How Facebook ads work

Facebook offers a variety of paid ad options and placements, but all ads can be broken down into three elements:

  • The campaign houses all of your assets.
  • Ad sets. If you’re targeting separate audiences with different characteristics, you’ll need an individual ad set for each.
  • Your actual ads live within your ad sets. Each ad set can hold a variety of ads that vary in color, copy, images, etc.

As an advertiser on Facebook, you can choose the audiences you want for your ads. We offer tools that help you reach people based on traits and categories like:

  • Where they live
  • Demographics: Like age, gender and more
  • Interests: Like shopping, gadgets and more
  • Behaviors: Like shopper profiles and offline interests

When people are on Facebook, they may see your ad in News Feed the personal stream of updates from their friends, family and things they care about. Since your ads reach people based on who they are and their interests, they’ll be more relevant to the people who see them.

This is a fairly straightforward process and involves the following four steps:

  • Set Up Facebook Business Manager. First, you create a Facebook page for your business. From there you can create a Business Manager account that allows you to run ads for that page. To start go to the home page for Business Manager and click “Create Account” Then log in using the email and password you used to set up your business page account.
  • Install the Facebook Pixel. Go to your website and install the Facebook pixel that allows Facebook to identify people who visited your website, create custom audiences comprised of those visitors, and then show ads to them.
  • Create Audiences to target users. This tool allows you to create and save audiences that are most relevant to your brand. Go back into Business Manager and select the “Audiences” option from the assets column.
  • Create a Facebook Ad from a Facebook post. Now you can try it out. First decide what you want to accomplish do you want more clicks, sales, video views, or leads?

How each tool works is essential to shaping your campaign.

  • The Plan section contains tools that help you learn things about your audience and give you creative ideas for running your ads. With the Audience Insights tool, you can find out a lot of information about different audiences on Facebook.
  • Create and Manage. Here you find tools for creating your ad and managing your campaigns.
  • Measure and Report. When you want to analyze how your ads are performing, check out the tools in the Measure and Report section. For example, here you can create those custom conversions to track whether ads are meeting your business goals.
  • This section gives you quick and easy access to key assets that you’ve used to build your ads, including audiences that you’ve saved for ad targeting, images you’ve used, your Facebook pixel, and more.
  • The settings area is where all of your account information is stored. Go here to update payment information, your email, and so on.

How to Get Started with Facebook Ads

Ad transparency is important for figuring out the algorithm. The ability for any user to see exactly what ads a Facebook page or Twitter account is running is particularly useful for marketers and businesses. There are three key ways that marketers can leverage this information to their advantage:

  • Research competitor campaigns and consumer markets. Seeing all the ad campaigns your competitors are running is invaluable as you consider your own campaign. Visit their landing pages and assess their call to action. What special offers are they running? How long are their videos? Are they trying to attract clicks, drive purchases, or just create awareness?
  • Get inspiration for using new ad features. New ad features roll out all the time on Facebook and Twitter. Look to major brands like Home Depot, Target, or Airbnb to see how they’re using new ad features; it’s a good way to see what each feature does and how it works without investing your first dollar.
  • Share active campaigns with customers and prospects. Because users can engage with the ads in the same way they would if the ad appeared in their news feed, customers and prospects now have an opportunity to begin a purchase or a signup they might have missed out on.

Strategies

  • Provide free content to warm up your audience. Content marketing is one of the most effective ways to differentiate your business and warm up cold audiences. Provide free valuable content that entertains, educates, or inspires your ideal customer. You could use videos, lead magnets (guides, checklists, coupons, etc.), or blog posts, for example.
  • Engage people on your email list. Delivering your message via your Facebook ads and email marketing is twice as effective. Customers will see your message in their inbox and when they browse Facebook.
  • Retarget website visitors. If you install the Facebook pixel on your website, you can target people who have recently visited your site.

Currently, Facebook says it has over 800 million users in the Marketplace. The plus of Facebook Marketplace is that it’s where people are actively looking for a specific good, which means you have immediate access to an audience that is looking for you.

  • Create a campaign objective. Marketplace offers five objectives: reach, traffic, conversions, catalog sales, and video views. Once you pick one you can give your campaign a name.
  • Choose placement. Where do you want the ad to appear? Scroll down to the Placements section and pick the settings.
  • Create a video ad. In the Ad Creation section, you can upload images as well as a video. Videos tend to outperform static images in Marketplace, so that might be your best option.
  • Analyze placement results. Check out how your ad is performing in comparison to other placements. You can do this by filtering your ad reports by selecting “Placement” from the Breakdown drop-down menu.

Targeting

Several experts suggest that Facebook Ads acts purely as a tool to generate demand and spark interest. Generally, we don’t check Facebook with the same intention as browsing on Amazon, Ebay or other similar sites. We probably go to the latter with a clear intention to buy or at least find out more information about a specific product that we already have in mind.

Concerning targeting, possibilities on Facebook are pretty unrivalled. You have the option to narrow down your audience based on demographic variables, including:

  • Age
  • location
  • gender
  • spoken languages
  • relationship status

You can even choose your advertising audiences based on their level of education, field of profession, and occasion-based information like:

  • Birthday month
  • expecting parents
  • engaged for 1 year
  • expats, and many more

Bidding & performance

Similar to Google Ads and other advertising platforms, Facebook operates a real-time digital auction. However, Facebook auctions evaluate advertisements slightly differently – based on their competitive value.

Unlike other advertising platforms, this is not solely made up of the maximum amount you are willing to bid, but also the intrinsic value of the ad: level of engagement that the ad attracts, user experience (for example, likes, comments, negative feedback ). For example, should you bid €3 to have your ad shown at your chosen placement, the magical and mysterious algorithms of Facebook Ads then weigh your ad’s relevance against other competing ads and organic content. The more relevant your ad is to your target audience, the less you need to bid for its delivery.

How do you know if your ad is performing well?

Start with establishing what your goal with Facebook advertising is. Is it purely to maximise the number of clicks and landing page views? Alternatively, is your aim more concrete, and you want people to take a particular action once they get directed to your landing page?

Your next step once you have delineated your goal is to instruct Facebook Ads to begin optimising to deliver your adverts to people who are more likely to take the required action.

Once you have set up your campaign accordingly, the ad will then enter the learning phase, that does precisely what it says on the tin – Facebook uses its algorithms to learn whom to show your ads, to maximise your chosen results. Ad delivery during the learning phase usually is more expensive; however, it should normalise after reaching circa 50 conversions (i.e. your desired actions taken by Facebook users).

