There was a question on a group on LinkedIn last week that got me thinking. It was someone looking for advice on how to use social media to market a new bank in the States that was opening soon.

For some reason, it set off alarm bells in the professional part of my brain. All I could think of was how many things can go wrong when launching a new product – let alone a new bank. To do so in the glaringly public light of facebook, Twitter and YouTube sends shivers down my spine. Twitter and blogging are perfect tools for complainants, and the words of a few disgruntled clients can then be picked up by the press, producing the perfect public relations storm.

While I’ve been going on about the benefits of social media, there are downsides, and you need to know what they are. We all know, the speed of any damaging information going round the web can be astonishing. Did you see the Will Ferrell video on Healthcare reform? Click on the link if you have not. It went viral very quickly, being blogged, Tweeted and re-tweeted. It is very clever and very funny…  and will have those lobbying against Healthcare reform on the backfoot. Just imagine if it was your product being lampooned.

I realise that financial services are very traditional when it comes to communication, but everyone needs to know how to use this new tool. All you have to do is remember that this is just another form of communication – albeit, a very quick and effective one. Whatever you do, you have still to remember the basics: everything has to be planned well; you have to be very clear about your message and identify your target audience; you have to comply with SEC/FSA rules. Lastly, but just as important – you need to have a plan in place in case things go wrong and the flak starts hitting the cyber fan.

What this tells us is that a social media campaign, just like a traditional PR or marketing offensive, needs to be well-planned and professionally executed. If someone could think up something as clever as Compare the Meerkat campaign and take it viral, there is no reason it could not work … in the right hands.

Today I’m getting ready for the first conference of the season- Les Rendez-Vous de Monte Carlo – the first in a succession of industry conferences where not only business is done, but contacts are met or made.

This year, for the first time, I’m meeting a series of people I’ve met through social media. They are not really random strangers, but people in the Market whose names I have known. I have come across through either LinkedIn or even, believe it or not, Twitter. How the world is changing – and getting even smaller.

One of the people I’ve come across on my forays into social media is Tom Hagy of HB Litigation Conferences in the US, a company that organises legal conferences and has a large reinsurance agenda. I found Tom on Twitter and liked what he was posting so I checked out his profile and company. It was my interest in their September 10th conference on Reinsurance Claims & Dispute Resolution that led me to get in touch – and at the same time he’d checked me out and got in touch via LinkedIn. I couldn’t get to this conference because I’ll be at the Rendez-Vous, but asked about other conferences… and now I’ve become a marketing partner for and my company rein4ce is a sponsor of the 2010 Insurance Insolvency & Reinsurance Roundtable in Scottsdale, Arizona.

This will be added to the list of conferences to end this year and start next: in October (25th) Baden-Baden, where reinsurance prices are decided. In the same month is FERMA (4th Oct), where risk mangers from around Europe gather. Then on to ARC Congress, RIMS, AIRMIC… the list is a long one and is added to with a list of interesting Middle East conferences as well as the Bermuda agenda.

Thanks to the new contacts I’ve made through social media, I’m feeling that my company is reaching a much more global audience than before – particularly in the US where the insurance and reinsurance world is ahead of us in its use of social networking. Lets see where this takes us all… and  enjoy the ride.

Don Kramer, founder and CEO of Ariel Re has this trick he uses sometimes when public speaking. He holds a slide in his hand and describes what is on it to the audience. The last one he did he held up the slide and said something along the lines of: “This is the most technologically advanced cat modelling tool we have come across. As you know we are in Bermuda we are at the forefront of this technology (pause). It is a computerised darts game (pause and laughter). What you do is you throw darts at the board to predict when and how hurricanes are going to hit. The reason it is the best tool is that the darts don’t have points on the end (pause) unlike the ratings agencies who can seriously injure people when throwing real darts.”

While it may take a certain type of re/insurance audience to appreciate these jokes (and yes, everyone laughed), his point is valid about forecasting for hurricanes. This is supposed to be an average hurricane year, with Colorado State University (CSU) having the prediction of 12 named storms, with six hurricanes are likely to make landfall.

But the flaws in cat modelling run much deeper. Hurricane Ike last year once again threw into stark relief how difficult it is to predict what a catastrophic event will actually do in reality. What had been seen as a relatively mild storm and initially seen as a fairly minor event, grew in size and cost as the claims grew and grew and the magnitude of the destruction became clear as time marched on.

The flaws in cat modelling are well documented. Just think of the terrorism attacks at the World Trade Center, London, Madrid and Mumbai, as well as Hurricane Katrina’s devastation to flood defences.

Modellers have learnt from these and the many other hurricanes that have provided additional information to modelling vendors as well as insurers.

Vendor models have increased resolution of their simulations to try and fill gaps in knowledge and the quality of information form insurers has improved in quality. But what needs to change is that modelling needs to be seen as an integrated tool – something to be used just to aid underwriting, but is and always will be fundamentally flawed. For instance, how long will it take for the lessons learned in Ike to filter down into the models – and how much business will have been underwritten using them by the time the updated models hit the streets?

So as we continue to look to the weather channels to see what might be forming over the Atlantic’s unusually warm seas (and by the way there are no tropical cyclones at this time), we may have to heed the venerable Mr Kramer’s advice and get ourselves a dart board to play with.