Finding the cure: although insurers don't typically target new prospects via e-mail, legal definitions of spam could affect communication with existing customers.

The familiar chime of "you've got mail" can be a welcome sound ... or an unwanted nuisance. The volume of spam--unsolicited commercial e-mail messages and promotional advertisements--that fills computer in-bins each day has risen to record numbers. In fact, as of March, 45% of all e-mail sent was unsolicited advertising, according to Brightmail, a San-Francisco-based anti-spam company. By the end of this year, industry experts predict that half of all e-mail will be unsolicited.

While insurers typically don't market to prospective customers via e-mail, some rely on the pervasive mode of communication to reach out to customers and business partners, and the potential passage of some form of federal anti-spam legislation may have an impact on the way insurers do business electronically.

Growing Problem

The spam epidemic--in which the buzzword got its name from a Monty Python sketch where customers of a restaurant were offered the canned, processed pork luncheon meat of the same name--dates backs nearly a decade to two lawyers who posted an advertisement to Internet news groups.

The problem has grown ever since.

From pornographic material to bogus commercial solicitations, spam is everywhere, and now it's not only affecting e-mail systems, but also is reaching into mobile technologies as well. Technology and software developers and state and federal governments are working hard to come up with a solution to the widespread problem.

Not only has spam spread faster than most people anticipated, it hasn't leveled off as many expected it would by this time, said Adam Bosnian, general manager of Burlington, Mass.-based Elron Software, which provides e-mail and Web content filtering applications. "Fourteen months ago spam was barely on a company's radar screen, but now it's projected that by 2004 over 50% of all incoming e-mail will be viewed as spam. Some Large enterprises have already passed the 50% barrier earlier this year." The recent Sobig.F virus that plagued thousands of computers in late summer was thought to be the work of spammer masterminds to distribute unwanted e-mails and product promotions.

Not only is spam wreaking havoc throughout some companies, it's draining significant dollars from companies' wallets. Research and advisory firm The Gartner Group estimates that, on average, businesses with 1,000 employees lost $25,000 per month, or $300,000 a year, in worker productivity due to spam. In addition, increased volumes of messages may overload servers and/or damage systems, both of which cause interruption of service and significant costs.

Helping or Hindering?

While a handful of bills have made their way to Capitol Hill, what passage of such legislation might mean to insurers' ability to market via e-mail remains questionable.

Some of the recently proposed federal legislation includes the Anti-Spam Act of 2003, the Ban on Deceptive Unsolicited Bulk Electronic Mail Act of 2003, the Criminal Spam Act of 2003, and REDUCE Spam Act of 2003. One of the most talked about bills is the CAN-SPAM Act of 2003, which was introduced in April by Sens. Conrad Bums, R-Mont., and Ron Wyden, D-Ore. The proposed legislation would require unsolicited commercial e-mail messages to be labeled and to include opt-out instructions and the sender's physical address.

In addition to proposed federal legislation, states also are taking the spam issue seriously. Currently, about 39 states have some type of anti-spam laws on their books.

While federal legislation may change some companies' marketing strategies, most insurers and other industry experts believe the effects across the insurance industry will be minimal, particularly because most insurers don't use e-mail as a marketing tool to reach customers and potential clients.

Michael Sippey, managing director for e-mail solutions agency Quris, believes recent legislative moves against spam will slightly hinder insurers' ability to market using e-mail. He believes legislation won't affect marketing to or servicing existing customers, however, but rather in identifying new prospects. "E-mail is better used as a tool to educate customers and drive already identified prospects through the sales funnel than to source new prospects," he said.

Many believe legitimate marketers will be relatively unscathed by federal legislation. "Most of the laws are targeting deceptive marketing, fraudulent claims, falsified return addresses and unsubscribe links that don't work--the real underbelly of the spam business," said Michael Herrick, president of Matterform Media, a Santa Fe, N.M.-based developer of Spamfire anti-spam software.

But insurers and agents are afraid that if federal legislation isn't passed in the near future, states may have the upper hand. "If the federal government can't pass quality legislation, states are going to start responding quickly and individually to the problem. If these laws differ from federal law, we will have problems," said Nat Perlmutter, a general agent with N.Y-based Forest Hills Financial Group, an agency, of The Guardian Life Insurance Co. "Conversely, if state laws are more stringent, it will leave the question: 'What supersedes--federal law or state law, which will result in costly and unnecessary litigation."

In addition, insurers believe federal legislation needs to clearly define what constitutes commercial solicitation. "We need to be able to continue to service existing customers. Customers will be worse off if they can't receive information on new products conducive to their lifestyle or new features to existing products because the message is classified as a commercial solicitation," said Kirk Herath, chief privacy officer for Nationwide Insurance in Columbus, Ohio. A broad definition means mailing materials or making phone calls will end up costing more money than sending relatively inexpensive e-mail messages, he said. "And in the long run, insureds will bear more costs because their premiums are inclusive of servicing costs."

Missing the Target

Many observers anticipate federal legislative remedies will be ineffective in blocking out the large number of spam e-mails coming across international borders.

"Federal legislation won't help with global problems; only those within U.S. borders," said Elron's Bosnian. There are numerous ways to defeat spam coming from outside the United States, but at the end of the day, there are a number of tricks to get around it, be added.

"Policymakers have a fine line to travel between killing the golden goose and allowing the golden goose to morph into something hideous," said Nationwide's Herath.

In addition, many believe that legislation's major impact will only be to set a clear line between acceptable e-mail marketing and unacceptable messages. "People are objecting to unsolicited e-mails, such as pornographic materials, and while there is some spam now involving solicitation around offering better insurance and mortgage rates, insurers generally aren't in the business of marketing that way," said Bosnian. In addition, insurers--many of whom rely on technologies such as anti-spam filters and software to ward off spam coming into their companies--understand how the process works and feed that information back to their own marketing departments, he added. "So, at the end of the day we aren't really seeing anything that would impact e-mail marketers' ability to market legitimate mail offers in general."

Avoiding the Spammer Mark

Insurers recommend several measures companies should follow to ensure their e-mails aren't mistaken for spam.

Nationwide's corporate policy, which includes an opt-in/opt-out commercial e-mail policy; strictly prohibits spamming. All company commercial e-mails must contain an "ADV:" in its subject line to signal an advertising-related message, followed by a brief description of the e-mail's content, said Herath. "Customers have the ability to look at a message quickly and make up their mind if they want to open it or not." Every e-mail also contains an address or phone number of someone to contact at Nationwide, as well as the ability for recipients to opt out from the company's mailing list.

Insurers also suggest that companies limit the e-mail addresses posted to their Web sites, because spammers often peruse sites as a way to generate future spam targets.

It's also important for marketers to focus on audiences with whom they have pre-existing business relationships, to use e-mail for opportunities to communicate with clients said Quris Sippey.

In addition, insurers should treat e-mail as an honest extension of their existing marketing practices, said Herrick of Matterform. "If a company uses the 'get rich quick' approach, then they will get what they deserve and messages will get flamed. But if they treat customers as valued individuals and respect and approach them from the position of establishing and maintaining an ongoing mutually beneficial relationship, then customers are much more likely to accept, read and value the e-mails they receive."