If you are only starting with Facebook Ads, you must know some basic terms, that help you  evaluate your ads’ performance:

  • Impressions: The number of times your ad gets delivered to a Facebook user for the first time
  • Reach: The number of people that your ad has been delivered to on Facebook
  • Clicks: The number of times your ad has been clicked on
  • CTR or Click Through Rate: This is the percentage of clicks on your ad out of all the impressions it has received
  • CPC or Cost per Click: The average cost that you have paid for each click
  • CPA or Cost per Acquisition/Action: Average cost per whichever action you have defined as a conversion. This can be a newsletter signup, website purchase.
  • Frequency: The average number of times that your ad was shown to a Facebook user
  • Attribution: Different marketing-related steps that a user takes before making a purchase

Building an online community

An online community is a group of people who interact with each other on an online platform. These communities can range from the 1+ billion-person Instagram community to a 10-person community of coffee lovers that rates artisan cafes in their city through a private Facebook group.

There’s a huge range in how an online community can scale, and understanding what type of online community is the most beneficial for your brand is the first step in building your own community.

Branded communities.

This type of community is the opposite of a public social network. You’ll need to provide more than an email address and password to get inside of the community. Imagine SOHO house, or a private members club, but online. You’ll need the right credentials (experience, common interests, location, etc.) to have access to the community even if it’s on a public social media platform.

Public social networks.

Think Instagram, Facebook, Twitter, TikTok even Vine (RIP) was a massive online community. Public social networks are online communities that only require someone to have an account to be part of the community. There aren’t many guidelines or restrictions when it comes to who gets to be part of this type of community.

Advantages

Increase engagement.

Online communities can boost your engagement in several ways. If you’re the blogger we wrote about earlier who has grown a substantial following on Instagram, having your community tag you in their Instagram story to share a daily win, how they’re using a product, etc., boosts your engagement. You can also have people comment on your Instagram posts, post in your Facebook group, reply to your tweet, etc.

Product feedback.

Similar product complaints or questions in your online community should never be passed over. While they are great for reducing your support costs, they’re even better at improving your product in exactly the way that your customers want.

Don’t let these complaints and questions get lost take note of them and put them on your “Product Improvement Notes” to-do list.

Reduce support costs.

Inside your online community, look for patterns about the before-state of your customers as well as their after-state. Their after-state comes once your product has solved their problem. Your goal after-state for your customers and the actual after-state may differ if your customers are running into issues with your products.

Your online community can not only be used to answer questions that customers might have, but can also be used to see what reoccurring issues customers are having and fix them. This will reduce the number of tickets coming into your customer support team.

Get to know your customers.

You can also use this megaphone to understand the before-and-after state of your customers. You’ll notice patterns in the way they describe their problems that you can use to improve your copy. This makes the copy more relatable to your customer avatar and shows them that this product is the one they’re looking for.

Drive product innovation.

Your customers are the best people to tell you what product improvements need to be made. They can tell you what they love, what they hate, and what they never use. Your online forum is a megaphone for your customers as to what you can do to improve your product for them.

Public community:

  • Facebook
  • Twitter
  • LinkedIn
  • YouTube
  • G2 Crowd
  • GetApp
  • Quora
  • Discourse
  • Glassdoor
  • Slack

Building Process

Choose a platform for your community.

There are two types of forums: one revolving around shared interest and the other that is more informational in nature.

With a shared-interest forum, you’re bringing together people who happen to be interested in a common topic where they can explore and connect with each other on a larger range of topics. Collaboration between members is key here.

Informational forums are largely used when you want to create a space for the community to search for and share content related to your product, service, or designated topic in one location.

Once you’ve identified the use case and the type of engagement you’re after (i.e., customer support operations or brand loyalty), you’ll want to start looking at detailed features that would support your community goals. These can range from:

  • Deeper analytics
  • Ease of use and good user interface
  • Customer support
  • Platform flexibility
  • Integrations
  • Mobile
  1. Develop a launch framework.

When determining what business problem you want to resolve with your community, consider the following.

Are you looking to:

  • Increase your customer satisfaction ratings?
  • Decrease costs related to customer support?
  • Increase demand of your product/service?
  • Identify and mobilize influencers and advocates?
  • Increase collaboration?

Knowing these answers will make it easier for you to identify why you are launching your online community and help you align its purpose to your intended goals.

  1. Identify key internal stakeholders for the community.

After determining the need for forming your community, your next step is to identify your company’s stakeholders. You can consider three categories of stakeholders:

  1. Those who will be managing the community. For external facing communities, this group of stakeholders may include the community manager, marketing department, and/or customer support. The stakeholders may vary greatly for internal communities.
  2. Those who will be impacted by the community. If your community is external facing, marketing is generally involved because the answers you are seeking will have the most impact on them. If there is feedback from the community regarding product improvements, product management may also be involved.
  3. Upper management. This stakeholder is the person who is responsible for the community and all that are affected by it. Usually, an executive could be an operations manager or a CMO who oversee all digital experiences.

Another way to go about identifying stakeholders is to lump the role of the community manager along with the social media management role. Your marketing team, operations department, customer service, or perhaps a specially created department may be put in charge of the community launch. In this instance, each department is likely to put focus on key performance indicators (KPIs) that are meaningful to them.

Marketing KPIs

  • Market share
  • Customer sentiment
  • Mobilizing influencers and advocates
  • NPS: Net Promoter Score

Operations

  • Operational efficiency
  • Reducing support costs

Customer Service

  • CSAT: Customer Satisfaction Score
  • NPS

Product Management

  • Product testing
  • Market research
  • Beta testing
  • Customer feedback

Typically, only one person will be tasked with the community launch. However, by leveraging resources and other talent within your company, your launch can be less stressful and more successful.

  1. Set up your community.

Making a decision on what platform to use for your community is the first step. If you are launching the community on your own or taking a team approach, you will want to make sure that you or your team are familiar with the software you will be using. This is a good opportunity to play with a demo or go through some hands-on training.

After you and your team have a good understanding of the software you’ll be using, you can move on to making some setup decisions. These include:

  • Keeping your community pre-launch private. You do not want outsiders having access to your community until you are ready, so make sure to enable your privacy settings.
  • Displaying a list of recent discussions for the forum on the “homepage view.” New members or first time visitors may be more apt to join in the discussion if they see what is trending in your community.
  • Creating your initial categories. Remember, your initial category list is not carved in stone and you should avoid creating too many categories at the start. Keep it simple and let your categories evolve. This will help keep a handle on discussion noise.
  • Reviewing the sign-up process for members. The easier the process is, the more likely people will want to sign up for your community. You should consider a setting up a single sign-on (SSO). It is also important to thoroughly test your sign-up process before the pre-launch.
  • Defining the roles your staff and members. Decide what roles will be included within your community, such as moderators or super members. Consider who on your staff will be the community’s admin, moderators, or community manager.
  • Assigning permissions for roles. You will need to assign and test permissions to the roles you create. For example, you may restrict new accounts from posting pictures or links.
  • Deciding which features will be enabled. This includes plug-ins, add-ons, and other features that are integrated into your online forum. Some features may not be needed right away, but others may be crucial to getting your team the data they need.
  • Setting up gamification. Start thinking about the perks you want to reward your members with. This could be badges or other types of recognition for different achievements, such as being a beta-tester.
  • Implementing your theme. You will want to tie your forum into your brand. Do not settle for impersonal default settings. For example, utilize your company’s color scheme and add other personal touches.
  • Configuring spam controls. Take advantage of your software’s spam controls. Test the controls against a baseline of your trusted users. Adjust the settings as needed if you find that valid content is being labeled as spam.
  • Setting up outgoing email. Decide what email address will be used for forum notifications. Review your welcome and registration emails to make sure they say what you want.
  • Testing. You need to test everything before over and over until you are happy with all the parts of your forum. As you get closer to launch-time, your testing should become more stringent. Consider all types of probably scenarios and prepare yourself beforehand that not everything will be perfect. Get ready to decide on a launch date.
  1. Begin a soft launch.

