Critics say TikTok videos are misleading viewers about life insurance – Insurance News

A recent routine service call led to a discussion about indexed universal life insurance between well-known industry analyst Sheryl Moore and the visiting technician.

The man asked Moore – the founder of Moore Market Intelligence and Wink, Inc. – if she had ever heard of “indexed permanent life insurance.” He had listened to product presentations on TikTok.

The more the man talked, the more annoyed Moore became.

He described the plans for his life insurance investment: “get rich,” take out interest-free loans, and ultimately secure his retirement income.

“I had to explain to him that what he was seeing about indexed life on social media was not reality,” Moore said in a recent LinkedIn post.

As a hard-working, single father to a young daughter, the man had found himself caught in a no man’s land where largely unregulated financial information flows from a mix of dynamic personalities.

“He was a good boy trying to do the right thing for himself and his daughter, and he was misled by Tik Tok videos about the index life,” Moore said.

The proliferation of so-called “financial experts” using half-truths and elaborate scripts to sell IUL on TikTok and YouTube is worrying many in the industry. Ultimately, the bad apples reflect poorly on everyone who works hard and honestly to use life insurance to help families.

Influence of social media

Studies show that young people have deeper financial insecurities than older generations. Data from the 2024 Insurance Barometer study shows that compared to older generations, young adults report higher levels of financial concerns about paying for medical expenses, living on disability, and paying monthly bills.

These younger generations are used to getting news and information through social media.

Among those who use social media for financial information, the three most popular social media sites for young adults, according to LIMRA data, are: Facebook: (67% Millennials and 54% Gen Z) YouTube: (68% Millennials and 62% Gen Z ) And. Instagram: (54% Millennials and 57% Gen Z).

While many advisors use social channels to promote their financial literacy, they are not the only ones. For example, popular TikTok and YouTube videos claim that IUL holders can borrow money without interest charges. These videos often omit important facts such as the surrender charge.

Sara Grillo is a financial advisor and marketing consultant focused on transparency and ethical behavior. She is an outspoken critic of some social media outlets that market life insurance.

While most investors are too smart and conservative to fall for a TikTok life insurance strategy, there is certainly a vulnerable audience.

“There are certain people who may not be the most patient and reward-seeking and are more susceptible to being taken advantage of in this way,” Grillo said. “The kind of people who are maybe a little risk-taking and risk-taking. They’re the ones who need that gratification, they’re looking for that immediate gratification.”

Recognize the script

Most questionable social media content follows a similar script, Grillo said. She divided the typical video into four parts:

Loss of knowledge. The narrator begins with a specific statement of deep knowledge, such as “401(k)s are created by 26 US Code 401 Section 401(k) of the Internal Revenue Code of 1986.” And the stage is quickly set.

“A lot of times they seem a lot smarter than they actually are, but that’s how they kind of gain the trust of the audience,” Grillo said.

Scaremongers. “They’ll say, ‘Well, there was this one woman who was a nurse or something, and she put her hard-earned money into a 401(k) for 22 years, and then she lost it all when that market collapsed,’” Grillo said.

This statement undoubtedly reflects reality, she added, but is the result of inattention, taking too many risks or unfortunate timing of the market.

“It has nothing to do with just the 401(k) or the fact that they are market instruments and not insurance. People also make this mistake with insurance. They also lose large sums of money on these instruments,” Grillo explained. “In the scary part of the script, they always present an incomplete fact.”

Rich claim. Next, the script calls for a misleading or completely inaccurate claim. A popular saying goes, “You can’t lose money with an IUL.”

“You can lose money on an IUL,” Grillo noted. “Your cash value may decrease if there is a year with no market return and you deduct the cost of insurance from the cash value, nothing will be credited to your cash value. At the same time, money will be deducted from the cash value of the policy. When you make withdrawals, the actual cash value within the IUL policy does not increase.”

Alternative option. Finally the trap is ready to open. The narrator will propose a scenario around an IUL or variable universal life policy.

“They will propose the solution without mentioning that these products have similar disadvantages,” Grillo said. “So they propose the solution and say something like, ‘Well, not many people know about this.'”

“Obvious misinformation”

Stephen Kates is a certified financial planner with extensive experience in the industry. There needs to be better regulation of social media platforms, he said.

“These videos are, at best, sales materials that should be subject to oversight by employers and regulators,” Kates said. “At worst, this is blatant misinformation and inflation designed to lure consumers who don’t know any better. Better oversight is necessary to eliminate bad information and lack of disclosure.”

Media claims regulation generally falls under the Unfair Trade Practices Act, which covers “deceptive or misleading advertising.” Since its introduction by the National Association of Insurance Commissioners in the 1940s, the law has been updated several times.

Likewise, the NAIC later adopted the Model Regulations for Advertising of Life Insurance and Annuities. It “establishes minimum standards and guidelines to ensure that all relevant information in the advertising of life insurance policies and annuity contracts is truthfully and fully disclosed to the public.”

The Federal Trade Commission also enforces truth-in-advertising laws to protect consumers from misleading or deceptive advertising.

Recently, state insurance regulators have launched measures to combat fraudulent marketing of health insurance products. The Improper Health Insurance Marketing Working Group has developed changes to the Unfair Trade Practices Model to give regulators more authority over misleading Medicare lead generation ads.

We’re taking on the scammers

Grillo prefers that agents and consultants deal with fraudulent social media advertising scams. She proposes a four-part strategy:

1. Confront the content provider. Because some life insurance and annuity products can be complicated, Grillo recommends proceeding in good faith. Assume that the content provider has made a genuine mistake and offer factual information to correct it.
2. Create rebuttal content. Alternative content can supplement the missing information and provide contrast to the claims being made, Grillo explained.
3. Contact the social media platform. Content hosts are likely to remove truly outrageous and misleading information about life insurance.
4. Contact regulatory authorities. The Securities and Exchange Commission has had some success in fining advisory firms for misleading and inaccurate social media posts. But regulation is evolving, Grillo said, and regulators need to know what’s happening.

“If every agent who saw one of these fake videos came forward and directly refuted claims like these, it would increase trust in the good agents and decrease trust in the scammers,” Grillo said. “Either people don’t know how to do it, they don’t want to do it, or they don’t want to be the one to do it. But our silence will make this possible.”

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