How Pixel Tracking Influences Claims and Underwriting in the Digital Marketing Age

Pixel tracking stands at the forefront of digital marketing innovation and is a key tool for understanding user behavior and optimizing marketing strategies. Yet, this powerful technology demands responsible use, especially considering the liability and insurance implications it brings.

Understanding how pixel tracking influences insurance claims and continued underwriting of risks is crucial for businesses, claims professionals and insurers aiming to mitigate these risks.

A Double-Edged Sword

To dive deeper into this technology, pixel tracking works by allowing third-party content aggregators to install cookies on user machines (usually with their consent), which then pulls selected information from web pages visited by these users that contain the pixel.

This information is then relayed from the user cookie back to the data aggregator, which is then used to compile metrics around website traffic and interactions with the website. Common applications of pixel tracking include email marketing, website analytics, ad retargeting, conversion tracking and audience measurement, empowering marketers to refine their strategies and personalize content.

Despite its utility, pixel tracking presents significant privacy and security risks. Insurance claims stemming from pixel tracking activities are on the rise, notably from alleged privacy law violations like the Video Privacy Protection Act (VPPA) and the California Invasion of Privacy Act (CIPA). These laws entail statutory damages per violation ranging from $2,500 to $5,000, highlighting the potential financial impact on businesses utilizing pixel tracking technologies.

The Evolution of Pixel Tracking

Currently, we’re witnessing the emergence of a second wave of lawsuits related to pixel tracking marketing activities. Initially, pixel tracking predominantly operated on traditional computing devices like laptops, PCs or Macs. However, a notable shift is occurring as similar technologies are being integrated into mobile platforms.

Key players such as Google Analytics, Adobe and Blaze are spearheading this transition; additionally, plaintiffs’ firms are employing technologists to identify mobile technologies that use pixel tracking functionalities so that they can identify new targets for lawsuits. This shift accentuates the expanding scope of pixel tracking’s influence and emphasizes the need for insurers to adapt their risk assessment strategies accordingly.

Businesses aiming to safeguard against liabilities from pixel tracking should prioritize obtaining cyber insurance. While some media policies provide coverage for these risks, they often include exclusions that limit their effectiveness.

Businesses must carefully examine these exclusions, particularly those related to improper data collection, to secure adequate coverage. Faced with mounting losses from VPPA and CIPA related litigations involving marketing technologies, many insurers have started excluding pixel tracking liabilities; however, through negotiations, businesses can achieve endorsements that reinstate coverage depending on the controls they employ. This collaborative approach between insurers and businesses facilitates a tailored response to the unique risks of pixel tracking, thereby, enhancing overall protection and mitigating potential liabilities.

Navigating the Legal Landscape

Regulatory requirements and guidelines for pixel tracking and data privacy are outlined in various laws, with the anticipation of more to come. In the U.S., the absence of centralized federal oversight leads to a fragmented landscape of regulations, guided by government entities such as the Office for Civil Rights (OCR), the VPPA and CIPA to name a few. For example, recent OCR guidance highlights the importance of securing consent for pixel tracking activities where the data aggregator is not a business associate under HIPPA regulations (which is almost never the case).

Navigating consent requirements can prove challenging, yet implementing best practices for obtaining consent is crucial for businesses aiming to align with legal requirements that mitigate liabilities effectively.

One effective method is using pop-up notices tailored to the specific pixel tracking technology employed. A prime example of this practice is seen in businesses operating within EU General Data Protection Regulation (GDPR) jurisdictions, as the GDPR mandates clear and explicit language.

Businesses should also be mindful that what constitutes valid consent under one law may not be applicable to another. For example, consent under the VPPA is only valid for two years, requiring periodic renewal. This requirement generally coincides with Terms or Use renewals observed in platforms like Netflix or Amazon, where consent periods expire and must be refreshed.

The Role of Insurance Carriers

It’s quite plausible that insurance carriers employ pixel tracking technology to gather valuable insights into consumer behavior. Such data can inform insurers about visitor demographics, areas of interest and potential issues in their applications, aiding in better customer service and targeted marketing. No matter the industry segment, the key to effective risk mitigation for market technology lies in how effectively compliance is vetted.

While insurers are not commonly the focus of VPPA claims, they could just as easily face scrutiny under CIPA if consent protocols are not followed. By drawing on lessons learned from past VPPA litigation of the early 2010s and the more recent spate of marketing technology litigation, insurers can leverage their industry knowledge to proactively address risks and set industry standards for data privacy. This proactive approach aligns with their role as leaders in risk management, leveraging their vast reservoir of insights to prevent the recurrence of previous errors and maintain data privacy compliance.

Proactive Risk Mitigation Strategies

To stay ahead of emerging risks associated with pixel tracking, businesses need to leverage both internal and external resources. Internally, understanding the marketing strategies and technologies employed by the company is essential, as is fostering collaboration between marketing, legal and IT departments to ensure compliance.

Externally, maintaining relationships with law firms and technology vendors can provide valuable insights into legal trends and new developments in the digital marketing space. Additionally, staying engaged with insurers can offer firsthand intelligence on risk management strategies, enabling insureds to proactively address emerging threats.

Conclusion

Mitigating the risks associated with pixel tracking requires a multifaceted approach. Firstly, establishing robust processes between marketing, legal and IT departments to vet compliance is crucial. Secondly, obtaining consent upfront, perhaps through a pop-up mechanism, is recommended to ensure compliance with legal obligations.

And lastly, reviewing arbitration agreements is essential, as they can be weaponized against companies facing large numbers of claims. Implementing informal dispute resolution processes prior to arbitration along with class action waivers can help mitigate the financial risks associated with marketing technology claims.

Ultimately, understanding the risks and making informed business decisions are key to protecting against potential liabilities related to pixel tracking.

Trotta is vice president, claims practice leader, cyber and professional liability, financial lines at QBE North America. Trotta has 20 years of experience handling and advising on claims involving management and professional liability insurance coverage. Trotta holds a JD from New York Law School and is a certified information privacy professional.