Once you are satisfied with the workings on your community, it is time to get ready for a soft launch. The purpose of a soft launch is to get your community ready for your full and public launch.

A great example of a soft launch is from BigFish Games with the introduction of their new game: Dungeon Boss. While preparing for the launch, they placed their app in the Apple Canada store and drove users to their community forum in a closed and private environment. They got a lot of customer feedback, some of which was incorporated into the Dungeon Boss game title. Consequently, when they launched worldwide, it became one of their most downloaded games.

Your soft launch should occur in three stages:

  1. Preparing for the Soft-Launch

At this point, your community should be ready to be launched. All test content has been removed and any known issues have been fixed or have been scheduled to be fixed. It is time to pre-populate your community with quality content that will spark discussion and make good use of your existing content. Start off with at least 10 discussions using your existing material. Recruit your colleagues to get the ball rolling with these discussions. Tone is important, so you will want to set the right tone before moving on to the internal soft-launch.

  1. Internal Soft-Launch

The purpose of the internal soft-launch is to identify problems using trusted people from your organization, colleagues, and friends before your forum goes public. While they are trying out your community, they can provide you with valuable feedback and report errors they find before moving to the full launch. This phase will allow your moderators an opportunity to learn how to use the tools that will be used in your forum. Any training deficiencies should be addressed and additional training provided if needed. Request feedback from your internal users. Then, set a deadline to move to the next phase: your public soft-launch.

  1. Public Soft-Launch

This launch should be limited to a select audience that you will encourage to give you feedback on your new community forum. To form this group, try requesting volunteers from trusted customers, creating a banner on your website, or including a mention of it in your company newsletter. During your public soft-launch, address the following questions:

  • Who should you include in this group?
  • What problems do you want to solve while in this beta stage?
  • What is needed to transition the community to live status
  • What is your hard deadline to take your community to fully live?

Your goals should include:

  • Getting the public involved
  • Refining your community
  • Receiving feedback
  • Ensuring that your moderators and team are comfortable with the platform
  1. Promote your community.

Once you have your date set, it’s time to get the word out to your target audience. The best way to do this is to take advantage of your existing presence online. Promote your launch all over your website, through email communications, and by having your sales team and customer service reps tell your existing and potential customers about the launch.

Here are some more tips that will help you drive the first 100 members to your community:

  • Invite your contacts. No, it’s not always fun to bombard your family members, friends, or professional contacts about something you’re working on … but it works.
  • Discuss with everyone and anyone. Get in the habit of talking to people everywhere you go, especially if your community is centered around a broad product or service that has value for many people.
  • Enlist the help of new members through gamification. Ask your growing, early group to help you broaden the network by inviting their friends, colleagues, and digital connections. You can encourage this through contests or reward systems integrated into your platform.
  • Partner with influencers. Collaborating with a related and complementary company can be an effective way to promote your new community and welcome new members who like both products and services.

Employer branding on LinkedIn

Being one of the best professional networks, LinkedIn is a hub of job seekers and potential hires. You can post your job opportunities to find the best talent, source potential candidates, as well as build your professional network.

In addition to this, you can leverage LinkedIn to present your company as the best place to work for your potential hires. You can speak about your company culture with the help of photos, videos or gifs. You can also share blog posts written by your employees on your LinkedIn page and showcase your talented team and rich company values to your potential candidates.

A strong employer branding helps you in delivering the right message to your target candidates. With the help of your recruiting team, you can plan out your employer value proposition and take the required steps for effective recruitment marketing. You can depict to your potential hires how it is to work for your company and help them in making an informed decision.

Whether it is your company website or your career website or social media platform like LinkedIn, your employer brand speaks for your organization. Building your employer brand on LinkedIn should be an ongoing activity. Read this blog to learn how to build your employer brand on LinkedIn.

Best Employer Branding Examples on LinkedIn

Many companies today have successfully implemented the right employer branding strategies to build their employer brand and attract the right talent. In this blog, you will find the best examples of companies who are doing their best to strengthen their employer branding on LinkedIn.

  1. Canva

Canva simplified the complex process of designing professional images with their easy-to-use online designing tool. It offers you thousands of design templates to simplify the task of designing images for you.

Canva’s LinkedIn Page is as engaging and interesting as their careers site. They are making the best use of their LinkedIn page to showcase their company culture and attract the best talent for their jobs. In addition to having a dedicated section to jobs, their LinkedIn page also has a section showcasing life at Canva HQ. This certainly boosts their employer branding efforts by a great deal.

Canva’s LinkedIn page offers a glimpse of their work environment, company culture and what they have in store for their employees. Firstly, they share informative blogs about interview tips, resume writing, personal branding and much more. Secondly, they give the authorship of their blog to their employees and ask them to share their experience working at Canva.

In addition to sharing the news about the company’s achievements and festivity wishes, Canva has adopted a new way of promoting their job openings. They share an amazing video along with their job openings on LinkedIn. These job ads certainly make Canva stand out and boost their employer branding.

  1. Spreetail

Spreetail is a successful eCommerce website delivering a great shopping experience to their customers. They deal with selling products for the styling and redecorating of homes and gardens.

Spreetail’s Career Page gives us visual proof about how much they value their employees. Employee happiness and satisfaction is something that Spreetail does really well. They give prospective job seekers a glimpse of how it is to work for them.

As we all know, LinkedIn is one of the best professional networks to find the top talent for your roles. Spreetail leverages their LinkedIn page to advertise their job openings. They craft their job ads with clear and concise job descriptions speaking about the role and responsibilities in simple language.

  1. HubSpot

HubSpot helps businesses simplify their sales and marketing efforts with a host of tools like search engine optimization tools, content management tools, social media marketing tools, and a Sales CRM.

The hiring team leverages the company’s LinkedIn page effectively to promote themselves as an employer of choice. Their employer branding strategies are fresh, creative and innovative. The HubSpot Team speaks about their company culture, the work-life as well as glimpses of their office environment on their LinkedIn page.

Just the way they have shared their culture code on their website, their LinkedIn page also has a short presentation of their company culture. They also showcase some engaging blogs written by the team as well as employee testimonials.

  1. Slack

Slack is an instant messaging and file sharing platform that helps teams collaborate with each other seamlessly. Founded in the year 2009, Slack Technologies designed and developed Slack so that ambitious teams could work together.

