The use of social media to "pressure" insurers into paying out claims is costing companies millions and driving up premiums, according to the peak-body for the insurance industry.
The Insurance Council of Australia's Campbell Fuller said dissatisfied customers taking their gripes of rejected claims to Twitter and Facebook can cause a number of problems, including reputational harm for insurers.
"It can have an impact on the cost of acquiring a new customer, or moving a customer from one insurer to another," Mr Fuller said.
"And because those costs are embedded in the business, they can affect the premium that customers are paying. So it does have some impact.
"When a company is trying to sell a product to a customer, it falls down the Google rankings and therefore it's harder for a new customer to see that particular company."
Mr Fuller said customer pressure over a claim can sometimes lead to payouts where they are not due.
"Other factors involved are that we have customers complaining on social media or using social media to try and leverage an insurance company," he said.
"And insurance company may feel under pressure to pay a claim even if that claim is not fair. Even if that claim is actually not legitimate or only partially legitimate.
"Simply because when there are issues and disputes, the costs of not paying the claim can actually be higher than the cost of actually paying the claim."
Social media holding businesses accountable
But some social media experts are sceptical of the claims, saying insurance companies should be using social media to listen to their customers.
Facebook and Twitter are often the places people go when they want to vent their displeasure.
Mark Pesche, a digital culture expert at the University of Sydney, said online accountability had actually improved customer service across many businesses.
"Any company that is so afraid of social media, it means that they haven't been interacting with their customers and so they're feeling like they're being attacked by them," he said.
"That's probably a sign to those businesses that they need to interact with their customers more continuously and more regularly so that they can actually put those problems to bed.
"Social media is how customers voice their opinions all the time, and any company that isn't listening to it isn't doing their job and also isn't getting the important feedback."
But Dr Pesche said while social media had made businesses more accountable, it was something that should not always be trusted.
"You actually have to be super careful because sometimes people will post things that are false," he said.
"Like a competitor will plant something, and that will then be a way of undermining a competitor. So you have to regard these things a little suspiciously."
