TikTok Made Me Do It | Influencer Insurance

Influencers are not just on the rise they are booming like the gold rush of today’s generation and with their constant plugs for brands, are they at risk of being liable for providing advice to consumers?  Where does the exposure actually sit, is it with the brand they are working for or does it sit with them personally?

We know younger generations are turning to platforms like TikTok and Instagram to learn everything from cooking, how to invest, what to wear, medical tips and what are the new must-haves in products.  It doesn’t take a rocket scientist to see that this is a ticking time bomb.

Influencers are small businesses

What many influencers do not realise starting out, is they are actually their own business and they also have exposure to a potential claim against them if their advice or representations about goods or services cause an injury or property damage. 

Influencers should check the social media platform user agreement to see if the platform indemnifies the influencer’s responsibility for anything published on the platform. Influencers may be surprised (or not) to find that social platforms are brilliant at passing the liability buck when they come under fire.

Things to consider for Influencer Submissions

If an influencer is looking to apply for Professional Indemnity or General Liability cover there are a few things insurers would need to consider.  Such as, what products are they promoting, are the products they promote limitless or do they specialise in one particular product or line of products.  What level of expertise and research have they put into that product and is it safe for the target market.

If a stay-at-home mum was working on a side income by pushing products to her large followers and a claim was brought against her, she could potentially be in significant financial strife if she had to defend a claim in court.  That side income no longer becomes worth the hours and creativity she may be putting in to it.

Things companies or advertising agencies should consider if they are engaging with influencers

The rise of the influencer presents new emerging risks. Unless the influencer is an Australian Financial Services Licensee, there is no consistent regulation that requires them to have PI insurance for promoting products. However, there are a variety of legal and reputational risks that can arise from the engagement of influencers – such as – misleading or deceptive conduct or intellectual property infringement.

If your client uses or is considering using an influencer to promote their product, it is prudent to ask the influencer for proof of cover before they engage with them. Further, your client should consider implementing a due diligence framework to support the review of marketing collateral before it is posted or published on the influencer’s social sites.  Isn’t it better to be safe than sorry?

Unlicensed Financial Advice

Another concern is the rise of cowboy financial advisors or “FinTokkers” appearing on various social platforms since COVID. Many of these “financially savvy” influencers do not have any financial qualifications and they may not be appropriately authorised to provide financial services. Despite this, their numbers are growing.

A recent “Young People and Money” survey conducted by ASIC found that 33% of people aged 18-21 follow at least one financial influencer on social media. The study also identified that 64% of young people reported changing at least one of their financial behaviours as a result of following a financial influencer.

Influencers who discuss financial products and services online must comply with financial services laws. This applies to plugging investment platforms or cryptocurrencies (if it is considered to be a financial product), also known as “affiliate marketing”.  Affiliate marketing is where an influencer earns commissions from sign-ups so they have more of an incentive to plug them on their social sites.

Many of these influencers are flaunting self-made lavish lifestyles which entice viewers to follow their advice so they too can have the same success. The issue here is that where an influencer is not complying with financial services law and giving unlicensed financial product advice that may result in consumer harm, they could face hefty fines from consumer watchdogs like ASIC.

Dangerous Trends

The list of risky trends on social media rises every day, recent examples include various “Challenges” that viewers try to impersonate such as the “Back Crack Challenge”.  As the name suggests, influencers really do influence and the ramifications of people trying to replicate these actions could cause serious injury.  

Protecting Your Clients

The above examples may be extreme but they demonstrate there is compliance and legal risk for all types of influencers – even micro influencers.

It is important to understand how your clients are marketing their businesses and if they need to review their current procedures on social media or their engagement with influencers.

For more information contact one of your local underwriters.

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