Old Mutual will not underestimate the power of social media again after facing a public backlash for allegedly defying a court order to pay out a retirement benefit.
A public outcry erupted after a post on X (formerly Twitter) by Sebabatso Molefi. In her message, posted on 5 March, she expressed frustration with Old Mutual for allegedly not paying her mother’s pension despite a court order.
Her tweet, which garnered more than a million views and just under 3 000 reposts, prompted other Old Mutual policyholders to share similar struggles with accessing benefits and receiving less-than-expected policy payouts. Some threatened to cancel their policies.
Old Mutual initially refrained from disclosing details to the media about the complaint, citing concerns about safeguarding customer privacy. But after taking a beating in the proverbial popularity polls, Old Mutual “set the record straight” during a virtual press conference on Thursday last week.
What went wrong?
According to Celiwe Ross, Old Mutual’s director of strategy, sustainability, people, and public affairs, the issue involves a complex scenario where a divorce decree regarding pension assets was received after the retirement benefit of Mr Molefi, the customer and policyholder, had been paid out.
Kerrin Land, Old Mutual’s managing director of personal finance and wealth management, explained that, typically, with a divorce, the parties will reach a settlement agreement dealing with how the assets will be split. “Then that is made a court order, and that is the court order to which the daughter keeps referring [in her posts],” Land said.
Ross said Old Mutual, the fund administrator, was not informed of the policyholder’s divorce at the time his retirement pay-out was processed.
Per the Pension Funds Act (PFA) and the Income Tax Act (ITA), a portion of his benefit was paid as a cash lump sum, and the remainder was put into an annuity.
According to these Acts, before retirement, a divorce order can entitle a non-member spouse to receive a portion of the retirement assets as a lump sum, and these would be taxable if they were withdrawn in cash.
This is what Mrs Molefi, as the ex-wife, would have been entitled to before Mr Molefi’s retirement, Land said.
“However, post-retirement, which is the situation we find ourselves in, the allowed format is a portion of the member’s annuity income,” she said. In other words, Mrs Molefi cannot receive a lump-sum payment.
Normally, divorce decrees are relatively straightforward, Land said.
“If we receive a divorce decree pre a member’s retirement, we can deal with it quite swiftly. Similarly, if we receive a divorce decree post-retirement which deals with annuity income, we can deal with it quite swiftly. This particular matter is complicated by the timing because the formal decree is a pre-retirement one, but the member is post-retirement,” she said.
Nazrien Kader, Old Mutual’s head of tax, said the other complicating issue is that the courts send divorce decrees to the divorcing parties; they do not go directly to fund administrators.
“For that reason, we are compelled to wait until the member lodges the divorce decree with us for us to even know that it exists. So, as you can imagine, that causes delays,” Kader said.
National Treasury is looking into doing something about this, she said.
Coming to the party
Ross said that, in facilitating the payout, Old Mutual needs to ensure that the administrator complies with the PFA and the ITA. Old Mutual has investigated ways to solve the problem. However, she said, the process requires the co-operation of both Old Mutual’s customer and his former wife.
“We are now post-retirement. A portion has been taken in cash, etc, and we need to be able to unwind that and pay both parties accordingly,” she said.
To resolve the issue, Old Mutual representatives met with the daughter and her mother’s legal representative on 12 March. Old Mutual described the meeting as “productive” and the interaction as “cordial”.
During the meeting, two potential solutions that could lead to Mrs Molefi receiving her share per the divorce decree were outlined, Ross said.
“On the same day, we detailed in writing what those options are. Yesterday [13 March], we followed up with detail of what the standard expected tax impact of each option would be,” she said.
Land said Old Mutual was working to resolve the matter as quickly as possible.
“It’s also important to clarify that we need to resolve this matter between our client and his ex-wife to make sure that it gets paid,” she said.
Why so quiet
During the height of the social media uproar, Old Mutual refrained from disclosing specific details about the matter. The group’s handling of what has been dubbed “a public firestorm” has been widely criticised.
