THE CULTURE OF THE AMP

Shareholders in the AMP have collectively lost billions of dollars in recent years. They must be wondering how an organisation which is marketing its wealth creation skills to outside clients can get its own affairs so wrong.

Perhaps the answer lies in the culture of this organisation. After 150 years the AMP thought that it was large and powerful and could do no wrong.

The staff at all levels seemed to be inculcated with the dangerous philosophy: "We are the AMP, we are always right."

An interesting case study affecting the AMP is set out in Learn more about Shares. Because of the way the recent demutualisation was implemented there is now a substantial overlap between AMP customers and AMP shareholders. Most of the policyholders of the life company at the time received shares in the new listed vehicle.

Conceptually, this overlap should be a tremendous hidden asset for the group - it is always much cheaper to sell something to an existing satisfied and loyal connection than to attract a brand new customer from scratch.

Yet the recent experience of one shareholder, a woman who had been a life insurance customer for nearly 40 years, left a lot to be desired. It presents a classic illustration of a public service mentality unworthy of a private sector organisation and of a culture badly in need of reform - perhaps a micro-symptom giving a clue to the group's more widely publicised macro-problems.

This customer received a renewal notice for the premium on a small policy, for an amount which was clearly excessive. Well, she reasoned, mistakes will happen in large organisations. She naturally thought that the matter would readily be fixed without fuss as soon as brought to notice.

So being modern in outlook she used the AMP's own web site to send a brief message to the company, giving her policy details and asking politely: "Please explain why your latest renewal notice is for $200.00."

After several reminders this produced the simplistic reply: "The premium due on this policy is $200. This has been the premium you have been paying for several years and was due on 9/1/2000."

The clear implication was that the customer must be an idiot for asking such a stupid question. The AMP officer concerned had quite obviously not bothered to look into the matter at all.

The customer, none too pleased at this superficial treatment of a serious inquiry, wrote back angrily: "This is not correct. The policy requires a final premium of $147.78. Your inefficiency in this matter even when an error is brought to your attention is deplorable."

Things then started to look up. The brief reply from the AMP said: "I have arranged for a corrected premium notice to be sent to you. Please accept my apologies for the inconvenience this matter has caused you."

However, the customer was forced to write again: "Your amended notice shows a premium of $150.00. Please advise:

1. by what authority you are altering the contract unilaterally

2. why you have done this despite being told the correct premium.

"In the circumstances please also provide a report from your management explaining why your records are in such a deplorable state. This is most disconcerting to shareholders."

Instead of answering these pertinent questions the reply in effect said that 75% of the yearly premium was $150 for the nine months concerned. "This is why a premium notice requesting $150 has been sent. In addition, could you please inform where you got the figure of $147.78?"

The customer patiently explained this once again: "Your impertinence in continuing to contradict a customer and shareholder is not appreciated. The initial premium was £26-2-2. The policy document shows a final payment of £73-17-10. The difference is not great, but as a matter of principle I am not prepared to tolerate this sort of behaviour from a financial institution. How many other of your policy records are in such a mess?"

She then turned to the economics for AMP shareholders as a whole and went on to say: "Apart from not following the old principle of `the customer is always right' you are wasting resources and prejudicing goodwill by prolonging this correspondence. Please refer this file to your top management."

The AMP responded in a message threateningly headed "without prejudice or admission of liaility" (sic): "I hope the following information will clarify your concerns. The $150 premium fell due on your policy on 9/1/2000. We have not received this premium. We charge interest on any unpaid premiums at a current rate of 9% p.a. As a result, the premium required to renew your policy until maturity is $151.58 as at 10/2/2000.

"However, I understand there has been some confusion as to what the premium required is. I can understand how you may have come to the assumption that we only require a premium of $147.78 considering the policy commenced prior to the change to decimal currency. Taking this into consideration, I have agreed to waive the difference of $2.22 and any interest charges accumulated thus far, provided you make this payment before 10/3/2000. I am not able to issue a premium notice for $147.78."

The customer was not impressed with this waffle and was not prepared to let the matter rest:

"Thank you for your reply and your apology. However, your arrogance is appalling. The only confusion is at your end - due to ignorance of the law of contract and an inaccurate database.

"Please explain:

1. How you can `waive' something to which you were not entitled in the first place?

2. What on earth has the conversion to decimal currency to do with this matter?

3. Why is your system so defective that it cannot even generate a renewal notice in accordance with the terms of a policy?

"In the light of your earlier attempt to cheat a customer and shareholder by overcharging and your inability to speedily resolve this matter which was first raised on 29 December 1999 I must insist on an UNQUALIFIED confirmation that the payment of $147.78 will now renew the policy to maturity.

"I also suggest, if you are going to head your correspondence with offensive phrases, that you should at least learn how to spell them accurately. Please also advise the e-mail address of your managing director."

The brief AMP response was: "I have now referred this matter to our Customer Relations department." This rather suggested that none of the other AMP departments was interested in customer relations.

In any case, one month later the Customer Relations department sent a two-page letter which pointedly ignored all the six aspects raised above and the other unanswered questions set out in the earlier correspondence.

Instead, the department reasserted that the AMP was right and by implication that the customer either was a fool who could not understand the unambiguous words in the AMP's own policy document or was a deliberate liar when quoting them.

The AMP's philosophy seemed to be the Dr Goebbels line that if an untruth were repeated by the company often enough then it would become accepted as the truth.

The letter went on to withdraw the previous "waiver" of the small premium difference, but did suggest that the dispute could be taken to what it delightfully called the "Finance Insurance Complaints Service (FICS)". The body the company had in mind is actually the Financial Industry Complaints Service.

Fair enough, but what a waste of resources! The AMP apparently would rather spend a few hundred dollars getting a claim arbitrated than admit to a $2 error on its part.

However, surely a much bigger principle is at stake here: If the company is not prepared to honour its own contracts in regard to trivial amounts, then what hope is there when real money is at stake?

There is something seriously wrong with the culture of an organisation which treats its most valuable assets - its loyal customers - in such a cavalier fashion. AMP shareholders might want to raise this aspect at future general meetings.