Slack is an equal opportunity employer and believes in having a diverse workplace employing talented individuals from various backgrounds and experiences. The Slack Team is making the best use of its LinkedIn page to build their employer brand.

  1. Zappos

Zappos.com is a leading eCommerce company selling apparel and footwear from thousands of brands online. Located in Las Vegas, Zappos has been growing since its inception in 1999. Currently, the Zappos family consists of approximately 1500 Zapponians.

Zappos.com is slaying at their employer branding efforts. Through their company’s LinkedIn page, Zapponians walk us through their brand, their company culture, and their beliefs. The lively office environment, the perks they offer and the amiable team make Zappos an employer of choice.

Zappos LinkedIn page is constantly updated with fresh content that boosts its employer brand by a great deal. In addition to sharing their active job openings, Zappos takes efforts to post pictures of their latest outings and events. Their LinkedIn page also mentions about their company culture in pictorial representations. Zapponians use quirky and funny captions in their posts which reflects their fun work environment and talented team.

Process

  1. Update your Linkedin company page

When is the last time you took a look at the content on your Linkedin company page? Does it reflect your company’s mission or values? Are you proactively promoting the right content? Is it up to date? Answering these questions is the first step to leveraging Linkedin for your employer brand.

Data from Hootsuite shows that complete company pages receive 2X more visitors than those that are incomplete. This means something as simple as reviewing and updating your profile can give a quick boost to your employer brand.

  1. Diversify your content

It’s important to keep a consistent tone to build your employer brand, but remember to diversify your content. On Linkedin, you can post updates, photos, videos and more. Be sure to use a diverse mix of content formats to keep your audience engaged. Linkedin is also a great place to display employee-generated content (EGC). Starbucks prioritizes ECG specifically with the #tobeapartner campaign which highlights their employee experience.

  1. Share company culture content

People on Linkedin want to know about your business. It’s the perfect place to highlight your mission, employees, and culture. Instead of strictly using ads alone to promote your company, you can create content that gives users an inside look at your business. This increases the likelihood of organic engagement.

One company that does this well is Zendesk. When you visit their Linkedin page, you’ll see a great mix of business content and company culture content. The feed includes photos from charity events, meetings, and even holiday parties. They also use a branded hashtag to group these posts and make them easy to find on the platform.

  1. Use sponsored content

Posting sponsored content is another way to boost your presence fast. It allows you to get your message in front of a targeted audience and ensure that you get more eyes on a post. However, you shouldn’t treat sponsored content the same way you treat other types of ads. You can use sponsored content on Linkedin to stand out and help your business reach specific goals.

  1. Create a seamless candidate experience

Linkedin is likely the first place many candidates will go to when they want to learn about your business. Having great content on your page and on Linkedin contributes to building a strong brand.

  1. Encourage employee advocacy

Remember, your employees’ individual Linkedin profiles also contribute to your employer brand. If your employees are active and have a complete profile, it shows that they’re engaged at work. This can make your company more attractive to potential employees and have a positive impact on company culture. All of these can help you build a strong presence on the platform.

Marketing and building presence on Facebook

Facebook marketing refers to creating and actively using a Facebook page as a communications channel to maintain contact with and attract customers. Facebook actively provides for this, allowing users to create individual profiles or business pages for companies, organizations, or any group attempting to develop a fan base for a product, service, or brand.

Facebook as a platform for growing your business:

  • Has global coverage. Over 1,5 billion users visit Facebook daily. About 2,3 billion every month. More than 7 million active companies create ads for this massive audience.
  • Offers highly targeted paid ads. With Facebook Ads, you can tailor your promotions to a specific audience based on gender, age, location, job, interests any demographical or behavioral data, which users willingly share with Facebook.
  • Makes organic reach possible. If you don’t have resources to utilize Facebook Ads, build relationships organically by sharing materials that bring value to people on your Facebook page. Your posts will show up in the newsfeed, though the high level of competition will make it harder to build an audience naturally.
  • Allows integrations with other marketing channels. Facebook marketing is not a single isolated system. You can combine it with other marketing channels, like email marketing, mobile marketing, search engine marketing, and Facebook Messenger ads, to develop a promotion mix that will increase your brand outreach.

Featuring nearly a billion potential customers, every business should be using Facebook. It is at least as essential as having a business web page and actually much easier to create. Whether you represent a big brand or a small business employing only a handful of people, you can bet that some portion of your customers are already on Facebook. Commonly, Facebook marketing is used by:

  • Food, electronics, home goods, restaurants nearly any kind of brand can be promoted through Facebook, turning passive customers into active fans who follow news of promotions and developments, and who share with their own friends.
  • Local businesses. Whether a business is family-owned, or a franchise of a larger company, a Facebook page can be used to turn a local customer base into a fan base that more commonly visits your store.
  • Musicians, celebrities, authors, syndicated columnists anybody who makes their money through being known wants to be known by as many people as they can on Facebook.
  • Non-profit organizations. Charities, political groups, and public service campaigns can all leverage the natural sharing capabilities of Facebook.

Internet Marketing Managers

  • Promote company engagement with social media, including Facebook
  • Coordinate Internet marekting campaigns, including Facebook, Twitter, company blogs and websites, and affiliate programs
  • Establish goals and metrics for marketing efforts through Facebook, and evaluate success
  • Assign and monitor teams to create content for the company’s Facebook page

Advertising and Promotional Managers

  • Develop promotional videos and other content that can be posted to a company website, and shared through Facebook
  • Create advertising slogans to represent products and brands
  • Manage specific promotional assignments, such as conducting an online contest for Facebook fans
  • Advertise internally as well as externally, so that a company’s employees are more likely to become a part of the company’s Facebook fan base

Public Relations Managers

  • Write short-form press releases to post to a company’s Facebook page
  • Identify trending attitudes towards a company, and craft messages to respond
  • Develop spotlight stories for particular people or products within the company, which can be shared on the company Facebook page, among other places
  • Develop a narrative for the company

Benefits

  • Precise targeting. You already know that Facebook allows users to deeply segment their audience but let’s take a closer look at the options available. Within demographic targeting, you can select an audience with a particular income, education level, life events, relationship status, or job. You can look for customers, taking into account their interests, such as their preferred entertainment, sports, hobbies, and shopping habits. Also, you can reach clients based on purchase behaviors, intent, device usage, etc.
  • Increased website traffic. With this platform, you can drive your audience directly to your website. Moreover, these people will be higher quality leads than users who land on your site organically because they already know your company. Hence, you have more credibility in their minds. Encourage your followers to visit your site to find out more about your products. Besides, when linking to a site, Facebook generates a full-size image if your site page has one. So, it will attract many users’ attention and help you boost website traffic.
  • Variety of ad formats. Facebook provides businesses with excellent opportunities that allow them to showcase their products from the best angles. Ads on this platform include both text and visual formats. You can boost your post by turning it into an ad, produce stories to show your behind-the-scenes, make a slideshow of your new collection, use carousel ads to demonstrate up to 10 products linking to the corresponding pages, etc.
  • Customer support. A lot of people prefer to connect with a brand via social media. Phone calls have become a thing of the past. Create a chatbot for Facebook Messenger to communicate with users based on their popular queries keywords. They can include “price,” “delivery,” “payment options,” “purchase,” “book,” etc. You only need to develop a scenario based on users’ FAQs and write the answers. Your chatbot will imitate the real conversation. As a result, your support team will have time for more complicated issues and you can automate routine tasks.
  • Positive impact on SEO. Some marketers claim that social media influences search rankings. It’s believed that robots take into account your data in the About section while ranking. Moreover, your social media engagement contributes a lot. Shares, likes, and comments tell Google that people are interested in your brand and engage with it. Although there is no exact proof, it isn’t superfluous either.