Although Old Mutual contends it has been transparent and accessible to the family and the media throughout the saga, Land said the group chose not to divulge specifics earlier to protect the privacy of the individuals involved.
There is information that is private under the Protection of Personal Information Act. “We have ensured we don’t breach that,” Land said.
In addition, there is information about customers that the normal person would expect a respectable company not to discuss in the public domain.
“Divorces are often traumatic experiences for families and certainly not something that they want publicly talked about. And we have stuck to that, but, unfortunately, we are now in a position where we just can no longer keep quiet about that, and we do need to lay it out,” Land said.
Ross said Old Mutual believes it handled the social media backlash as best it could.
“Our intention has always been to protect the information that we hold sacred about our customers and about the sensitivity of this case. However, we are now hosting this press conference, realising that a number of misconceptions can grow without us clarifying what the nature of the complexity is,” she said.
Extent of reputational damage
Old Mutual’s share price closed at R12.07 last Wednesday – 1.15% lower than on Tuesday. Last Friday, it closed at R11.82.
Ross said Old Mutual is deeply concerned by the comments that have been expressed by some of its customers about their claims experience.
“It is difficult to comment on every single case that has been mentioned on X because whilst every customer is sharing their experience, we would need to look at every case according to its merits and be able to respond accordingly,” she said.
According to Land, in a typical year, Old Mutual pays out more than R100 billion in investment payments, benefit payments, and risk claims to nearly a million people.
If even a small percentage of claims are not paid, such as 1% of a million claims, that will affect 10 000 people.
“Even a small percentage of the number that we deal with in a year is, unfortunately, quite a lot of people,” she said.
Old Mutual paid out 98% of long-term and short-term insurance claims in its 2022 financial year, according to the group’s annual report. (It will announce its 2023 financial results on 27 March.)
Possible reasons for non-payment of claims
According to Old Mutual’s statistics, nine out of ten funeral claims lodged with the group are paid in less than four hours, “oftentimes in less than two hours”, Ross said.
If a claim is valid with all the correct documents are in place, payouts can happen “really quickly”.
Incorrect documentation can result in a delay or non-payment.
“Normally, we will let the client know which documents we do need, and if they have a financial adviser and accredited or regional financial adviser, they’ll be able to facilitate that process for the customer, and [Old Mutual] will pay as soon as we have the right documentation,” Ross said.
Another issue that might cause delays is when a death occurs under unnatural circumstances, necessitating the involvement of the South African Police Service.
“We can’t control the timing of that investigation, but we work as quickly as possible to be cleared to pay so that the deceased can be buried with dignity.”
Suspicions of fraud can also hinder payouts. The insurance industry encounters cases of fraud, where individuals make false claims about a death that has not occurred or falsely assert to being a beneficiary.
“In those instances, we once again do need to investigate, and if we do find that fraud is involved, we do not pay,” Ross said.
Old Mutual is exploring ways enhance the service it provides.
“In line with this, we also recognise the importance of consumer education. We are prioritising efforts to educate our customers on the claims process and what they can do to facilitate a smoother experience,” Ross said.
Push-ups are at an advanced stage in order to follow up on declined claim that my partner suffered with Old Mutual. I’m not surprised that some people will go the social media route.
I had to wait months for Old Mutual to payout when I had a house robbery recently. SAPS had been and gone, the OM assessor had come out and yet it still took ages of emailing back and forth between ourselves and our brokers to get OM to payout. We have just signed up with a new insurance company and do not intend to go back to the Old Farts at Old Mutual!
Yes I do agree that oldmutual undermine their clients, especially the court orders are not taken seriously at old mutual, even me m 1 of the victims am still confused about oldmutual how do they operate ,my account suspended on 15 January and final court order to unsuspend received on 28 Feb but still they can’t do that ,and I made follow up but no positive response so I don’t know what to do about this