Old Mutual faces reputational damage after X storm

Listed financial services group Old Mutual is in the midst of a social media storm, as outraged users call for consumers to move their policies to alternative providers after it declined to pay out a pension policy.

Last week, an X user named Sebabatso Molefi posted that a court order had been granted to enforce the payout of her mother’s pension and the firm had not complied. The post has been viewed 1.3-million times, with many social media users sharing similar stories of non-payment or lower-than-expected savings product payouts.

Old Mutual, which provides life insurance, disability insurance and savings products, however, says it pays 96% of all claims and an average payout of R29.2m each working day.

Calls for consumers to move their policies to other financial service providers are growing.

“It’s Monday, don’t forget to transfer your Old Mutual policies and don’t forget to talk about it at work, in the bus, in the cab, everywhere,” one X user named “Rakgadi rubber bands” said with the post garnering 77,000 views. 

Old Mutual cannot disclose the details of the case, but said it would meet the family this week and its compliance with the court order had to be consistent with its obligation to comply with the pension funds law and tax law. It suggested this is not a clear-cut situation. It said, however, that it was “committed to finding a solution”.

Investor and financial activist Koshiek Karan said the effect on Old Mutual’s bottom line would depend on how many users heeded the call to move over to new service providers.

“With over R1-trillion in funds under management a few cancelled policies won’t really move the dial, but the strength of collective, co-ordinated mass action certainly will.

“These aren’t high net worth clients and it’s really easy to be dismissive of their concerns as digital media noise, but that’s a massive mistake. In financial services, trust is absolutely everything. The breakdown in client relationships lasts long after a PR cleanup crew gets involved.”

Social media storms can negatively affect a company’s bottom line. The boycott at Dis-Chem over a letter by then CEO Ivan Saltzman about hiring only black people led to fewer chronic scripts, valid for six months, being redeemed in certain areas of the country. Both Clicks and Spur said in results that social media storms over racial incidents had affected sales. 

Many X users have said poor black people are too often victims of large financial services firms. 

What made matters worse was poor communication by Old Mutual on Friday.

A unattractive post on X by Old Mutual on the matter was written in legalese with Molefi’s name spelt incorrectly. Old Mutual suggested it would take court action against the client if needed. Nine-million people have viewed this post. 

Tech analyst Toby Shapshak called the post, in unattractive white PDF format, an “own goal”.

“X/Twitter is not a place to have this kind of meaningful conversation. People are outraged. And I’m quite sure this kind of communication, which includes misspelling the person’s name, does not fit with Old Mutual’s brand or communication policies,” Shapshak said.

“I would judge that this is a tweet by a frustrated junior employee that has done some damage to Old Mutual’s reputation and has now been seen by 9-million people who themselves are now probably outraged.”

Old Mutual said it would “like to apologise for the way we have managed the outcry on social media. Our reluctance to engage and debate on X stems from the complexities of the case and our desire and duty to protect the personal information of the individuals concerned.”

The outrage that been expressed in online media, radio and on social media suggests many have been disappointed in payouts. Users have retweeted the video of the 2019 incident when customers took a dead body to Old Mutual’s offices in KwaZulu-Natal as they had struggled to get a funeral policy payout. The group’s annual report, however, says it pays 88% of all funeral claims within four hours.

Sasfin analyst David Shapiro said he understood the anger of those on social media. 

“Insurance companies are quick to sell products such as short-term and life and investment products to the inexperienced or uneducated, but are slow to explain the small print. They are slow to make sure the buyers really understand what they’re buying.”

He said when claiming “you literally trip over the red tape. So, I can understand the anger expressed on social media.”

He said the fault lies with the insurance companies and the strict adherence to compliance. “There is no room for reasonableness any more. Everything is binary.”

Old Mutual said: “We remain committed to delivering on our obligations while ensuring that we operate within the regulations of the industry and the law.”

childk@businesslive.co.za