Is social media becoming a pivotal piece of the market conduct puzzle?
Momentum’s about-turn after its life insurance claim debacle shows that consumer opinion cannot be ignored.
By Julian Kesler and Nic Ray
The growing influence of consumer opinion and the trend towards outcomes-based market conduct regulation means organisations can no longer afford to turn a blind eye to social media.
On November 18 2018, someone with the handle @BATMAN_8_ tweeted: “They don’t deserve any business from us. Its [sic] so unfair for the family.” The next day, @MerchSouth tweeted: “So you won’t pay the 2.4m & that time you make 10 folds more. Your reasoning is not fair & unethical. This is going to cost you.”
These may only be two tweets, but they are part of the mass of 35,000 others, posted between November 14 and 22 2018 about Momentum’s life insurance claim debacle. The insurer made headlines when it faced downward spiralling public sentiment in response to its decision to reject a policyholder’s claim based on non-disclosure.
At the time, some executives may have considered the online chatter as innocuous grumblings from digital nobodies. Things have changed though. The Momentum debacle illustrated social media’s growing influence as a court of public opinion that determines — far more than any ombudsman — what is, and is not, fair. After mounting public outrage online, Momentum announced that it would reverse its initial decision and amend its policies, despite the ombudsman siding with the insurer.
The notion of fairness is at the heart of the Conduct of Financial Institutions Bill that is likely to be tabled in parliament in 2019. The bill, among other things, will give legislative effect to the principles-based market conduct approach known as, treating customers fairly (TCF), and promotes the fair treatment of customers by financial institutions. TCF requires that organisations consider, not just the letter of the law and contractual agreements, but place emphasis on the spirit of an agreement with a consumer.
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Fairness-focused, outcomes-based regulatory approaches have taken centre stage in market conduct around the world. The Financial Times reported in April that Australia’s big four banks will spend more than A$24bn ($16.62bn) on natural language processing technology to detect misconduct and improve regulation. US-based Citigroup’s chief risk officer, Brad Hu, said that “regulators very much want to know that customers are treated fairly and that we have the right oversight and controls”.
SA consumers are no strangers to the power of social media in raising complaints, particularly when they feel they have been slighted. The consumer response to Vodacom’s seemingly lawful, but “unfair” plan to charge a fee for data rollovers in response to the Independent Communications Authority of SA’s (Icasa’s) new regulations is a good example. Icasa councillor Botlenyana Mokhele described the telco’s initial plan to charge for data rollover as unexpected, noting that the regulation aimed at bringing down the cost of data to favour consumers.
When Vodacom changed its tune on these charges in February 2019, Business Day’s editorial highlighted that “the most interesting thing about the Vodacom saga is what it says about a new risk that companies have to navigate, and how so many have been found wanting”. The editorial concluded that “Vodacom’s announcement that it would review the roll over fees stemmed from consumer ire on Twitter and not due to regulatory pressure”.
TCF will encourage financial services organisations to adopt pro-active approaches and better manage customer outcomes. The Momentum and Vodacom cases are timely reminders to business that, when assessing claims, fees and policies, simply following the letter-of-the-law, without due regard to treating their customers fairly, will not suffice.
Momentum’s policy change was a groundbreaking case in SA’s financial services that together with proposed new legislation, will trigger the spread of outcomes-based policy shifts with long term benefits to consumers.
In the face of emboldened consumer activism online, and stronger legislated consumer protection, businesses are waking up to the importance that monitoring customer feedback, in near real time, can play in mitigating risk and nipping crises in the bud before they reach the complaints authorities.
The rapid and unpredictable spread of consumer dissatisfaction, particularly on social media, means it can no longer be viewed as simply a space for marketing, but as a barometer for market conduct and reputation. Organisations that capitalise on this stand to benefit from consumer loyalty and trust, those that do not, place their reputation and bottom line at risk.
This article was originally published in Business Day.
Nic Ray - BrandsEye SA CEO
Julian Kesler - BrandsEye Head of Content