Councilmember Tom Hucker took the county’s water utility to task at a recent committee meeting, saying it’s unwittingly steering ratepayers into buying underground pipe insurance from a company that’s been fined for misleading customers.
During the council’s Transportation, Infrastructure, Energy and Environment Committee’s April 21 discussion of the Washington Suburban Sanitary Commission budget, Hucker raised questions about the utility’s relationship with HomeServe USA, which sells repair plans to homeowners to cover .
Those fixes include repairs to water pipes that break between the utility’s water main and the house. Some homeowners think such repairs, which can cost thousands of dollars, are the responsibility of the utility, but they’re not: The homeowner is on the hook.
Hucker has two major concerns.
One is that WSSC’s two-year contract with HomeServe, which expires in May 2018, provides the company with access to the utility’s mailing list of ratepayers. Under the deal, HomeServe can solicit business via mailers that carry the WSSC logo. Such an arrangement leads ratepayers to think HomeServe has the imprimatur of WSSC, Hucker said.
The utility provides water service to 1.8 million residents through about 475,000 customer accounts in Montgomery and Prince George’s counties.
Hucker’s other concern is that HomeServe has landed in legal hot water over its business practices.
Six states have taken action against the company, Hucker noted – including Maryland.
Two years ago, the company settled allegations by the Maryland Attorney General’s Office dating to 2010 that the company solicited business by implying that it was acting on behalf of municipal governments, according to a news release from the office. The company also was accused of providing only 11 months of coverage during the first year of its “annual service” offer.
While the agreement with the state was not an admission of guilt or a finding of violation of law, the company agreed to pay $115,000 and remedy the allegations.
Hucker noted that companies such as HomeServe are not regulated as conventional insurance carriers are.
“Our own Office of Consumer Protection has warned ratepayers about engaging in a contract with HomeServe,” Hucker told WSSC officials at the meeting, referring to the county agency.
Plus, D.C. Water, Washington’s water utility, has rejected a possible partnership with HomeServe, he said.
“Personally, I don’t think it’s a great look for WSSC,” Hucker said. “I’m not sure I’d recommend you renew the contract when it’s up.”
Instead, Hucker recommended that WSSC send out a list of repair companies and insurers to ratepayers, who could then choose. “There are other companies out there,” he said.
Carla A. Reid, WSSC’s general manager, said the utility would follow up on Hucker’s recommendation.
Councilmember Nancy Floreen agreed with Hucker. “It’s very confusing,” she said. “Homeowners think you’re recommending them.”
The WSSC website does say that the utility and HomeServe “have worked together in creating this program to ensure it is worthy of WSSC’s endorsement.” The website has a link to a page on the HomeServe website that carries the WSSC logo and reads: “Washington Suburban Sanitary Commission (WSSC) has selected HomeServe to provide you with an optional repair plan that can help protect you from the expense and inconvenience of plumbing emergencies. For its part, WSSC justifies the contract in an October memo, saying that HomeServe agreed to clean up its business practices under the agreement with the state Attorney General’s Office. It also says that HomeServe agreed to pay $300,000 annually into a “hardship fund” to help low-income ratepayers pay their bills.
Actually, broken water lines leading to homes are not all that common in the first place.
Investopedia, a financial information website, lists water line coverage as No. 7 under its list of “15 Insurance Policies You Don’t Need.”
“The odds are in your favor that you will never use this coverage, particularly if you live in a newer home,” the site says. “If you live in an average suburban neighborhood and you need to repair the water line, the distance to the street is short, the likelihood of a problem is low and repair costs are a few thousand dollars or less.”
In its memo, the WSSC says it does not track how often such repairs are needed, as they are made by homeowners, not the utility.
HomeServe sells a variety of home repair plans. The one covering this type of break costs $3.99 a month in Montgomery County.
The company has an A-plus rating from the Better Business Bureau, which awarded it 3.92 out of five stars.
Still, 78 percent of 50 customer reviews received by the agency were negative, with a total of 244 customer complaints.
At the committee hearing, Reid pointed out that HomeServe has a 97 percent customer satisfaction rate. But Hucker pointed out that that’s 97 percent of all customers, not just those who’ve needed repairs.
“We should take the 97 percent rate with a grain of salt, considering the rareness of this occurrence,” he said.
HomeServe USA, with offices in Connecticut, is a division of HomeServe plc of the United Kingdom.
As of Sept. 30, 2016, it had 2.8 million customers in the United States, up from 2.1 million a year earlier, according to the parent company’s most recent annual report. It collects $96 annually per U.S. customer.
It offers plans to 49 million homeowners through a utility brand in the U.S., up from 31 million a year earlier.
And even though its annual revenues rose 29 percent to $117.2 million, HomeServe USA posted a net loss of $1.6 million for the year, vs. a net loss of $2.2 million the prior year.