior
executive with broad decision-
making authority assigned to the
team. This person must be able
to make rapid decisions in time
to handle sensitive emergencies.
2. Formally assess the
organization’s social media
activities, maturity, existing
practices and policies, and
disparate uses across the various
departments, employees, and
distribution channels. Identify
the applicable laws and guidelines
and engage expert counsel to
review them with an eye toward
how they apply to your business.
Understanding the current state
of the business and social media
is critical to moving forward.
3. Evaluate social media
insurance needs, making sure
that there is adequate coverage
for the various areas of risk, from
downtime to being hacked to
leaked personally-identifiable
information (PII) to litigation.
Note that commercial general
liability may not cover online
activities, nor possibly cover
cyber-attacks or extortion,
data corruption, specific leaks,
inadvertent defamation, privacy
violations, or employee and
agent actions.
4. Develop a social media
strategy for the company and
then build a comprehensive set
of guidelines and policies that
support it. These guidelines and
policies will be integral to all
departments, and will ensure
a consistent set of practices
enterprise-wide.
5. Train staff and field
personnel on social media risks.
Provide reminders and schedule
refresher courses to ensure
everyone is aware of, and watching
for, any potential problems.
6. Designate responsibility
for monitoring and responding to
postings, tweets, and complaints.
Also, ensure the team has a rapid
response charter and a well-vetted
plan of action. Quick, coherent
and informative responses will
help mitigate the damage and
possibly even benefit the brand.
Social media remains
unchartered waters in many ways,
with unanswered questions and
untested legal ground. Some of
the challenges are deeply rooted
in values and beliefs:
• What is an individual’s right
to privacy when it comes to
their personal accounts, friends,
and postings and at what point
should it be accessible by society
or a given business?
• What about free speech
versus the perception of sharing
proprietary information and
damaging commentary? Are
people not allowed to say what
they want on their own personal
media pages?
• When is a social media
action by an employee on
their time and equipment a
terminable offense?
• Was a proper release
obtained before using an outside
investigative vendor? Does the
information collected represent a
consumer report under the Fair
Credit Reporting Act (FCRA),
requiring advance consent?
• Are adequate measures
in place to ensure no
discrimination, civil rights,
Americans with Disabilities
Act (ADA), or other regulated
prohibitions are violated?
• Does all monitoring activity
comply with state and federal
privacy laws, including the
Electronic Communications
Privacy Act, and is it applied
consistently and equitably?
Regardless of whether a
company is using social media
for marketing, customer service,
or claims, the risks and exposure
social media represents for
reputation and profitability
are significant and require
continuous management. What
is being said about your company,
and what your employees
and agents are saying, are not
optional concerns. In fact, they
are critical elements of growth
and success. Make sure your
company is addressing the rest of
the iceberg before it’s too late.
Steven M. Callahan CMC©
is a practice
director for the Robert E. Nolan Company
and a regular contributor to IASA’s
Interpreter. He can be reached for further
insights or comment via email
at Steve_Callahan@RENolan.com.
‘‘Even with good
monitoring tools, a
company must have
well-established policies
and practices, and staff
trained on them both,
so that any actions taken
will be consistent with
pre-approved and
legitimized responses.”