The utility agreed to allow HomeServe – a 20 year-old British plumbing repair and insurance company – to hawk its wares using the local water company’s letterhead and website to sell pipe protection insurance policies to locals.
“WaterOne has partnered with HomeServe to provide you with a voluntary plan that can protect you from the expense and inconvenience of water service line emergencies,” reads the pitch on WaterOne’s website. “With the Water Service Line Protection Plan, you can save a significant amount of money, eliminate the line inconvenience of finding a quality plumber and be sure that the job is professionally completed and guaranteed.”
In return for allowing HomeServe to trade on WaterOne’s good name – resulting in significantly more sales – the local water company gets a kickback or commission from the Walsall, England based firm.
The $64 million question being, is it a good deal for homeowners and will HomeServe be around to cover their claims in the years to come?
The Better Business Bureau has its doubts.
“BBB encourages caution as HomeServe USA solicits locally,” reads a headline on the bureau’s website. ”BBB has received numerous complaints, from consumers across the country, concerning this business’s direct mail solicitations, specifically that the solicitations’ layout may cause consumers to perceive the letters as coming from the consumers’ utility companies and not an independent business selling home warranty or insurance coverage.
“BBB also received customer complaints concerning coverage issues, specifically that when a problem occured, it was not covered by the policy.”
Therein lies the problem.
While WaterOne’s website and mailings say that it’s “partnered” with HomeServe, the implication to consumers is that WaterOne is backing the repairs, which is not the case.
“A person associated with another or others as a principal or a contributor of capital in a business or joint venture, usually sharing its risks and profits.”
While WaterOne is sharing in the profits from these sales – HomeServe, not WaterOne – is the only one on the line for any homeowner claims.
In other words, WaterOne does not stand behind the policies.
“I think the water line insurance is not a good deal,” he says. “Because if you’ve got a copper water line coming in it’s going to last 150 years. And it’s going to be rare that they have a water line claim because most of the water lines in Johnson County went out in the 1970s and have been replaced. It’s very rare that we see a water line claim anymore.
“They’ll clean up on the water line insurance, they’ll flat clean up,” Roger adds. “Because in addition to the repairs being unlikely, they aren’t that expensive to replace.”
So can HomeServe pay for and provide the repairs?
HomeServe USA is merely a division of the parent company in England, a company that based on recent reports is experiencing serious difficulties.
“HOMESERVE, the boiler repair company, is struggling with an emergency of its own as it continues to leak customers in the core UK business, a trading update revealed yesterday,” London’s Telegraph reported September 30th.
“As the company heads into a crucial six-month period, during which customers decide whether or not to renew their contracts, the shares are looking decidedly shaky, with the group still labouring under an investigation from the Financial Conduct Authority.
“Homeserve, which sells products such as boiler repair cover and plumbing and drainage insurance, built its stock market reputation on pleasing investors with rapid growth rates driven by a slick marketing machine that attracted thousands of customers.
“But this all came to an abrupt halt when it suspended all of its telesales and marketing activities in October 2011 following an internal review by accounting firm Deloitte that discovered sales practices that the company said at the time ‘did not meet the company’s high standards.’ ”
As for hawking its sewer service here in Johnson County, “I think the only way they’d be able to sell these plans is because of the endorsement of (WaterOne),” Roger says. “But we don’t know who is going to do the repairs or if they’re going to cut corners and just do repairs instead of replacement. Most of the time when you’re having a sewer problem it should be replaced, not repaired.”
“(It’s) a marketing strategy by a private company that uses a city’s logo on a letter, above the mayor’s name, to get its pitch before potential customers,” the Star’s Matt Campbell reported two years back. “It works. More than 12 percent of 7,800 households in Prairie Village that received that letter recently have signed up, according to Dennis Enslinger, assistant city administrator. City Hall, in return, gets a 10 percent cut of the premiums.”
Will the company – or more to the point – its US division be around to pick up the tab if and when consumers make claims? We’ll see, but there’s room for concern the Telegraph reports.
“HomeServe has some bright spots such as growth in the US and a stable business in France but, as previously illustrated, these aren’t big enough to offset any hole the UK business will leave.”
As for the Better Business Bureau findings, “HomeServe USA is headquartered in Stamford, CT.,” the agency says. “BBB|Connecticut rated the company a D, on an A+ to F scale, and noted that HomeServe USA has entered into consent agreements with the states of Kentucky, Ohio and Massachusetts. Both Kentucky and Ohio alleged that the mailing solicitations ‘generated confusion’ and were ‘deceptive’ in their appearance. According to the BBB Business Review, the settlements should not be considered as an admission of guilt or a legal violation.”