Which? has discovered that 9 of the UK’s 12 biggest water companies are promoting potentially unnecessary supply pipe insurance, costing consumers more than £100m per year.
Water companies were found to be promoting expensive supply pipe insurance when they offer their own free pipe repair schemes which customers are automatically entitled to use, resulting in millions of people buying insurance they don’t need and will never claim on.
Water companies proactively push this costly third party insurance, and our researchers found nine of the 12 big companies promoting Homeserve’s policy via direct mail promotions. While references to the water companies’ free pipe repair schemes are included in some of these letters, their benefits were played down. Some of the firms also promoted third party insurance on their own headed paper, potentially persuading consumers to unnecessarily buy a policy.
None of the letters we scrutinised mentioned that home insurance may also cover water supply disruptions. We found that 19 of the leading 25 home insurers, including AA, Legal & General and RIAS, will cover burst supply pipe claims to varying degrees. Disturbingly, we were concerned to find that many water companies’ websites encourage their customers to first call a plumber in the event of leak, which in fact could invalidate a claim under their home insurance, as many insurers specify they must be contacted before any repairs are made.
Which? executive director, Richard Lloyd, says:
“It’s totally unacceptable that water companies are pushing potentially unnecessary water supply pipe insurance from third-party private companies. Few companies highlight their own assistance schemes, and most fail to tell you that your home buildings insurance may overlap on the key benefits of cover.
“We’re calling on all water companies to use the same free pipe repair scheme so that it’s clear to consumers what they’re covered for. We also want to see the Government and Ofwat take action to stop water companies from confusing consumers by promoting third-party pipe insurance under their own banner.”
Notes to Editor
The article ‘£100m down the drain – Raw deal for water company customers’ is from the May issue of Which? magazine. Please contact Helen Lacey for a copy.
1. 667,000 homes in the Anglian, Southern and United Utilities areas are covered by Homeserve. The sheer number of people who buy this cover hints at how valuable these policies are to the providers – at £35 a year, customers in these three regions alone spend more than £23m on pipe insurance. Once you add the customers from other regions, the total spend is likely to be more than £100m
2. The cause of pipe leaks can be environmental – such as subsidence caused by prolonged dry periods, or cold weather causing freezing pipes – or as a result of ‘wear and tear’ – usually problems stemming from old pipes being in situ.
According to the ABI, environmental damage is likely to be covered by your home insurance policy, however damage due to ‘wear and tear’ is typically not covered. While there is no industry-wide definition of what comprises wear and tear, Homeserve said their research with their contractors in 2012 showed that more than 90% of water supply pipe problems that Homeserve contractors attended resulted from wear and tear.