Sen. McKinney Questions Gov. Malloy’s Selection of HomeServe for State Largesse

December 12, 2013

“The state’s investment in support of HomeServe’s relocation will help foster further growth for the company and create good-paying jobs with good benefits for Connecticut residents.HomeServe is a company that continues to be a leader in this innovative segment of the service industry and we are pleased that they call Connecticut home.” Gov. Dannel P. Malloy said in a Dec. 11 news release announcing the approval of millions of dollars in aid to help Stamford-based HomeServe USA Corp. relocate its headquarters within Connecticut. HomeServe is a foreign company based in the UK that purports to offer home repair services as well as “insurance” for those services.

Senate Minority Leader John McKinney (R-Fairfield) today questioned Gov. Malloy’s selection of HomeServe to receive millions of dollars in taxpayer assistance to move from one Connecticut city to another and raised several questions about how the state vets companies that are selected for taxpayer-funded assistance.

HomeServe is a foreign company based in the UK that purports to offer home repair services as well as “insurance” for those services.  Under its deal with the state, HomeServe will receive a $1 million grant and a $3 million loan, two-thirds of which will be forgiven if job targets are met. It will also be eligible for up to $5 million in urban reinvestment tax credits.

The State Bond Commission is expected to approve funding for the state’s aid during its meeting Friday in the Legislative Office Building in Hartford.

Sen. McKinney asked whether Governor Malloy, or anyone in his administration, was aware of the fact that HomeServe has been the subject of numerous government investigations both here and in its home country of the UK.  These investigations, which have resulted in heavy fines, have involved allegations that HomeServe sent sales materials that (1) falsely appeared to be a bill from the consumer’s local utility, (2) contained logos designed to look like official state logos, (3) stated that consumers were at risk of losing current insurance coverage if they did not pay, and (4) misled consumers as to the types of repairs that they might be liable for and the scope of the coverage being offered.

  • In 2011, HomeServe settled an investigation by Massachusetts Attorney General Martha Coakley and agreed to pay an $85,000 fine for sending deceptive marketing material to nearly 950,000 homes in Massachusetts. (This investigation followed numerous complaints, including one from an 83 year old Quincy, Mass. woman who was left in the cold for five days when HomeServe failed to respond to her call for service.)
  • In 2010, HomeServe was investigated by the Attorney Generals of Kentucky and Ohio for deceptive sales practices that included falsely portraying the company as affiliated with the local regulated water utility and suggesting that consumers were required to purchase their service.
  • Over the past several years, HomeServe has been the subject of consumer complaints and BBB alerts and warnings across the country including Minnesota, Iowa, Alabama, Florida, Nebraska and South Dakota.

In addition to the false and misleading advertising, consumer advocates have warned that HomeServe’s “insurance policies” are largely unnecessary or useless.  Most repairs are already covered by homeowner’s insurance or are the responsibility of the local water company or utility.  Even worse, many consumers have found that when they do try to make a claim with HomeServe, coverage is denied due to unknown exclusions.  BBB alerts have advised consumers to “read the fine print.”

HomeServe’s abysmal record of deceptive and aggressive sales tactics should not be surprising in light of its record in the UK.

  • The company is currently under investigation by the Financial Services Authority and has been forced to drastically cut its UK workforce and sales projections.  According to a report today in The Scotsman, HomeServe has announced another 300 job cuts and expects its UK business to be down this year by almost one third.  However, HomeServe hopes to offset the shrinkage of its British business by taking its business model abroad”
  • In 2011, HomeServe was forced to suspend its entire sales operation in response to an investigation of claims of questionable sales tactics.
  • In 2012, the company was hit with a record fine by Ofcom, Britain’s regulatory authority for sales and marketing.

“Does the Malloy Administration vet the companies it is providing millions of our taxpayer dollars to?” Sen. McKinney asked.  “Did anyone do any research or did they just write out the check?”

Sen. McKinney also cited a 2012 review of HomeServe by the Better Business Bureau (BBB), which states:

“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.”

“Through a simple Google search, this is what I found,” Sen. McKinney said.  “And yet, here we are, prepared to hand out millions of taxpayer dollars so that another company can move from one Connecticut city to another.  Here we are, sending a big check to a foreign company that is laying off hundreds of people.  Here we are, handpicking another company for state funding even though that company has had several questions raised about its business practices. It is reckless and careless.

“At best we are giving millions of dollars to a foreign company that will take work away from our small local contractors, at worst we are facilitating consumer fraud.

“I call on Gov. Malloy to remove this funding from the Friday Bond Commission agenda so that these questions can be answered and that we can make certain state taxpayer dollars are protected.”


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