Jeramey Jannene
City Hall

Is Milwaukee Being Sold An Insurance Scam?

Or is exclusive contract with company offering water and sewer line warranties a good deal?

By - Nov 29th, 2023 05:38 pm
A portion of a lead service line removed from a house on S. 12th St. Photo by Jeramey Jannene.

A portion of a lead service line removed from a house on S. 12th St. Photo by Jeramey Jannene.

Milwaukee City Channel viewers that watched the Public Works Committee Wednesday morning got a highly entertaining show.

Representatives of HomeServe, a Connecticut-based company that offers warranties for water and sewer leaks not covered by homeowner’s insurance, came before the committee attempting to secure approval to use the city’s name and logo for marketing its products and to have the city automatically add an up to $1 per month leak insurance fee to every municipal services bill.

Opponents’ opinions of the proposal were perhaps best summarized by committee chair Robert Bauman. After the lengthy debate, the alderman, standing too close to a hot microphone, said to a colleague, “This is a scam from top to bottom.”

The Department of Public Works representatives who spoke during the lengthy debate were a bit more guarded in their language and reasoning. “From the department’s standpoint, we do not want to endorse one single private company,” said Commissioner Jerrel Kruschke after confirming that there was competition for some of the services. He said the department supported people getting more insurance if they want it, but not explicitly endorsing a single company.

Milwaukee Water Works (MWW) Superintendent Patrick Pauly said the state-regulated utility couldn’t be seen as endorsing internal plumbing components, and possibly other insurance products, without Public Service Commission approval. He also raised concern that the city’s expansion of its lead service line replacement program and absorption of the associated costs for replacement when there’s a break in the line would eliminate the need for at least water service line insurance.

But Alderman Russell W. Stamper, II is a strong supporter of advancing the proposal and is pushing for any concerns to be addressed. It’s the second time HomeServe has been before the committee this year at Stamper’s request.

Bauman opened the discussion by saying that while HomeServe was very good at wining and dining council members at the National League of Cities conference, the “fundamental question” was whether the City of Milwaukee should explicitly endorse a private company. The alderman said that it was beyond the city’s capacity to evaluate if HomeServe was a quality operator and asked the Department of Public Works for its response before Stamper interceded.

“There is a protocol,” said Stamper. “Let them present before you put your opinion out there.” It was only the first of many times someone would interrupt someone else during the debate.

HomeServe account director Brian Davis said the company offers a suite of products, including a water line protection program for $7 per month, a sewer line protection program for $9 per month and a water leak protection program for between $0.50 to $1 per month. In the event of the failure of a lead water line, the company would replace it with a copper one at no charge. In addition, HomeServe would make a “six-figure” donation to the city to support a low-income assistance program and would continue to provide funding based on the premiums it received.

Davis said the service provides peace of mind and protection for residents, who could face unexpected, large bills if any of their lines fail. The company provides an “Uber-like” service with local plumbers to make the repairs. It has partnerships with approximately 1,500 cities and utilities. Davis said HomeServe was taking on notable risk and previously said the city had even lost money in Baltimore.

“That’s all great. Then sell the product,” said Bauman, noting the company offers its products directly already.

“We can only get a half percent if we go direct to the consumer,” said Davis. He said sign-ups would climb to 10% to 12% of all households if the city contracts with the company. HomeServe would also slash its rates and expand its per-incident maximum coverage because of the volume of customers. The key component is the city authorizing HomeServe to send out letters with the city logo on the outside.

“This is costing residents millions,” said Stamper in endorsing the concept. He said it would be a boon for minority contractors. Council President José G. Pérez and Alderwoman JoCasta Zamarripa each said they had constituents who had experienced unexpectedly large bills for sewer failures and were interested in learning more about the service. Zamarripa said it sounded similar to the State of Wisconsin‘s certified list of providers for bartender safety classes, but Bauman noted that was for multiple vendors.

“You want us to do the marketing and the promotion for free,” said Bauman to the HomeServe representatives.

After Kruschke raised concern about being denied sewer claims for issues like roots penetrating lines, Davis said HomeServe offered better terms for its official city partnerships.

