The statement to shareholders by British-based Home Emergency Insurance Solutions (HEIS) about its sweetheart deals with utilities sounded like a personal invitation addressed to David Lazarus at the Los Angeles Times: “In the U.S.A., we have been proactively working with local attorneys general and media commentators . . . to minimize the risk of any negative media commentary.”
Lazarus mentioned that as background in his piece about Southern California Gas Company’s business arrangement with HomeServe USA, the official name of the Connecticut-based subsidiary that markets its insurance policies through direct mail.
Many SoCal Gas customers received a packet of information from HEIS under the letterhead of The Gas Company’s parent, Sempra Energy, warning of dire things that could happen to their home and the danger of being underinsured. Four dollars and ninety-five cents a month buys $3,000 worth of protection and billing is included on the gas bill.
So, is this an endorsement of HEIS by The Gas Company, after a careful review of insurance products that might benefit their customers?
No. But a lot of people won’t know that by just reading the sales pitch. You have to go to the utility’s website to learn, “We do not endorse or accept liability for HEIS’ specific warranty products, services and terms.”
That might be a wise decision. The Connecticut Better Business Bureau (BBB) warned back in 2011:
“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 occurred, it was not covered by the policy.”
Lazarus listed the exclusions that would limit claims. They include: “problems caused by willful damage, abuse or vandalism” and “damage caused by Acts of God, natural disasters, acts of nature, fire, explosion, theft, war, riot, military unrest, nuclear accident, flooding, hurricane, windstorm, hail, wind, lightning, earthquakes, earth movement or landslide.”
In Baltimore, Rev. Alvin C. Hathaway, pastor of Union Baptist Church, complained to the city council that a HomeServe mailer for water pipe insurance scared him into signing up: “It was frightening. I thought it was an official action from the city. I saw Mr. Chow’s name and mailed $74 [to HomeServe] out of fear.” Rudy Chow is the Baltimore Public Works director and his agency’s letterhead adorned the packet.
The Southern California Gas Company has an exclusive association with the unaffiliated insurance company because they get paid. Lazarus was unable to come up with how lucrative the business deal is, but it’s enough that the utility takes credit on its website for lowering customer bills.
“SoCal Gas is paid a fee by HEIS for providing the billing and remittance processing services. The majority of this fee is then paid back to our customers through our rates, and helps keep rates lower than they otherwise could be.”