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When Real World Insurance Meets Online Behavior

The film “The Social Network” clearly illustrates that the idea for Facebook actually did not originate in a good spirit. Some would argue that things have not improved in the land of social networking, including your insurance company. Increasingly, participating in sites like Facebook, Twitter, and MySpace is seen as high risk behavior by insurers. The day may not be far away when such activity will make inexpensive rates a difficult proposition for some users.

“Checking In” Tells Thieves Where You Are

Travel information heads the list of dangerous activity. Not only do users post photographs of themselves on vacation, they also “check in,” giving their exact location at a specific time. Should a burglary occur while they are away, and the insurer discovers the social networking activity, all or part of the claim may be denied. Essentially the homeowner has advertised their absence and given the thieves a clear go-ahead to break in.

This scenario is even more complicated if the home has an alarm system. Say, for instance, that the traveler checked in on Facebook at 7 p.m. raving about a restaurant 2,000 miles from their home, and the burglar alarm was tripped at 7:30 on the same night. The link between the two is obvious, and even the social networking sites themselves warn users that thieves may be stalking them online. Generally these warnings are contained in a caution for users to tighten the security on their individual accounts. If they don’t do so, that’s another “risky” mark against them in the eyes of their insurer.

Online Behavior Results in Real World Liability

More serious and convoluted problems can arise where issues of liability are involved. There was a case where a a group of high school kids created a fake MySpace page under the name of one of their teachers. They added pornographic material to the site, using image editing software to put their instructor’s head on the bodies of participants. When this came to light, the teacher sued the family for slander. Although the father, who was a prominent businessman, had liability insurance, his son’s activity was not covered. In the end, he paid out more than a million dollars in lawyer’s fees and a court-mandated settlement.

Insurance Coverage Hasn’t Caught up to the Internet

Insurance coverage that protects users in their “virtual” lives is in its infancy. There are specialized Internet liability policies and even some emerging coverage to protect online “assets.” This kind of coverage is rare, hard to find, non-standardized, and usually costs the earth. It’s only in the last year or so that real insurance products have emerged to protect the owners of smartphones not just for potential loss or damage to their equipment, but to cover the data contained on the device itself.

Most people worry about more concrete insurance problems — auto, homeowners, health, and life insurance coverage. They worry about the price of their policies and look for ways to lower the cost of those rates. Their primary goal is inexpensive but comprehensive insurance. It should come as no surprise that when the virtual world meets the real world, standard forms of insurance don’t protect the user against risky online behavior. The consequences are often embarrassing, and at times, costly.

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