Claims for Money Again Louisville Water Company

Louisville mailboxes are regularly stuffed with messages alarm residents they could pay thousands of dollars in repairs if they don't have water line warranty coverage.

Though the envelopes bear the logo of Louisville H2o Company, they are actually from a individual warranty company called HomeServe Us, which has run afoul of several state attorneys general, including Kentucky, in recent years over allegations of unfair and deceptive advertising.

Customers across the land have chosen their utilities to ask whether or not the service is legit, and numerous land officials accept warned residents to read the fine print.

Earlier this twelvemonth, a British regulatory agency slapped a $51 meg fine against HomeServe'due south parent company for overcharging and misleading its customers. Information technology was the largest retail fine in British financial history.

Homeserve has assured Louisville Water Co. that the problems were overseas and didn't affect Louisville customers. And Louisville h2o officials say there's no pressure level to buy the warranty, anyway. Information technology'southward voluntary.

But the utility is also making millions from the marketing deal. And consumer advocates have raised concerns about partnerships similar the ane between HomeServe and Louisville Water Co.

"Is there any dubiety you should be concerned about that?" said Ira Rheingold, executive manager of the National Clan of Consumer Advocates. "If they engage in abusive beliefs…  why would y'all call up that when they come to the U.s.a. that behavior is going to change?"

The UK'due south regulatory bureau stated that HomeServe developed a civilization of "putting profits before treating customers adequately."

Regulators found that HomeServe Membership Ltd. encouraged staff to boost sales regardless of customers' needs and that the company's failings were particularly serious given that a large number of its customers were vulnerable senior citizens.

A Contract Worth Millions

For the past vii years, HomeServe USA has used Louisville Water Co.'s brand – and its database of client information – to sell water and sewer service line warranties to customers. Those warranties cover repairs to h2o and sewer lines that start at the city'southward pipes and end at the home, costs not covered past LWC and not always covered past a homeowner's insurance policies. The advertised monthly charge for water line protection is $v.49.

In return, the utility receives a 15 percent commission on the auction of those products.

HomeServe has like partnerships with nearly 40 utilities in the United states of america and plans for more. Last twelvemonth, Louisville H2o reaped $1.vii one thousand thousand out of its deal – and $5.1 meg since the partnership began through the stop of 2013. Roughly 83,000 out of LWC's 243,000 residential customers take 1 or more contracts with HomeServe, according to the utility.

Kelley Dearing Smith, a spokeswoman for Louisville Water, said utility officials spoke to HomeServe about the fine in Uk and were told the issue had been resolved and that the issue had no issue on HomeServe'southward work with Louisville H2o Co.

"If people were truly dissatisfied and thought they were being ripped off, I'd exist hearing about it," she said. "Our president would be hearing near it. I'd be getting calls from metro council folks, which I don't. The mayor would exist hearing most it. And I don't see that."

According to the contract, the utility facilitates the promotion, auction and marketing of these warranties. Over time, those products accept expanded from h2o and sewer lines to internal plumbing and drainage, and water heater coverage.

The contract includes several types of bonuses for the utility, including one for the launch of new products and a referral fee for Louisville Water's aid in expanding HomeServe's partnerships with other utilities.

Consumer Advocates Question Partnership

The messages tell homeowners that "the h2o service line buried cloak-and-dagger on your property could fail without alert, leaving you responsible for the toll of repair."

Though the utility insists that the warranties are voluntary, some consumer advocates say the idea of personal choice can be misleading.

Despite wording in the solicitations that the program is voluntary and from a private company, simply using the utility'southward logo can lend legitimacy to the product considering customers consider it a trusted brand, according to Susan Grant, director of consumer protection at the Consumer Federation of America.

Partnerships like the i between Louisville H2o and HomeServe also enhance concerns almost privacy, she said. Utility customers don't expect their information to be shared with a tertiary party.

"The real motivation hither is non necessarily in the involvement of the consumer but just pure profit," Grant said. "I recall it's misguided. I wish that utilities would non allow themselves to exist used substantially by companies who just want to profit off of their customers.

"I understand why the turn a profit is highly-seasoned, but I think on balance… utilities and others should think twice before doing information technology."

History of Complaints

HomeServe USA has been accredited by the Better Business Bureau since Feb of this yr and has an A- rating. Only it hasn't ever had adept reviews. The BBB has had 305 complaints about the company in the past three years. Sixty-six of those were in the past 12 months. And several state attorneys general have forced the company to alter its ad practices.

In 2010, HomeServe came to an agreement with the Kentucky Attorney General's office to change the wording in fliers that suggested its service was a mandatory fee charged by the utility. The company also paid $7,500 in civil penalties and the price of the investigation.

The same twelvemonth, the company came to a similar understanding with the state of Ohio and paid $15,000 for the price of the investigation and attorneys fees. The company agreed not to use "unfair, deceptive and/or misleading advertisements."

In 2011, HomeServe paid $75,000 to the Massachusetts Attorney General and agreed to disclose to customers that it was not part of the local utility and that its services were optional.

In each of those cases, HomeServe denied any wrongdoing.

Click to read HomeServe's monthly functioning report for Louisville for December 2013.

Despite the defoliation among homeowners, Homeserve'south spokesman said the company'south intentions are clear.

"In all of our materials that we use today and take, in fact, for the terminal several years, it'due south very articulate near who we are, what the product is and the fact that it's optional and HomeServe is an contained entity separate from the local customs," said Myles Meehan, senior vice president of public relations for HomeServe.