Marketing and building presence on Twitter

A Twitter marketing strategy is a plan centered around creating, publishing, and distributing content for your buyer personas, audience, and followers through the social media platform. The goal of this type of strategy is to attract new followers and leads, boost conversions, improve brand recognition, and increase sales.

Creating a Twitter marketing strategy will require you to follow the same steps you would if you were creating any other social media marketing strategy.

  • Research your buyer personas and audience
  • Create unique and engaging content
  • Organize a schedule for your posts
  • Analyze your impact and results

  1. Customize and brand your profile.

When someone looks at your company’s Twitter profile, you want them to automatically know it’s yours. Meaning you should customize and brand your Twitter profile with your logo, colors, and any other recognizable and memorable details you want to incorporate. There are a few locations in which you can customize your profile.

  • Handle: Your Twitter handle is your username (for example, our handle is @hubspot) this should include your company’s name so your followers, customers, and fans can easily search and find you on the platform. You create your Twitter handle when you sign up for an account.
  • Header: The header on your Twitter profile is your background image. You might choose to create a unique image for your header, use your logo, or another branded image.
  • Profile picture: Your Twitter profile picture represents your company’s every move, interaction, post, and tweet on the platform. It’s the image that sits above your bio and might include a picture of your logo, company’s initials, or CEO.
  • Bio: A Twitter bio provides everyone who visits your profile with a brief synopsis of what they’re about to see in 160 characters or less. It might include your mission statement, a blurb about what your company does, or something humorous and engaging.
  • Website URL: Beneath your profile picture and bio, there’s a location where you can include your URL to direct traffic straight to your website.
  • Birthday: In the same location as your URL, you can insert your company’s birthday or the day when the company was founded, so your audience gets to know your business on a more personal level.
  1. Create Twitter Lists.

A Twitter List which any user has the ability to create and view is an organized group of Twitter accounts you’ve selected and put together in specific categories. For example, at HubSpot, lists include Leadership Experts, Top Marketing Experts, Top Business Podcasters, and more. When you open a Twitter List, you only see tweets posted by the accounts on the list.

Twitter Lists are great if you want to follow only specific accounts. You might segment your lists into groups such as business inspiration, competitors, and target audience so you’re able to easily review their posts, interactions, and content.

  1. Host a Twitter Chat.

You can schedule and host a Twitter chat to engage your followers, discuss a topic, create a sense of community, and ask your audience for their opinions or input on something you’re working on.

To host a Twitter Chat (or TweetChat), you’ll need to choose a topic, set a time and date for the chat to occur, and create a hashtag for the chat. You can share this information with your followers in a tweet, on your website, in your Twitter bio, and wherever else you choose.

  1. Advertise on Twitter.

Advertising through Twitter is a great way to reach your audience. This will make your tweets easily discoverable by thousands of people, helping you increase your influence and following. You can do this through promoted tweets or Twitter Ads.

Promoted Tweets

Promoted tweets make your tweets appear in the Twitter streams or Twitter search results of specific users. This is a great option for anyone looking to get more people on a specific webpage. Your business will pay a monthly fee as long as you’re promoting a tweet.

Twitter will put your promoted tweets in a daily campaign targeting the type of audience you want to reach as previously indicated in your settings. All Twitter users have the ability to interact and engage with Twitter Ads the same way they would with your organic content.

Twitter Ads

Twitter Ads is a great option if you’re using different types of tweets to achieve one goal for your business. It’s ideal if you’re looking to grow your base of followers and brand awareness significantly through the platform.

Your business can decide between different objectives when it comes to your Twitter ads including app installs, video views, and website conversions, as well as audience targeting for your campaigns. This decision will impact the price you’ll need to pay to run your ad.

  1. Drive traffic to your website.

Twitter can help you direct traffic to your website there are a number of ways to include your website’s URL on your profile as well as add links to your web pages and blogs in your tweets. Here are some ways you can use the platform to direct traffic to your website to help you increase your conversions and sales.

  • Add your website URL beneath your bio on your Twitter profile.
  • Incorporate links to your website in your tweets.
  • Retweet any content that includes direct links to your website and/ or blogs other people have shared.
  • Embed tweets on your website with a Twitter Timeline.
  • Set up Twitter Ads to drive users to a specific landing page on your site.
  1. Use Twitter Moments.

Twitter Moments are collections of tweets about a specific topic or event. They’re like a “best of” collection of tweets regarding your topic of choice. For example, Twitter’s Moments section includes “Today”, “News”, “Entertainment”, and “Fun.”

  1. Get verified on Twitter.

You might choose to apply to get your Twitter profile verified depending on the size of your company and your industry. Twitter states they typically only accept requests for account verification if you’re in “music, acting, fashion, government, politics, religion, journalism, media, sports, business, and other key interest areas.” If Twitter accepts your application and verifies your profile, a badge with a blue checkmark inside of it will appear next to your handle. This symbolizes an authentic account.

Marketing

  • Use keyword targeting in your Twitter Ads
  • Implement hashtags
  • Organize a content sharing schedule
  • Create a Twitter campaign
  • Write a strong profile bio
  • Use images and videos
  • Interact with your followers
  • Share media mentions
  • Keep an eye on your competitors’ Twitter accounts
  • Focus on followers’ interests and needs when creating content
  • Promote your events
  • Check your direct messages regularly
  • Keep track of your analytics

Reserving process followed by insurance companies

Loss reserving refers to the calculation of the required reserves for a tranche of general insurance business. It includes outstanding claims reserves.

Typically, the claims reserves represent the money which should be held by the insurer so as to be able to meet all future claims arising from policies currently in force and policies written in the past.

Methods of calculating reserves in general insurance are different from those used in life insurance, pensions and health insurance since general insurance contracts are typically of a much shorter duration. Most general insurance contracts are written for a period of one year, and typically there is only one payment of premium at the start of the contract in exchange for coverage over the year. Reserves are calculated differently from contracts of a longer duration with multiple premium payments since there are no future premiums to consider in this case. The reserves are calculated by forecasting future losses from past losses.

