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4 minute read
5 Oct 2021
3:03 pm

Class action suit filed after claims Telkom overcharged insurance clients


If the overcharge is endemic to the entire Telkom customer base, this would amount to R39 million that may be erroneously reflected as profit.

A system error, whether intentional or otherwise, runs much deeper than is being admitted, the driving force behind the suit said. Photo for illustration: iStock

A class action suit has been filed in the Gauteng High Court against Telkom and its insurance provider Mutual & Federal Risk Financing, which is part of the Old Mutual group, over claims that Telkom clients were routinely overcharged for insurance.

One of the claimants, Nozipho Mkubu, signed up as a Telkom Mobile client in October 2019 and agreed to a monthly charge of R132.45.

When the full policy documents were provided, the insurance amount had been bumped up to R151 a month. When the Telkom invoice arrived, the amount charged was R152.32, a still higher overcharge of nearly R20 a month.

This may seem like a rather trivial oversight – and Mutual & Federal Risk Financing admits there was an overcharge due to a system error and affected clients are being reimbursed – but the figures could run into hundreds of millions of rands if the overcharge was applied to all Telkom Mobile customers, according to Gareth Miller, the driving force behind the class action suit.

“System errors – such as that claimed by Mutual & Federal Risk Financing – lend themselves to class actions, as they apply to everyone in the system,” says Miller.

“As we have argued in our court papers, this is a system error, whether intentional or otherwise, that runs much deeper than is being admitted.

“We don’t want to be brushed off with a dismissive comment that it only happened to a few customers and they are being repaid. We want full transparency and recompense from Telkom and its insurer, Mutual & Federal.”

The applicants want an independent auditor to assess the extent of the overcharge, which Miller says could involve more than 100 000 customers.

According to court papers, Telkom Mobile offers device insurance for its contract customers underwritten by Mutual & Federal Risk Financing which falls under Old Mutual Insure.

Once a customer agrees to take out device insurance with Telkom, an in-store contract is signed reflecting a monthly insurance amount to be deducted by debit order.

Thirty days later the customer receives the full policy document via email.

All the applicants in this case say the full policy document reflected a higher insurance amount than was agreed in the in-store contract.

The customers then receive their Telkom statements, which again reflected a higher amount than was agreed in either the in-store contract or in the full policy document.

Though just five people are listed as applicants in this case, this figure is expected to run into tens of thousands of customers – and possible many more – who will automatically be included in the action unless they specifically opt out.

The applicants are being represented by Advocate Douglas Shaw, with litigation funding being provided by Miller. The case was filed in the Gauteng High Court in June.

Companies reactive, not proactive

“Despite the fact that the overcharging has been ongoing for a number of years, Telkom and Old Mutual Insure only decided to take action [by offering to refund clients] after the class action was lodged at the High Court,” says Miller.

“Telkom and Old Mutual have agreed that there was a system or wording error on the in-store contract, which effectively equates to the document failing to show a Vat [value-added tax] amount of 14% [the Vat rate increased to 15% on April 1, 2018].

“After consultation with Telkom and Old Mutual Insure, they acknowledged the overcharge and have agreed to refund their customers. This is great news.

“What we now need to know is how extensive was the system error and whether it applied to all clients and, frankly, this is something that the auditors – and not us – should have picked up.”

Shaw and Miller have advised Telkom Mobile customers to inspect their Telkom statements and compare the insurance premium to the agreed amount reflected in the in-store contract.

Enquiries can be directed to


Telkom’s latest annual financial statements reflect income generated from device insurance premiums for the last two years at R294 million.

If the overcharge is endemic to the entire customer base, this would amount to R39 million that may be erroneously reflected as profit.

However, the overcharge may apply to a much longer period, says Miller, resulting in an overcharge potentially running to hundreds of millions of rands.

Karen Naidoo, speaking on behalf of Old Mutual, provided the following response:

“We can confirm that court proceedings are currently underway, and we are involved in a legal case. The matter involves Telkom, Mutual & Federal Risk Financing Limited and five individuals.

“We can provide you with further detail on the matter once we have served and filed papers in response to the application.

“At this stage, we can confirm that the case pertains to a system error that affected the premiums collected from customers.

“The system error was rectified as soon as we learnt about it and the affected customers are in the process of being reimbursed.”

By Ciaran Ryan

This article first appeared on Moneyweb and was republished with permission. Read the original article here.