California crackdown on brand advertising hurts state’s newcomers
California is an ethnically and culturally diverse state, and it is becoming more so with each day. That diversity brings with it economic strength, but also a need for public policy that consciously accounts for the different ways in which people engage in the public sphere.
For whatever reason, the California Department of Insurance stands against that principle. That’s manifested itself recently in the department standing in opposition to those advertising practices that are most likely to appeal to the broadest swath of California’s consumers.
In a recent press release, Commissioner Dave Jones commended a judicial decision that harms insurers’ ability to appeal to these new Californians, proclaiming that “consumers should not have to pay for brand advertising that only benefits the insurance company and provides no meaningful information to consumers.” So-called “brand advertising” includes marketing campaigns designed to promote awareness of a particular brand, so that consumers are made aware of the various options they have within the market.
Were all Californians fluent in English and equally able to access the insurance market, perhaps the commissioner would have a point. But California has the highest number of English-language learners in the nation. Brand advertising is exactly the type of consumer education most likely to allow them access to the financial tools and protections that so many of us take for granted.
The policy debate comes in the context of California’s Proposition 103, a painfully obsolete initiative passed in 1988 that consciously restricts innovation. Under Prop 103, the California insurance commissioner must approve insurance products before they may be sold. The process involves a ratemaking formula that gives the department incredible say over the types of products consumers are able to purchase.
To comply with that ratemaking formula, insurers are compelled to submit their expenses to the department for review. By rule, some expenses may not be included because the department has deemed them of little worth to consumers. This means that such activities are not accounted for when a company seeks to introduce a new product, which makes it particularly costly for insurers to undertake such activities.
Recently, the department decided some types of advertising, including brand advertising, fall into that category. Because this type of advertising often uses media that aren’t conducive to lengthy and detailed explanations of product offerings, it struggles to qualify for consideration in California’s ratemaking formula. The department reasons that such advertising does not educate consumers about specific product features and is therefore of less inherent worth than other advertising.
But the importance of brand advertising is growing, along with the diversity of California’s population. That’s because transcultural marketing, which is heavily reliant on brand advertising, is designed to appeal to new and diverse communities. In fact, brand advertising does serve an educational function, by letting such consumers know about the presence of established, reputable and regulated market participants, without regard to an individual’s stage of cultural assimilation or English-language proficiency. In its opposition to brand advertising, the department is working at cross-purposes with its own commitment to fostering diverse participation, both within the industry and among consumers.
The bold assertion that brand advertising only benefits insurers is simply not true. Discouraging its use benefits no one, least of all those who, on a daily basis, overcome a brute language barrier and a legion of other cultural impediments. When it comes to inclusivity, California aspires to be better than that, and so should its Department of Insurance.
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