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If you've seen the movie "Brazil," you will understand what has happened to my brother. In the movie, an administrative error--compounded by cover-ups, official denials and dirty tricks--leads to the wrong man being driven crazy. In real life, an insurance company has set about systematically destroying my brother's standing in the community, to cover up its own gross incompetence. I kid you not.

I had never been able to comprehend why insurance companies get such a bad rap. Now I understand. The company delivered ineptitude, dishonesty, delaying tactics and, finally, the unjust application of the power of the courts. All for a policy that my brother didn't ask for, didn't want, didn't buy and in legal fact didn't have.

My dad died about two years ago. My brother took over the insurance on his house, as a favor to me. For the first year's cover, the insurance company quoted a monthly premium and then took a larger amount, by direct debit. At the start of the second year, my brother discovered what had happened, and asked for an explanation and a refund. The company offered neither, but instead increased the monthly amount it was taking from his bank account.

The company "renewed" the policy without mentioning it to my brother. Then--illegally, I expect--it assigned him a "loan agreement" for the payment of 12 monthly premiums. He did not see, and has never signed, this "agreement."

When my brother stopped paying the premiums because the house was sold, the insurance company refused to accept the cancellation. They called him a liar. When he stopped the increased monthly payments the company had been taking without authority--and here we venture into the territory of Terry Gilliam, the director of "Brazil"--the company admitted in writing all the mistakes it had made, and that it owed my brother a refund. The next day, it took out the papers to destroy him. It issued a default notice under the "loan agreement," and sent it to the relevant credit agencies.

My brother--no financial genius, clearly--is now buying a house, but his credit rating and good name have been destroyed by staff of a company that would rather see him in distress than pay the refund to which he is entitled. It's only a couple thousand dollars.

Not being in insurance, my brother asked me why a company would behave like this. I had to think. The only reasons I can posit are: incompetent staff, who are presumably cheaper than competent staff; a level of arrogance that the Nazis would have admired; the certainty that the company's legal team exceeds in power and dollars anyone my brother might be able to afford; and the knowledge that, in light of there being an Ombudsman, no amount of indecent behavior will matter. Hardly anyone has the time or fortitude to pursue such matters to the bitter end. If the company loses every case it faces with the Ombudsman, it would still be way ahead, financially, of an honest competitor.

This is the most cynical answer I could come up with, yet none other fits the circumstance.

This company is an appalling stain on the insurance community, although I fear it may not be a unique case. Either way, the industry ought to be ashamed of itself. To paraphrase Bambi, if you can't do business honestly, don't do business at all.

ROGER CROMBIE is a columnist for Risk & Insurance®.

September 15, 2006

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