The reserving process can refer to different components of the process to internal or external personnel at the insurance company. The claims department is at the frontline when a claim is reported and a case reserve needs to be posted. An internal actuarial department performs work in support of the recorded loss and loss adjustment reserves (reserves) in the insurance company’s statutory financial statements. Either the internal or external appointed actuary relies on reserving methods or models to opine on a company’s Dec. 31 recorded reserves. Company management is responsible for the financial reporting process including the recording of loss and loss adjustment reserves and controls over the entire process.

One of the state insurance regulators’ primary functions is solvency regulation for which the risk-focused examination is a key tool. The primary purpose of a risk-focused examination of an insurer is “Assessing and monitoring its current financial condition and prospective solvency.” Conservatism in the recorded reserves is preferable to understated reserves when viewed in light of solvency regulations. It has been 40 years since the National Association of Insurance Commissioners (NAIC) June 1980 Plenary Session where the first formal statement of a loss reserve opinion requirement was adopted and nearly 30 years since what is now referred to as a Statement of Actuarial Opinion as required by the NAIC Property and Casualty Annual Statement Instructions was required. This Statement of Actuarial Opinion has operated as a regulatory control over the reserving process by helping to mitigate the risk of insurance company loss reserves being “too low” (deficient or inadequate) or “too high” (redundant or excessive).

Chain Ladder Method

The chain-ladder or development method is a prominent actuarial loss reserving technique. The chain-ladder method is used in both the property and casualty and health insurance fields. Its intent is to estimate incurred but not reported claims and project ultimate loss amounts. The primary underlying assumption of the chain-ladder method is that historical loss development patterns are indicative of future loss development patterns.

Methodology

According to Jacqueline Friedland’s “Estimating Unpaid Claims Using Basic Techniques,” there are seven steps to apply the chain-ladder technique:

  • Compile claims data in a development triangle
  • Calculate age-to-age factors
  • Calculate averages of the age-to-age factors
  • Select claim development factors
  • Select tail factor
  • Calculate cumulative claim development factors
  • Project ultimate claims

Limitations

The chain-ladder technique is only accurate when patterns of loss development in the past can be assumed to continue in the future. In contrast to other loss reserving methods such as the Bornhuetter–Ferguson method, it relies only on past experience to arrive at an incurred but not reported claims estimate.

When there are changes to an insurer’s operations, such as a change in claims settlement times, changes in claims staffing, or changes to case reserve practices, the chain-ladder method will not produce an accurate estimate without adjustments.

The chain-ladder method is also very responsive to changes in experience, and as a result, it may be unsuitable for very volatile lines of business.

Bornhuetter–Ferguson Method

The Bornhuetter–Ferguson method is a prominent loss reserving technique.

Background

The Bornhuetter–Ferguson method was introduced in the 1972 paper “The Actuary and IBNR,” co-authored by Ron Bornhuetter and Ron Ferguson.

Like other loss reserving techniques, the Bornhuetter–Ferguson method aims to estimate incurred but not reported insurance claim amounts. It is primarily used in the property and casualty and health insurance fields.

Generally considered a blend of the chain-ladder and expected claims loss reserving methods, the Bornhuetter–Ferguson method uses both reported or paid losses as well as an a priori expected loss ratio to arrive at an ultimate loss estimate. Simply, reported (or paid) losses are added to a priori expected losses multiplied by an estimated percent unreported. The estimated percent unreported (or unpaid) is established by observing historical claims experience.

The Bornhuetter–Ferguson method can be used with either reported or paid losses.

Methodology

There are two algebraically equivalent approaches to calculating the Bornhuetter–Ferguson ultimate loss.

In the first approach, undeveloped reported (or paid) losses are added directly to expected losses (based on an a priori loss ratio) multiplied by an estimated percent unreported.

BF = L + ELR * Exposure (1-w)

In the second approach, reported (or paid) losses are first developed to ultimate using a chain-ladder approach and applying a loss development factor (LDF). Next, the chain-ladder ultimate is multiplied by an estimated percent reported. Finally, expected losses multiplied by an estimated percent unreported are added (as in the first approach).

BF = L*LDF*w + ELR * Exposure (1-w)

The estimated percent reported is the reciprocal of the loss development factor.

Incurred but not reported claims can then be determined by subtracting reported losses from the Bornhuetter–Ferguson ultimate loss estimate.

Different types of reserves of insurance companies

Insurance companies deal with large and complex claims made against policies that are sold by them. It may often take months, or even years, to settle some claims. To ensure the company reports and avoid unpleasant surprises, insurers assign a claim reserve to each incident that reflects their best estimate of the liability. The term ‘Reserve’ is defined by the amount of money earmarked for a specific purpose. Theoretically, the reserve is an amount simultaneously with interest to be earned and premiums to be paid that will exactly be equal to all of the company’s contractual commitments.

Insurance reserves: The money which is reserved by insurers for the purpose of ensuring future payments of the insured sums and insurance compensation depending on the types of insurance.

Claims Reserves

A claim reserve is an amount of money that is set aside by an insurance company or by an insurer to pay policyholders who have filed or expected to file legal claims on their policies. This reserve is also known as the ‘balance sheet reserve’. The reserve amount of money under the claim reserve is for both the type of claims i.e. for RBNS (reported but not settled) and IBNR (incurred but not reported) claims.

Voluntary reserve

Voluntary reserve refers to fiscal reserve or other liquid assets set aside by insurance companies. Voluntary reserves are surplus or additional liquid assets above the requirement that ensure the solvency (the ability of a company to meet its long-term debts and financial obligations) of the insurance agencies. The most common reason for establishing a voluntary reserve for a company is that it helps to make the company appear liquid and stable. Moreover, voluntary reserve acts as a contingency fund, that is, to meet unexpected obligations and pay future liabilities.

Loss reserve

Loss reserve is the estimation of liability of an insurance company from future claims. Typically, composed of liquid assets, loss reserve allows an insurer or insurance company to cover claims made against policies that it underwrites. These estimating liabilities may be a complicated undertaking. Insurers must take into account the span of the insurance contract, the type of insurance offered and the edges of a claim being resolved quickly. Insurers have to adjust their loss reserve calculations according to the circumstances.

When a new policy is underwritten by an insurer, it records a receivable premium and a claim obligation (which is a liability). The liability is a considered portion of the unpaid losses account, which depicts the loss reserve.

Unearned premium reserves

Unearned premium reserves (UPR) is something that appears in the liability portion of the balance sheet of an insurance company. It is a kind of technical reserve that reflects the measure of written premiums but not yet earned. The unearned premium reserve of a company may be considered as its deferred income. It is the premium corresponding to the time duration remaining of an insurance policy. This reserve is proportionate to the unexpired portion of the insurance.

Statutory Reserves

These reserves are state-mandated reserve constraints for insurance companies. By law, insurers must hold a part of their assets as either cash or temporary securities so that they will be able to make good on their claims in a timely manner. Statutory reserves for insurance corporations are measured in two different ways; a rule-based approach and a principle-based approach. The Rule-based approach basically tells insurers how much money must be kept on reserve based on standardized formulas and sets of assumptions. More recently, many states have been moving toward a principle-based approach, which gives insurers greater freedom in setting their reserves.

