HomeServe faces £34 million penalty
Mis-selling of products and a sub-standard complaints procedure has landed HomeServe with a massive fine from the regulator.
HomeServe has been warned it could face a fine of £34 million from financial services regulator the Financial Conduct Authority (FCA).
The warning comes after an 18-month investigation into the home maintenance firm. If it's approved, it will be the largest ever fine handed out by the regulator.
The company is under scrutiny for a history of questionable sales and marketing tactics and poor complaints handling.
Record fine
In a statement, HomeServe confirmed it had received a warning from the FCA and will now start discussions with the regulator.
The company, which sells household insurance and repair service policies for items such as boilers and blocked pipes, has given very little information about what exactly the fine is for. But it clearly didn’t expect the fine to be anywhere near as big, and it has now had to increase its provision for paying it by £30 million.
This is not the first time the FCA has warned it over the way it handles both sales and complaints. In 2011 it admitted to mis-selling some of its three million UK home emergency and maintenance contracts. At the time all outbound sales and marketing activity relating to these plans was suspended, causing its share price to fall by 28% in a day.
It was also fined £750,000 in April 2012 by Ofcom for making excessive silent cold calls.
An Interim Management Statement from HomeServe will be published on 5th February where more details will be announced.
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Do you need this type of insurance?
Stormy weather, like we've experienced across the nation recently, can cause a lot of destruction. Companies such as HomeServe know this and it’s the peak time of year for customers signing up for this added protection.
Many utilities companies, such as British Gas and Scottish Power, also offer these type of services. Although it can provide peace of mind that the cost of repairs or replacements will be covered, it can be extremely expensive.
What it costs
There are a huge range of insurance options available from HomeServe. There's everything from a monthly payment plan of £3.75 for boiler and heating policies or a combined policy from £9.50.
The combined plan covers your gas and central heating along with plumbing, drainage, water supply pipe, electrical wiring, property security and pests. If you opted for this it would cost £114 for a year and you’d need to pay out a £50 excess if you claim on it. Without the excess it rises to £19.50 a month, or £234 in the first year.
This is a lot of money, especially when you look at the small print and find out what’s not covered. If your boiler is more than seven years old, for example, you won’t get a replacement but instead £200 towards a new one. The ‘plumbing and drainage’ cover also excludes a number of things such as showers, domestic appliances, immersion heaters, external guttering and rainwater downpipes.
Therefore, if you’re thinking about going for one of these polices it’s important to check the small print first to work out if it’ll actually save you money.
Whatever you do, don’t pay twice for insurance. Check your home insurance policy as you may already be covered for most of thesthings. And when you buy a new item for your home, such as a boiler or heating system, it will almost certainly come with an automatic warranty which will cover you for a fixed time period.
For more information on deciding what cover you might need read our article Don't burn money on your boiler cover.
See if you can cut your home insurance costs by switching providers
More on home insurance:
How to claim on your insurance after a flood
How I saved £1,200 on my new boiler
The most common home insurance claims
Where to get home insurance for high flood-risk homes
25 ways to cut your home insurance
The true cost of not shopping around for car and home insurance
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Comments
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Possibly the Roman Catholic church got their bad name from founding the Inquisition and torturing Galileo because he said the earth revolved round the sun. Perhaps that church have changed their teachings on that topic but their banker ended up hanging from a bridge in fishy circumstances so something wrong there. I never like how most electric dealer try to sell you a Home Serve policy. the dealer must be getting a fat commission on the sales. As for British Gas ( BG) I would not let them into my house. they are loonies that told my neighbour his boiler was not illegal as his flue was not angled correctly. Well, a gas engineer fitted a few years ago and it works perfectly. BG were just trying it on to get a sale. They treat all repairs as a basis to sell new vastly overpriced systems.Of course they then sub contract the work to a local plumber so you pay twice!! Still, lots of people have too much money and BG will relive them of it.
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Latent Yes and No. You get what you pay for, some are good, some bad. Read on if you wish. We came back in July from a holiday to hear from our housesitter that they had just started to hear water running at night. No signs of anything. Two days later our kitchen floor started to lift. A local plumber said our supply pipe had broken, but he was ill and could not take on fixing it, and there might be further damage. I made 3 fairly desparate phone calls. 1 - Thames Water promised to come in September! No, that is not a misprint. They offered no advice and their follow-up was lamentable. 2 - Home-Serve (who we have done businss with for years without claim) said they could come out in about 5 days time but were vague about what they could actually do and what we could expect in relation to fixing anŷ resulting damage 3 - Tesco Home Insurance (who we have used for about 3 years, on the Finest tariff, which I had just decided looked expensive and should look around when it ran out in a very few days time) had someone there at 8.00 the next morning to stop the leak and repair the pipe. An engineer came next day and agreed the damage and necessary repairs, which came to: - replacement of the entire kitchen and family room laminate flooring, a big area, and no problem with us paying a small amount extra to upgrade to real wood for the replacement - repainting the entire room and the next door dining room, walls and ceiling and new skirting board - replacing the underlay and cleaning the carpet in the dining room - replacing the carcasses of the cupboards over the stopcock where the pipe had broken - drying out all these rooms All carried out to a very good standard, promptly and with almost too many calls to check I was happy with the service. It took 11 weeks, but the engineer refused to allow the flooring to go down until the floor was completely dry, again very painstaking to ensure everything was done well. I actually do not know what Home Serve might have done, but I am sure they would not have covered all the damage Tesco did for a total cost to us of £400 for the excess. We have not dared think what the work would have cost us from savings. In any case the delay for HomeServe to arrive would just have increased the damage. I do not work for Tesco or have any other link apart from shopping and being a very happy customer for their Home Insurance (and Car Insurance, remembering a written-off, no-fault-of-mine claim handled very quickly 18 months ago). Read your policy! Be lucky! Learn where your meter is and the difference between the liability after the water gets to your stopcock and before that, and make sure both are covered.
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Why the gratuitous slur, electricblue? What has the Catholic Church got to do with insurance, or Latent's childishness? God Bless you, my son.
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18 January 2014