Clark Hill's Robert Tomilson discusses the reasons for the increasing numbers of state and even federal investigations of insurance lead generators (Lead Gens).
DISCLAIMER – No information contained in this Podcast or on this Website shall constitute financial, investment, legal and/or other professional advice and that no professional relationship of any kind is created between you and podcast host, the guests or Clark Hill PLC. You are urged to speak with your financial, investment, or legal advisors before making any investment or legal decisions.
Clark Hill's Robert Tomilson discusses the reasons for the increasing numbers of state and even federal investigations of insurance lead generators (Lead Gens).
DISCLAIMER – No information contained in this Podcast or on this Website shall constitute financial, investment, legal and/or other professional advice and that no professional relationship of any kind is created between you and podcast host, the guests or Clark Hill PLC. You are urged to speak with your financial, investment, or legal advisors before making any investment or legal decisions.
Hello and welcome to insure tech briefly, a quick legal review involving innovations in the insurance space. My name is Guinevere Anderson from Clark Hill, and I'm joined today by my colleague, Robert Tomlinson, who's a partner in the firm's insurance practice and co chair of the firm's emerging technologies practice. Hello, going to be here. What's our topic today? Well, you and I were recently talking about lead gens and investigations that are going on in various departments of insurance across the country. I know you were caught in some of these investigations on behalf of clients, but can we talk high level about why lead gens have drawn the interest of these regulatory bodies? Sure. Um, let's go back to the beginning. Regular listeners of this podcast will remember that back in the late spring of 2021, Google had mandated that any advertiser of health insurance on its website, hold a producer license. That's an insurance producer license. I helped dozens of lead gens create agencies and get them properly licensed in 50 states in order that they be compliant. Not with insurance regulations, but specifically with respect to Google's own mandate. Now, Robert, you said with Google's mandate, not insurance regulations. Are lead gens engaged in licensable activity? Well, they're not, um, and that's the, that's the interesting part of this to be clear. Legion is typically, um, to do search engine optimization to find customers that are interested in products. In this case, insurance products, insurance products are a rich field for legions because everyone buys insurance, sometimes voluntarily life, pet, medical, sometimes involuntary auto home workers comp. The legion industry has been around since the early aughts. And it's never been a licensable activity. It's Google that has, um, thrust the lead gens into the arms of the insurance regulators. So what happened? Are they engaged in different activity now? No, not at all. Uh, you know, and, and obviously there are some qualifications. There are some lead gens and some that I have set up who have seen the, um, the advantage of being producers and have therefore gone out and got some commission. But by and large, um, you know, Google was, you know, was undoubtedly being bombarded by complaints from consumers complaining about advertisers on their platform, in particular, in connection with the acquisition of health insurance. In response, they rather cleverly devised a scheme by where they, they outsourced the regulation of insurance advertising. specifically health insurance on its own platform to the insurance departments in all 50 states. Just health insurance? Is there something special about health insurance? And will there be a move by Google and other platforms to license advertisements of insurance products? Well, that remains to be seen, that last part. But yes, health insurance is special in many ways. Um, first, it's a huge market, both in terms of the number of insurers and the gross written premium. Second, it's a vital, it's a vital product for people's lives. Um, people's lives depend on it. It's not like pet insurance or renter's insurance. And third, a vast majority of the consumers of health insurance, um, that are being advertised are elderly. A vulnerable population, and, you know, I'm sure, you know, a vulnerable population that votes. So, insurance commissioners across the country are typically appointed by the state's governor, and they're very sensitive to elderly consumers, i. e. elderly voters who are having difficulty with insurance products as they should be. Will Google move to insist on producers licensing for auto home and life? I really don't know. A lot depends on the market today. Google's Internet platform is the proverbial 800 pound gorilla. If you want to be successful and be a major lead, Jen, and the insurance products, you have to advertise on Google that could quickly change. And now with chat, and other innovations, who knows where we'll be. Uh, there will be a multiplicity of platforms or how SEO market will work even a year from now. Add to that commissions on auto home and life are nowhere near as profitable as say Medicare Advantage. And so the cost of creating a licensed agency and keeping it compliant might be a real barrier to entry. Very interesting. So why are these legions now as licensed insurance producers? In the crosshairs of these regulatory bodies in a way that traditional agencies, carriers and are not well, it's for a number of reasons. You know, regulators is a general rule. They're unfamiliar with lead gen practices. For example, these lead gens, although licensed as producers continue to sell leads to carriers, agencies and other producers. They themselves are not acting on these leads. Again, as a general rule, and they've been doing this for more than a decade, but now they're coming under the purview of the insurance department across the insurance departments across the country because they're licensed prior to 2021 complaints from consumers about, for example, their contact information being sold to multiple parties was not a problem that was handled by the insurance department. Additionally, lead gems are now ubiquitous. Almost everyone looking for an insurance product turns to the Internet rather than stopping by a local insurance agency down the block or a local strip mall over the next few years. Mostly through litigation insurance departments and other regulatory bodies will become more familiar. With lead gen practices, I know this firsthand and they'll ultimately see the value that the lead gens are providing. And perhaps lead gens will also change their practices to accommodate some of these regulatory bodies. Thank you, Robert. That's very interesting. Uh, we look forward to following up on how this friction between insurance departments and lead gens works out over the next few years. Yep. It'll be interesting. Clark Hill is playing a major role in trying to successfully integrate legions into the value chain of delivering insurance products to us consumers. And we will get back to you and our listeners on any progress. This podcast is intended for general education and informational purposes only. and should not be regarded as either legal advice or a legal opinion. You should not act upon or use this publication or any of its contents for any specific situation. Recipients are cautioned to obtain legal advice from their legal counsel with respect to any decision or course of action contemplated in a specific situation. Clark Hill PLC and its attorneys provide legal advice only after establishing an attorney client relationship through a written attorney client engagement agreement. 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