Insurance Reserves and Accounting

A claims reserve is a reserve of money that is set aside by an insurance company in order to pay policyholders who have filed or are expected to file legitimate claims on their policies. Insurers use the fund to pay out incurred claims that have yet to be settled.

People pay for insurance coverage to protect themselves against financial loss. In exchange for taking on this risk, the company offering the service charges its customers insurance premiums. An insurance premium is the amount of money an individual or business pays for an insurance policy; insurance premiums are either paid in installments monthly or semi-annually or in one upfront payment before any coverage starts.

When entering a contract with customers, an insurance company accepts any liability in the event that an adverse occurrence takes place which damages whatever it agreed to insure. Accepting liability means making a payment to the insured person when they file a legitimate claim.

Every year, insurance companies deal with claims that are filed against the policies that they sell. For example, an auto insurance policyholder who gets involved in an accident will file a claim with their insurance provider to be reimbursed for any damages made to their car.

Some claims, such as property losses due to fire, are easily estimated and quickly settled. Others, such as product liability, are more complex and may be settled long after the policy has expired.

A claims reserve is money set aside for a claim that has been reported but not settled (RBNS) or incurred but not reported (IBNR). An insurance company will assign a claims reserve to each file that fit those descriptions, reflecting its best estimate of the eventual settlement amount. The outstanding claims reserve is an actuarial estimate, as the amounts liable on any given claim is not known until settlement.

A claims adjuster is responsible for estimating the payable amount. The monetary amount of the claims reserve can be calculated subjectively, using the claims handler’s judgment, or statistically, by evaluating past data to project future losses.

Money for the claims reserve is taken from a portion of the premium payments made by policyholders over the course of their insurance contracts.

It can be difficult for insurance companies to accurately determine the amount to set aside for claims. Regular reviews help, although that does not mean that adequate funds are always allocated. Significant underestimates can come as a nasty shock to investors, eroding trust in accounting practices and weighing on company share prices.

Claims that have been incurred but not reported (IBNR) are particularly tricky to assess. For example, workers may inhale asbestos while performing their jobs but might not file a claim until after being diagnosed with an illness 20 years after the adverse event occurred.

An outstanding claims reserve is an accounting provision that is recorded as a liability on a company’s balance sheet. They are classified as liabilities because they must be settled at a future date. In other words, they are potential financial obligations to policyholders.

The claims reserve is adjusted over time as each case develops and new information is retrieved during the claims settlement process. The total amount of funds set aside for a claim is the sum of the expected settlement amount and any expenses incurred by the insurer during the settlement process, such as fees for claims adjusters, investigators, and legal assistance.

When a business suffers a loss that is covered by an insurance policy, it recognizes a gain in the amount of the insurance proceeds received. The most reasonable approach to recording these proceeds is to wait until they have been received by the company. By doing so, there is no risk of recording a gain related to a payment that is never received. An alternative is to record the gain as soon as the payment is probable and the amount of the payment can be determined; however, this constitutes a form of accrued revenue, and so is discouraged unless there is a high degree of certainty regarding the payment. If the gain is recorded prior to cash receipt, the offsetting debit to the gain is a receivable for expected insurance recoveries.

A gain from insurance proceeds should be recorded in a separate account if the amount is material, thereby clearly labeling the gain as being non-operational in nature. For example, the title of such an account could be “Gain from Insurance Claims.” Though a gain is being recorded, the likely total outcome of an insurance claim is a net loss, since the amount of such a claim is offset against the actual loss incurred, net of an insurance deductible.

It may be necessary to disclose in the financial statement footnotes the nature of the events resulting in insurance proceeds, the amount of the proceeds, and the income statement line item in which the resulting gain is recorded.

In case of loss of Profit

Insurance company A/cDr

To Profit & Loss A/c Dr

To Profit & Loss Suspense A/c

(Being Loss of profit for next year)

Bank A/cDr

To Insurance Company A/c

Insurance Claims fraud and fraud prevention

Insurance fraud is any act committed to defraud an insurance process. It occurs when a claimant attempts to obtain some benefit or advantage they are not entitled to, or when an insurer knowingly denies some benefit that is due. The most common schemes include premium diversion, fee churning, asset diversion, and workers compensation fraud. Perpetrators in the schemes can be insurance company employees or claimants. False insurance claims are insurance claims filed with the fraudulent intention towards an insurance provider.

Insurance fraud is an illegal act on the part of either the buyer or seller of an insurance contract. Insurance fraud from the issuer includes selling policies from non-existent companies, failing to submit premiums, and churning policies to create more commissions. Buyer fraud, meanwhile, can consist of exaggerated claims, falsified medical history, post-dated policies, viatical fraud, faked death or kidnapping, and murder.

Insurance fraud has existed since the beginning of insurance as a commercial enterprise. Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are diverse and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities affect the lives of innocent people, both directly through accidental or intentional injury or damage, and indirectly by the crimes leading to higher insurance premiums. Insurance fraud poses a significant problem, and governments and other organizations try to deter such activity.

Hard vs. soft fraud

Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy in order to claim payment for damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars.

Soft fraud, which is far more common than hard fraud, is sometimes also referred to as opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise legitimate claims. For example, when involved in an automotive collision an insured person might claim more damage than actually occurred. Soft fraud can also occur when, while obtaining a new health insurance policy, an individual misreports previous or existing conditions to obtain a lower premium on the insurance policy.

Types of Insurance Fraud Schemes

Sellers

  • Premium diversion: An example of premium diversion is when a business or individual sells insurance without a license and then does not pay claims.
  • Fee churning: When intermediaries such as reinsurers are involved. Each takes a commission that dilutes the initial premium so that there is no longer any money left to pay for claims.
  • Asset diversion: The theft of insurance company assets, such as, for example, using borrowed funds to buy an insurance company and then using the acquired company’s assets to pay off the debt.

Buyers

Attempts to illegally reap funds from insurance policies by buyers can take on a variety of forms and methods. Insurance fraud with automobiles, for instance, may include disposing of a vehicle and then claiming it was stolen in order to receive a settlement payment or a replacement vehicle.

The original vehicle could be secretly sold to a third party, abandoned in a remote location, intentionally destroyed by fire, or pushed into a river or lake. If the owner sells the vehicle, they would seek to profit by pocketing the cash, and then claim the vehicle was stolen in order to receive further compensation.

Fraud prevention

  1. Implement a foundational framework

A foundational framework should reflect a fraud-detection strategy that addresses such questions as: How can we check all claims for fraud but ensure fast claim processing? How can we identify fraud before a claim is paid? How can we improve fraud investigation efficiency? How can we keep track of changing fraud behaviours? How can we reduce false positive signals? And finally: What is the best approach to automate the fraud-detection process and predict the likelihood of fraud? Implementing a foundational framework enables management to make better decisions about priorities, resource deployment and investments.