“For city partnerships, we deny less than 1% of our claims, and it’s typically for an irrigation issue,” said Davis.

Pauly said there were issues with the need for water line insurance. A revised lead service line replacement plan, backed by new federal funds, would have the city cover the full cost of replacing any lead service line that breaks.

An Automatic Charge?

The real sticking point might not be the sewer or water insurance products, but an internal water leak product.

The city would be required to charge every residential customer between fifty cents and $1 per month as insurance to cover the cost of a surge in water use triggered by a leak. The fee is expected to generate $1.5 million annually.

Only, MWW doesn’t think many people would be able to take advantage of the insurance.

“It’s less than 1% of our customers that experience an internal leak on an annual basis,” said Pauly. He said many of them are vacant homes, who presumably wouldn’t be paying customers.

“I don’t know. Maybe they’re all in my district,” said Stamper. Pauly said they are spread across the city.

The leak insurance charge would be administered on an opt-out basis and HomeServe would refund the premiums collected for anyone who opts out in the first year.

That seemed to get even Stamper to raise concern.

“I would support them having to opt in first,” said the alderman. “You can’t just bill somebody without telling them.”

But Pauly said telling them, which is what HomeServe proposes, is different from requiring someone to opt in. He warned that none of the costs of administering the service, like calls about the billing, can be legally absorbed by MWW.

“We can work on a solution for this,” said Davis. He said 650 partners were already engaged in the leak fee in some form.

In a moment of unintentional levity for the audience, Jermaine Reed, a former Kansas City council member who now works for HomeServe, attempted to address some of the city’s questions. But he demanded not to be interrupted, which resulted in Bauman interrupting him. The alderman made it clear he was the chair and would lead the meeting.

The committee ultimately inched the proposal forward, or at least some members thought they did.

Bauman, saying that it was clear DPW and MWW didn’t want the partnership, said he wouldn’t advance the resolution as it wouldn’t amount to anything. The resolution calls for the city to negotiate a deal with HomeServe, but Bauman said that was unlikely to happen. “I’m not going to direct these departments to negotiate if they don’t want to negotiate,” said the alderman.

Stamper said Bauman wasn’t being consistent with his past actions to direct departments to take action. He moved to recommend the full council adopt the resolution. Zamarripa voted in favor, while Bauman dissented. Committee members Mark Borkowski and Jonathan Brostoff were excused from the meeting.

The full council will consider the proposal, or at least the directive for DPW and MWW to work on the proposal with HomeServe, in two weeks.

Past Effort Was Killed

The city previously participated in a similar partnership from 2011 to 2013. The partnership was with Utility Service Partners (later acquired by Home Serve), endorsed by the National League of Cities and championed by Ald. Joe Davis, Sr. Davis, like Stamper, had learned of the agreement via the National League of Cities.

The council initially endorsed the 20111 agreement by a one-vote margin, and then overrode a mayoral veto on a 10-5 vote to enact the program. Bauman voted against the program initially, but flipped to vote for the veto override. Michael Murphy voted no both times, Milele A. Coggs voted yes in each case. No other current council members were serving at the time.

In 2013, the city exited the deal on a 12-3 vote, with Department of Public Works officials and many council members desiring to pursue a request for proposals for a new vendor and better terms. The city was paid 10% of all premiums under the 2011 deal, netting a couple hundred thousand dollars. Pérez, who joined the council in 2012, voted with Davis and Ashanti Hamilton to stay in the agreement.

No Bad Blood

Bauman and Stamper concluded the meeting, after wading through several other agenda items, by noting that despite their pointed questions and comments, it wasn’t personal between them. The two often work together on legislation, although each has their own style. On Wednesday, that was on display for all to see.

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Categories: Politics

3 thoughts on “City Hall: Is Milwaukee Being Sold An Insurance Scam?”

  1. steenwyr says:

    Is Baumann jealous he didn’t get wined and dined and Stamper did?

  2. says:

    Who got free meals and drinks from this outfit. Remember the cable franchise scandal?

  3. matimm says:

    Thank you for this reporting.

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