Analysis: Social media - Insuring influencers

Vlogger Joe Sugg really clicked with Strictly Come Dancing viewers, proving to be quite a hit, as he already is with his millions of You Tube followers. His sister Zoe, also known as Zoella, is one of the UK’s most prominent influencers, posting videos about hair, makeup, relationships and friendships. 

The online links some You Tubers and Instagrammers forge with their followers are strong and powerful, and big brands are keen to tap into the market with which they engage. Influencers sharing a brand’s message in their own voices gives an authenticity to which audiences respond.

This approach to selling gave birth to the term ‘influencer marketing’, with bloggers photographing, recommending, talking about or putting themselves into conversations about a product. Those with big numbers of followers dominate the space, although some experts argue that actual engagement is a more reliable indicator of commercial success, measured by the number of likes and comments received by each post.

“Influencer marketing is ultimately founded on an influencer’s ability to change the behaviour or opinions of an audience,” explains consultant Scott Guthrie. “Decision metrics measure the degree of success in driving the target audience towards a decision.”

Global advertising spend

According to Mediakix, an influencer marketing agency, global advertising spend on influencer marketing looks set to reach $10bn (£8bn) by 2020. So the launch of an influencer and public figure protection insurance policy by Hiscox is anything but a coincidence.

James Brady, head of media at Hiscox, says there is a huge opportunity for this product, given the need for bloggers’ cover: “They are living their lifestyles in the public eye and have exposures for which they don’t yet have cover, such as the implications of a poorly judged social media post.” What is said could adversely affect the reputation of the brand being built, and if a vlogger defames someone, or breaches their intellectual property rights, they could have a costly lawsuit on their hands, he adds. The policy covers claims by a brand against an influencer as standard, if someone sues in any jurisdiction worldwide, because the risks to which influencers are exposed are global. 

But do influencers consider these risks? And how savvy are they when it comes to managing them?

Ajay Mistry, partnerships director at BHIB Insurance Brokers, sees this area of risk as an extension of sole traders, who start as teenagers in their rooms, and won’t know they need insurance. He explains that his company acquired an extensive book of business from Aon last year, which included a media portfolio it is keen to develop. “We are looking at new ways to service these kinds of clients, including accessing policies online for media people.” He says he has a few hundred freelancers, including bloggers engaging in this activity as a commercial enterprise. Their money is made from advertising, and they are not a new risk necessarily, but in trying to place them into an insurance category, he would equate them with homeworkers as they might well be operating from a room in their home. 

Bloggers’ limited awareness of their legal risks remains a major challenge, because they don’t even think about their exposure, and are not even savvy about risks to their equipment, such as web cams, Mistry observes, adding: “They need to insure them, and might also need business interruption cover, because if something happens to their equipment, they can’t work because they rely on it.” He observes that bloggers might try to get cover under home and contents insurance. But if they are making money from the activity, that is really a business use, which might be excluded from a household policy. 

Arts and media have the highest number of freelance workers, and Hiscox is also keen to cover more of those, as well as the likes of a fitness person who promotes brands, and sports people, current or retired, who engage in promotional activities and corporate events on Instagram. “We also have an appetite to write TV and radio presenters who are freelance and who have potential liability for the services they offer, as well as personalities who have public speaking engagements,” Brady adds.

Engaging with such a disparate group is something of a challenge. So how do freelancers and insurers find each other? Michael Wood, associate director at Aston Lark, trading as Performance Film & Media, says the awareness of potential policyholders depends on the professional support they seek from their insurance professionals, lawyers or accountancy firms.

Risks of libel

That said, media organisations and freelancers are becoming more aware of the risks of libel and breach of copyright, says Wood. “Our responsibility, as a specialist insurance broker in the media industry, is to raise awareness of these exposures, and explain how these risks can be transferred via an insurance policy. Most importantly though, it is for the media organisation or freelancer to understand the exposure and decide the best route forward for them. We see certain trade bodies playing a growing part in helping their audiences in understanding the risks their members face by partnering with companies that can support them from an insurance or legal perspective.” 

Some insurance providers report an uptick in enquiries. That’s the case of Tapoly, which offers on-demand insurance for freelancers, contractors, SMEs, and others in the sharing economy. Its founder and CEO Janthana Kaenprakhamroy says media workers are becoming increasingly aware of the risks, especially after high-profile court cases, like the libel action that resulted in Gawker being shut down. Stricter rules, like the General Data Protection Regulation that came into force in May 2018, are also playing a role.

