6 Ethical Challenges for Marketing

As insurance firms in the U.K. weigh regulations on a "significant harm function," here are six considerations on marketing.

Everyone knows that marketing now plays a key role in the success of an insurance business. And this is down not just to trends in distribution and brand, but to digital links with underwriting as well. Moving from the periphery into the heart of a business has consequences, though. Being in the lens of regulatory scrutiny is one of them. See also: The 6 Principles of Persuasion   Insurance firms in the U.K. are currently weighing new regulations that introduce the concept of a “significant harm function.” This is defined as a role that might involve a risk of significant harm to the firm or its customers. Some firms will complain about how broadly it’s been worded. Others will understand that they’re expected to work it out for themselves. So what “risks of significant harm” could marketing create for a firm? Here are six for boards to consider.
  1. Marketing is collating a great deal of the data that is now influencing the underwriting of customer risk. As underwriting encompasses an ever growing range of factors (a thousand factors for motor risks is not unusual), the veracity of such data grows in importance. This active pre-qualifying of risk weaves marketing into the outcomes generated by underwriting and in doing so, changes its “harm” profile.
  2. Some of the digital techniques that marketers are adopting to segment consumers introduce a significant risk of biased decisions. Research is raising questions about the fair and equal treatment of consumers from algorithmic decisions. Actively addressing these risks is part of the marketer’s responsibilities.
  3. The days of communicating with consumers on a one-to-many basis are ending. All that data now allows personalized marketing, on an almost one-to-one basis. And it’s forever changing and adapting, following the flow of consumer behavior. How, then, do you monitor this? The signing-off of a campaign becomes impossible. It comes down to key marketing personnel recognizing and responding to a more sophisticated set of responsibilities.
  4. There is now a digitalized marketplace that sees marketers using chatbots to simulate conversations with consumers could see ethical consequences. How those chatbots are trained to engage with consumers introduces mis-selling risks that could scale exponentially unless appropriately overseen. Responding to such exposures will require marketers to learn new skills.
  5. Another choice facing insurance marketers is whether to adopt nurturing techniques that are becoming common in other business sectors undergoing digitization. These techniques use data and personalized marketing to move consumers into a context that would usually trigger a purchase response. This would see firms move from using behavioral knowledge to understand consumers, to using it to manufacture sales opportunities.
  6. As marketers increasingly take on the role of “the customer voice” within a firm, and as that firm seeks to engage more personally with customers, and as the balance between risk transfer and risk management within some insurance propositions changes, so does trust in the firm’s reputation come under tension. There’s a serious conflict of interest among all this, which the board, having responsibility for the firm's reputation, needs to be sure marketers are managing effectively.
So what are the implications of marketing being designated as a significant harm function? More oversight, for sure, but isn’t that just commensurate with those widening responsibilities? A small price, perhaps, for marketing to be able to sit at the top table with finance and underwriting. See also: 4 Marketing Lessons for Insurtechs   What marketers can bring to that table is customer insight. Yet because that insight comes from new techniques for analyzing those vast lakes of big data, it introduces what could be called “slingshot risks,” ones that a little algorithmic decision making can send out far and wide across a business, producing exponential impacts. It’s that capacity for exponential harm that, I think, makes marketing a real candidate as a significant harm function. Marketing is entering a new era of accountability

Duncan Minty

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Duncan Minty

Duncan Minty is an independent ethics consultant with a particular interest in the insurance sector. Minty is a chartered insurance practitioner and the author of ethics courses and guidance papers for the Chartered Insurance Institute.


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