Meehan said concerns about the bug in Europe "have been eliminated and addressed."

In the UK, the country'southward Financial Acquit Say-so found serious problems with the company's business organisation practices from 2005 to 2011. Customer complaints weren't resolved fairly. The company incentivized staff to close the files on as many complaints as possible. And employees provided misleading information to customers during sales calls.

Meehan said the U.S. business organisation is a separately operated subsidiary with its own management team that runs under a different set of rules in America. Louisville customers need not exist concerned, he said.

(Seemore than in HomeServe USA's "program review" with Louisville H2o Co.)

Do customers demand this?

The utility doesn't track whether these warranties are useful or necessary. Neither does any regulatory agency. KyCIR attempted to interview several plumbers simply none wanted to go on record.

"There's no way for Louisville Water to do a cost-do good analysis for a customer because we don't know – every customer is unique – the age of your home, the age of your line, where you live, how was your line put in," Dearing Smith said. "Equally a consumer you would do that yourself. You would decide: Is this advantageous or not for me to practice for this particular policy?"

That HomeServe is exempt from Kentucky's insurance laws might make that determination a fleck more hard for consumers.

HomeServe is one of 84 companies in the land that provide coverage through service contacts. A provision in land police allows those companies to provide coverage equally long every bit they register and provide an acceptable grade of security or bond.

Being exempt means those companies don't have to provide rate information the way traditional insurance companies do. And then at that place'south no regulatory bureau that collects marketplace information on these companies.

Dr. Burke Christensen, an Eastern Kentucky University professor with 30 years of experience as an chaser and executive officer in the insurance industry, called the partnership between HomeServe and Louisville H2o "affinity marketing gone amok."

"HomeServe is trading on the fact that you trust your water company," he said. "So they pay the water company to let HomeServe use the water company's proper name to urge people to purchase this product…  And the more people that participate in it, the more money the sponsor – the water visitor – is going to make."

Christensen took a expect at the company'southward services online.

"I wouldn't call it bogus or illegitimate, but … there is a lot of what I would describe as deceptive advertising or at least misleading advertising of the product."

And HomeServe doesn't provide the utility with detailed data about how many claims customers file or the individual cost of those claims. That's because the contract is between HomeServe and the client, not Louisville Water, Dearing Smith said. HomeServe doesn't provide detailed information to whatsoever of its partners.

A HomeServe spokesman said that in 2013 the company paid out $2.2 one thousand thousand for roughly 4,100 claims for Louisville H2o customers. Nationally, over the past three years, the company has provided more than $150 million in services to its i.5 meg customers.

Bister Halloran, treasurer of Louisville H2o, said the utility's largest financial expenses are majuscule infrastructure and labor. That additional money helps offset costs. If the $one.7 million from HomeServe hadn't been role of the budget final year, rates probable would have increased past 1 percent. That would accept meant an boosted 22 cents per month on the boilerplate water neb.

Because the plan is voluntary, the utility also sets aside 10 percent of its HomeServe revenues for a program that helps low-income consumers pay their water bills.

Kristina Goetz / KyCIR

Louisville Water Company headquarters in the 500 cake of South tertiary Street in Louisville.

Mixed reviews

With all the controversy surrounding the visitor, at that place's a mixed reaction when it comes people'south perceptions of HomeServe.

HomeServe United states provided some customers' names to the Kentucky Eye for Investigative Reporting to interview about their experience with the company and its products.

They included Mary Wayne, a Louisville resident who has both the water and sewer line warranties. She called HomeServe when at that place was a blockage in her sewer line. She guessed the repair would have been in the thousands of dollars if she'd had to pay the full cost, something she surely couldn't beget.

"They dug it out and replaced information technology, and at present I have no problem," she said. "And they did all this with one little phone telephone call."

Larry Cooke, who lives in the West End, said he kept receiving advertisements in the mail and finally decided to buy all of the warranties three years agone.

"I'm glad I did," he said. "I had a water leak, and it proved beneficial for me. In that location was a water leak from my main valve coming up to my house."

He isn't certain why he had to pay $200, just he said that doesn't matter.

"It was about $1,400 to $1,500 worth of piece of work," he said.

But there are people who still wonder whether the solicitations are a scam.

Hilton Brooks, of Middlesboro, is one of a handful of Kentucky residents who've filed complaints to the state attorney general's office since January 2012 after he bought the warranty. He sent a letter afterwards HomeServe sent contractor after contractor who couldn't make up one's mind the trouble with his sewer line.

"It was very frustrating," he said. "It required an extensive amount of correspondence and endeavour to fix the problem."

The issue was somewhen resolved, but he was unhappy with the service and canceled the sewer line warranty. However, he kept two other warranties for internal plumbing and water line service.

"I remain suspicious," he said. "But I still want to kind of give them the benefit of the incertitude."

Nancy Ragland, who lives in Madisonville, likewise sent a alphabetic character to the chaser general'southward office, request almost the legitimacy of the company.

The chaser general'south part wrote back to say Ragland should check with her local utility and determine which repairs she'd be responsible for and decide for herself the likelihood of problems.

Ragland never took the warranty.

"I simply didn't think that was anything we needed to be concerned with — never had earlier," she said. "We never had any reason to take that kind of a service."

Reporter Kristina Goetz can be reached at kgoetz@kycir.org or (502) 814.6546.

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Source: https://kycir.org/2014/08/28/insurance-offer-has-louisville-water-companys-logo-but-a-private-company-is-behind-it/

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