“We are seeing an uptick in enquiries about professional indemnity insurance and cyber liability for media and related industries, such as PR and marketing,” says Kaenprakhamroy. “We create our products with these new risks in mind: our professional indemnity cover includes cyber liability, and we also have cyber-breach response products to assist with the aftermath of data leaks or hacks.”

Top bloggers with millions of subscribers can earn large sums in advertising revenue and endorsement fees, but are they following the rules to which others in the media are subject? In its latest annual report, the Advertising Standards Authority said it wants to “ensure consumers are not misled by poorly labelled advertising from influencers and brands”.

“Compliance in this area needs to improve,” the ASA wrote, suggesting to label ads online using a hashtag like #ad or something equally clear.

In September, it issued An Influencer’s Guide to making clear that ads are ads in collaboration with the Competition and Markets Authority. The CMA also launched an investigation into concerns social media influencers are failing to properly declare payment or other rewards to endorse goods or services. It plans to give an update on this investigation at the end of the year. 

Attention from regulators

How personalities use their clout to influence people’s buying decisions is getting a lot of attention from regulatory bodies, comments Brady. And rightly so, as some followers might be too naïve.

George Lusty, senior director for consumer protection at the CMA, notes: “Social media stars can have a big influence on what their followers do and buy. If people see clothes, cosmetics, a car or a holiday being plugged by someone they admire, they might be swayed into buying it. So it’s really important they are clearly told whether a celebrity is promoting a product because they have bought it themselves, or because they have been paid or thanked in some way by the brand.” 

Putting together an appropriate defence to regulatory action against them isn’t something influencers would necessarily have the skills to do, Brady warns, explaining that an optional extension to the Hiscox policy would cover the defence of such actions. He adds: “The ASA does not have powers to fine, but any investigation that involved the brand the influencer was endorsing could impact on their reputation or breach the terms of the promotional contract and the policy would cover, as standard, claims in relation to this.” 

Forming a partnership with influencers whose values fit those of the brand being promoted is crucial. To help brands reach marketing goals, several influencer marketing agencies claim to be able to identify high-performing influencers with consistent track records in successful social media campaigns. But it is important to check influencers’ networks, statistics and audience demographics, because the market is not currently regulated, although it is starting to self-regulate.

All of that apart, has influencer marketing run its course? “Influencer marketing hit the mainstream in 2016, and until recently the press eulogised about this nascent marketing channel, but it is now experiencing a backlash,” Guthrie says, blaming it on the extent of influencer fraud that has been exposed. “This is the buying of fake social media followers, and fake engagement, by people who want to appear more popular or exert influence online. It is bad news for brands who collaborate with these influencers, assuming the paid-for content will reach, and resonate with, a far larger audience than is the reality.”

This is facilitated by social media spam bots, automated tools to ‘like’ and comment on behalf of the blogger or celebrity, and they often target content or users with some connection to what they are trying to promote. It is an extremely common situation, according to Kostas Alekoglu, managing director of Caliston Digital, and it means the so-called influencer is not really an influencer: “It is becoming more difficult to recognise what bit is real because of the involvement of artificial intelligence, and it is very common among celebrities.”

There has been talk of blacklisting fake follower offenders, but Guthrie comments: “This is a blunt instrument, and I can foresee a time when nefarious influencers sabotage their rivals by buying fake engagement or followers in the name of their rival.” An insurance policy for recourse in this event would be a great asset, he suggests. 

Machine-learning algorithms

Meanwhile, Twitter has announced a plan to develop machine-learning algorithms that proactively find problem accounts, after its system identified almost 10 million potentially spammy or automated accounts a week, in May. The platform will also require confirmation of an email address or phone number to sign up for an account, with safeguards for those requiring anonymity. The change has already stopped more than 50,000 spam signups a day. 

According to Alekoglu, brands are now extremely nervous of influencers, big or small, and his agency only uses them with the approval of the brand: “We do not pay an influencer to tweet something on Instagram but invite them to the client’s premises to sample a product or a service, and then give an honest opinion. It is less an advertisement and more a review.”

He adds some influencers have tried to blackmail brands, threatening to post something negative about their products or services online unless they pay up. This could be hugely damaging to a brand, given the online reach of some influencers.

Another potential risk for brands, he says, is potential damage to their reputation if they partner with an influencer and it later transpires that the influencer has had some issues in the past that could damage the brand. “For example, if an influencer, who had spent time promoting a certain brand, turns out to have a criminal record, it wouldn’t look good for the brand to be working with such a person.”

Guilt by association seems to be just one risk of entrusting one’s cherished brand to an influencer over whom one has no day-to-day control.