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Crisis Management Royal Commission Watch - Part 6
Why - in reputation management - timing is everything, and how to use the dénouement to your advantage
This week in numbers:
- $1,000: the additional monthly premium a non-smoker was paying to AMP, due to the default higher smoker rate
- 300,000: the minimum number of times Clearview estimates it breached the anti-hawking provision in just over two years
- $6 billion: the commissions the life industry has paid in to financial advisers over the past 5 years
Yesterday was not just the end of Round 6, but also the end of all hearings on specific industries. There is only one more round that we know of, in November, on policy questions.
And although it was a gruelling week, you can almost hear the industry breathe a sigh of relief to see the light at the end of the tunnel.
We talked last week about the shock and fear that people felt hearing these stories. This week’s were even closer to home, with families losing their houses and possessions to natural disasters, left unable to return home, caught in a purgatory of patch jobs and temporary accommodation.
And while we watched Bernadette Heald cry on the stand with anxiety over her daughter’s fear or Sascha Murphy worry about her children’s lead levels, nobody put it better than Glenn Sutton when he said “you take out insurance hoping that it never happens, but if it does you want them to have your back. You want to know they're going to look after you and it just didn't happen."
To be homeless. To lose all your things. To have your life put on hold for years in a limbo of admin. To have your family endangered and standby helpless and impotent.
These are the most primal worries – and they are the ‘grudge’ drivers behind our purchase of insurance in the first place.
“Whatever happens out of this whole inquiry, the whole thing needs to be much more transparent, there needs to be some accountability so that people don’t have to go through this. It’s just not right.” – Glenn Sutton
For all this, the ‘outrage fatigue’ was heightened this week too. There’s only so much intensity of tragedy an audience can digest before it begins to turn away.
There have been several climaxes over the course of the Commission: images and stories that will stay in our heads long after it’s over. Images that will hopefully serve as lighthouses, warning the industry away from such another wreck.
Check your watch
In tragedy, as in comedy, timing is everything. And we have been through the ‘catastrophe’ now – the sudden overturning. There is a palpable sense of coming to the end, apparent in the many endings going on throughout the industry.
In a narrative sense catharsis, or an ending, must occur to allow for new beginnings. Tragedy works because it evokes in its audience a sense of participation – it allows them to undergo the same catharsis through a feeling of sharing the loss.
"How do you deduct a premium for life insurance on a life that's...dead?" – Kenneth Hayne
Spring cleaning
From a governance sense there's greater bias for action on the part of leaders and boards. Some are taking this time to clean house. We saw Andrew Hagger, NAB’s Head of consumer and wealth, resign after his rough time at the Commission – and with an apology and acknowledgment on his lips. The AFR called it ‘making way’ for the incoming Mike Baird.
"I take accountability for what has occurred on my watch" – Andrew Hagger
Catholic Super ‘terminated’ executive Robert Clancy’s role, noting that "a broader investigation into how and why the behaviour was able to occur continues’" CBA was the last of its kind, taking the majors’ SMSF lending businesses from ‘endangered’ to ‘extinct’. Morgan Staney warned that “the Australian bank 'supercycle' is over".
A coiled spring
We have seen a definite shift in behaviour, particularly from a public relations and reputational perspective. Not only are some people getting the chop, but many are making apologies, acknowledging the need for the Commission, taking stock of the problems, and beginning to make their first changes.
Despite the bank’s serious injuries, NAB chairman Ken Henry reiterated that he had no regrets about being one of the eight signatures calling for the Commission, while Suncorp’s chairman said the Commission, “while not always comfortable”, was “welcome”.
“I have no regrets if the industry has been embarrassed.
The industry should accept that there are good reasons for its embarrassment and it should respond accordingly.” – Ken Henry
NAB continues to campaign its brand new attitude. As we mentioned last week, the bank kept its mortgage rates steady, rather than falling into line with the other three, saying it was wrapping its arms around customers. CEO Andrew Thorburn apologised fervently on Twitter. And this week it announced, in one more step towards regaining consumer trust, that it had changed its executive bonus structure. Not only meaning lower bonuses (by about 15%), but also introducing measures for customer compensation levels, regulatory breaches and compliance – which, if not meet, could nix the bonus all together. Accountability, in the new world, is a case of show not tell.
In many ways, the industry has begun to raise its dejected head, to look forwards at how to fix its problems. In a sense, the many class actions that have been undertaken are a part of this tailwind of restitution. But on more positive notes, CBA CEO Matt Comyn sent his customers a letter asking for their complaints – apologising for mistakes made, and telling them “hearing from you matters”. Monash University did a study to ascertain whether a Key Fact Sheet would help consumers make more rational insurance buying choices. And many others are seeking solutions – not least as to how to refresh their appeal, in particular to millennial consumers, and by launching new products.
Overall, we know the banks are ramping up on image-related spending. The industry, unsurprisingly, is spending more on consultancy and more on advertising (by almost 30% so far this year).
It is nearly time for the clocks to go forwards on financial services.
It’s the oldest story in the book – death and rebirth. Making way for new order. Banks' and other financial institutions' narrative and PR are signalling that they can read the time. So too are their boards.
It may well be that the communication approach and executive changes are just the beginning of a new, and better era.
Read last week’s hearings summary, “Why showing your humanity is good business (and just plain kind)”, here.
