The relevance of a positive corporate reputation on all levels can never be underestimated. German insurance group Ergo showed in 2011 how a single news event can destroy a good reputation. The negative headlines date from May 2011 and their negative impact hasn't disappeared from the net. The company has paid millions to fixers to drown the articles, memes, comments, and videos.
The Ergo insurance group used to be called Hamburg-Mannheimer. In a bid to distance the company's image from the conservative, respectable, and stuffy past associated with the name, the group's management renamed and re-branded it under the new name Ergo. The image carried by the Hamburg-Mannheimer may best be summed up with its television advertising. The same kind of ad had been used for so many years whole generations of Germans grew up with it. The slogan was 'hopefully [you are insured with] Hamburg-Mannheimer' and German speakers have used it to say 'good luck in your venture' for decades.
In May 2011, news broke about something that had happened back in 2007. The group had rewarded its management and the best of its insurance brokers with a sex orgy in Budapest, Hungary. In this way, the management sought to motivate its best sales representatives to continue their outstanding sales performance. It has to be said that the group was still named Hamburg-Mannheimer at that time.
The term double-standard has never been better demonstrated by a company. On the outside, the image portrayed a conservative, respectable, and stuffy insurance company with its rather stiff and buttoned-up sales representatives as shown in the TV ads. On the inside, the news leak made people aware of a sex, drug, and alcohol fueled party community made up of a scandal prone male coterie. In 2007, the management of the insurance group knew that it was playing with fire. Participants had been required to leave their cell phones and cameras with security before entering the party. The organizers wanted to avoid any pictorial evidence emerging that could relate to this particular event. The private company party was not meant for the public eye and should have remained confidential and under wraps.
The organizing managers were aware of the catastrophic consequences for the company should even a whisper emerge of what was going on behind closed doors. But bad news will out. And it became worse. The management had to admit that the full cost of this scandalous party were tax deducted as business expenses. In a bid to limit the damage done, Ergo's management announced in 2011 that it would donate the full party costs of 83,000 Euros (118,000 Dollars; 73,000 Pounds Sterling) to a sheltered accommodation for abused women. The group declared, too, that all senior managers of 2007 had left the group prior to the breaking of the news.
The social media community had a heyday with the scandal. Comments on social media showed the range from indignation to ridicule. The most often read comment was 'hopefully, Hamburg-Mannheimer is insured against loss of reputation' in allusion to its TV ad. The comments came in all variations and none were helpful to the group. Some jokers asked how and when they could start working for the company while promising great stamina. Then spoof ads and videos started to appear on YouTube and other video portals garnering ten thousands of hits. A single negative incident had destroyed the credibility of a whole insurance group within a few days if not hours.
It never rains, but it pours. Only days after this damaging leak, news broke that Ergo had handed faulty contracts to customers. The group had offered a government sponsored private retirement scheme (in Germany known as the Riester pension scheme). The contracts it had handed to the 12,000 customers subscribing to the policy scheme had been incorrect. The group had to pay damages of 6 million Euros (8.5 million Dollars; 5 million Pounds) to its customers over that unprofessional blunder after denying all wrongdoing earlier on.
Confidence in the Ergo group plummeted to an all-time low over negative reports staying in the top search spots over months. Ergo continued to lose credibility every day while social media spawned new negative comments. The company should have chosen a forward strategy of honesty to convince the public that changes are being made rather than bulwark behind denial. The primary goal of Ergo’s management should have been to restore its tarnished reputation with an online offensive and regain credibility. A well thought out and professionally executed Internet campaign could have reclaimed ground that had been lost. Instead, negative comments went viral helped by the inactivity of the insurer's management. And the most damaging negative comments, as usual, had been the witty and funny ones. And they look like they are there to stay.
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