A foundational framework can range from an “out-of-the-box” solution that automates the institutional knowledge of your claims professionals and enables workflow management to full social networking analysis of the parties involved in a claim. From there, insurers can add a multitude of scoring engines, third-party data captures, criminal history lookups and many other tools. An important aspect of fraud detection is having a culture in your claims staff that emphasizes the importance of recognizing, identifying and investigating suspicious claims. Empower your staff to be involved, and then the tools you deploy will function much more effectively.

  1. Know the relative level of fraud potential

Knowing the relative level of fraud potential for every type of claim allows the best, and quickest, action to be taken to maximize special investigative unit (SIU) efficiency and savings. With limited resources to devote to fraud, it is important to make sure your investigations can be focused on the items that have the greatest potential for cost avoidance and successful identifications. For example, a theft claim involving the suspicious disappearance of expensive jewellery has a higher potential for being fraudulent than a stolen smartphone or laptop. Examples of common false claim schemes include deliberately destroying property and misreporting the cost of auto repairs.

  1. Use data analytics to detect fraud

Fraud comes in all shapes and sizes. In general, insurance fraud can be divided into two categories: criminal fraud, which is perpetrated by professionals habitually trying to milk the system; and cultural fraud, which is a genuine claimant being opportunistic or exaggerating a claim.

Data analytics can be applied to detect fraud. By analyzing past fraud, insurers can use predictive modeling to produce what is called a “Suspicion Score,” a value for the propensity of fraud. The process works like this: Adjusters simply enter data, and claims are automatically given a Suspicion Score to indicate the likelihood that fraud has occurred. The technology behind this involves utilizing data-mining tools and applying quantitative analysis.

Even with automation and data analytics, the weakest link in fighting fraud can be your own employees. The importance of checks and balances cannot be stressed enough.

  1. Continually review and rescore claims

Success in combating insurance fraud comes from persistence and good timing. Above all, apply your arsenal of tools including data analytics and predictive modeling early and often. Claims should be continuously monitored for fraud potential. As an insurance company, it is imperative that you target the right claims, at the right time, with the right tools. Luckily, predictive modeling and advanced analytics are coming into play as essential tools for fighting insurance fraud. These tools can be automated, preventing the need for hands-on manual analysis.

By continuously reviewing and rescoring claims using Suspicion Scores, insurers can detect patterns that reveal fraud. Some claims score high immediately at first notice of loss, prompting your SIU to get involved immediately. For others, high scores do not show up until after the claim has been collected.

Monitoring Suspicion Scores has been shown to be more accurate and more effective than traditional fraud-detection methods. But again, the key is to not rely solely on technology to do all of the heavy lifting human analysts are required to initiate action after the suspected fraud has been flagged, and your people must follow through with appropriate measures. This is where training employees to identify fraud becomes an important piece of the overall fraud-detection puzzle.

  1. Adopt a layered approach

In the world of IT, a “layered approach” refers to using a variety of tools and technologies to tackle a challenge. In detecting insurance fraud, this means throwing the kitchen sink at the criminals, but doing it in an organized, well-considered fashion.

Fraud is a complex, multifaceted problem, and no single method can detect all fraud. Each fraud-detection method needs to be crafted to address a specific area. Different rules and indicators are needed for different types of policies and claims. Plus, fraudsters hide in multiple databases, so fraud-detection methods must search them all. Because of the complexity of fighting fraud, it is advisable to bring in outside expertise to help formulate a framework and implement the technology, tools and methods needed to deal effectively with fraud.

The modern insurance organization has a number of technology tools at its disposal to detect fraud. For example, videos, photos and even livestreaming can be used to document evidence at a car crash or crime scene. It’s difficult for the average person to fake a video, especially when the device’s location access is turned on. A virtual gold mine lies within unstructured data, and it is imperative to collect, organize, index and mine the data to detect fraud. Always remember: You can’t claim what you can’t prove.

  1. Revise based on market conditions

Criminals are ever resourceful, so always be ready to quickly adapt to changes in the ways fraud is undertaken, as well as changes in your industry. For example, professional criminals are sophisticated enough to become familiar with the analytical approaches that insurance companies use to detect fraud, and to change their tactics when committing fraud. As fighting fraud becomes more proactive, insurers must spot new fraud trends early and take steps to stay ahead of the bad guys.

Your everyday policyholders may also try to be more creative with their insurance claims when the economy is in a down cycle. Keep your claims staff aware of the type of market conditions the policyholders are facing so the staff can be on the lookout for new and inventive fraud attempts that may be unknown to the software in place.

Concept of Soft and Hard Insurance markets

Hard Insurance market

A hard insurance market is characterized by a high demand for insurance coverage and a reduced supply. Insurers impose strict underwriting standards and issue a limited number of policies. Premiums are high and insurers are disinclined to negotiate terms.

In a hard market, there’s less desire for growth and more of a restriction in the marketplace as insurance companies re-evaluate their books of business, their risk appetites, and how much capacity they want to present in the marketplace. In hard market conditions, underwriters often adhere to stricter standards in an attempt to correct any adverse loss ratios developed during soft market conditions. As a result, insurance rates often go up, the amount of limit carriers are willing to provide decreases, and the number of players in the market restricts. This makes it harder for insureds and their agents to find coverage options, which means the carriers that are offering coverage can push up their rates.

  • Catastrophic property insurance (California)
  • Trucking
  • Financial institutions insurance

Factors contributing to a hard market may include:

  • Economic downturn/uncertainty.
  • Financial market volatility.
  • Shrinking insurance capital/decreased competition.
  • Catastrophic events / Increased claim activity.
  • Global events (e.g., pandemic, climate change, etc.).

Soft insurance market

A soft insurance market is the opposite of a hard one. When the market is soft many insurers are competing for business and premiums are generally low. Insurers relax their underwriting standards and coverage is widely available. Underwriters are generally flexible and willing to negotiate coverage terms. Broad coverage is available with some extensions available for free.

In soft market conditions, insurance organizations often try to expand their market share. They enter growth mode, targeting prospects with cheap rates, attractive policy terms, and, when allowed, discounted coverage. In the most extreme cases (seen more so in less regulated markets around the world), the soft market resembles a bidding war, with everyone chiming in last minute to offer the cheapest deal on a risk. With all this buzz, insureds and their supporting brokers are encouraged to shop around, and as more companies move their business to insurance carriers with lower rates, the profits for the entire industry start to reduce. On top of that, when focusing on growth and price-driven risk transfer, insurers sometimes let slip on stringent underwriting, meaning loss ratios also start to rise. At some point, a correction to this unsustainable situation (reduced profits and rising loss ratios) is necessary and the market starts to harden.

Factors contributing to a soft market may include:

  • Active, growing economy.
  • Positive interest rate environment.
  • Low/favorable claims activity.
  • Abundant capital to insure.
  • Strong policy holder surplus.

Examples of current soft markets include:

  • Workers’ compensation
  • Cyber
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