Is the AA exploiting its most loyal customers – the elderly but also the very busy – by automatically renewing annual breakdown cover at up to twice the original price, in the expectation many won’t notice?
That’s the allegation from two AA staff members who have contacted Guardian Money keen to expose the “shameful and embarrassing” way they claim the breakdown recovery business now operates.
The pair, employed to sell the company’s services outside big supermarkets across the south-east, claim the business model is based on signing up new customers on to cheap “teaser” deals, and then pushing through massive price hikes (as much as 124%) in the second year.
The contracts they sign mean their policy is automatically renewed every year, which the salespeople described as a “scandal” as they say it leads to people overpaying for policies that they no longer want or, in many cases, will never claim on, as they may have sold their car.
The AA is by no means alone in offering teaser first-year discounts. But the salespeople who contacted Guardian Money say it’s the scale and the manner of the second-year increase that sets the company apart.
The AA, with 3.3 million breakdown members, vigorously rejects these claims, adding that it has made “great progress in the last couple of years to be much clearer and transparent in pricing and selling”.
Our whistleblowers say they have spoken out in part because they are fed up with being verbally attacked by customers on the receiving end of steep price rises.
Each year, four out of five AA customers decide to renew. But the complicated pricing tariff used by the salespeople, and seen by Money, shows by how much fees are hiked in the second year.
Its popular joint membership, that covers roadside assistance and home start, is £109 for “new” customers. But at the end of the first year, that rises to £215 with the money taken out under a continuous payment authority. The AA says it does this so customers aren’t left without cover.
The top-price breakdown product, that covers against most breakdown eventualities, is £179 in the first year. This is automatically renewed at a second-year cost of £401 – a 124% increase. The terms and conditions state that annual membership can only be cancelled up to 14 days after the renewal letter is sent out, which means some members can be stuck with a policy they can’t use.
“Everyone thinks that the AA is there to help but, from what we’ve seen, it’s about one thing – sucking people in on a super-cheap price before moving them on to a higher rate. There’s a guy who sold his car two years ago who ended up paying the AA for two years’ cover because they’d moved house and not told the AA. When he realised, it was too late to get his money back,” says one of the AA staff, who have asked to remain anonymous.
The second says it is the AA’s Gold members that he feels most sorry for. “I went to the dentist and, as I had my AA uniform on, he proudly told me he was an AA Gold member. Out of interest, I asked what he was paying. When I told him what a new customer on the exact same package would pay – half of what he was paying – he was furious. As I left, he was getting on the phone to give them hell, but he wouldn’t have got a refund of any previous years’ overpayments.”
The pair say they earn a basic salary of £15,600 plus 15% commission on sales up to £3,000 a month, while those who are self-employed are paid on a commission-only basis – typically up to 60% of the first-year membership fee.
The whistleblowers claim:
• People from eastern Europe, who have poor English, are often promised European cover is included when it is not. They only find this out when they break down, and have their claim declined.
• Individuals are sold a more expensive “any car” policy even though they only ever use one.
• Customers complaining have to wait until their policy has lapsed for 90 days before they can rejoin via the field sales team at the discounted price.
• AA Gold members (those who have been members for five years or more) are often paying twice as much as a customer who has just joined from the RAC. The AA’s data shows its customers typically stay with the firm for 12 years.
AA president Edmund King says: “We are very clear about putting our members at the heart of what we do and delivering excellent service. Treating customers fairly is built into all of our policies and processes, and into the training of all our people whatever their role in the AA.
“We have worked hard to promote our great products in a fair and transparent way. We do offer discounted introductory offers (via a sales force, online call centres and in advertising).
“In effect, the first year cover is, on average, 40% less than the full price. This is specified on the website and in our sales conversations as an ‘introductory offer’. This is also common practice in many fields including newspapers (including the Guardian), magazines, wine clubs, broadband and phone companies, travel and other motoring organisations.”
He says the AA writes to all customers before renewal, at which point they have a choice whether to renew or not. “Any customer can benefit from introductory offers via the call centre or with the direct sales force so there is no ‘discrimination’ if one doesn’t have access to the internet. Our letters are very clear and go far beyond much that is seen in the commercial world. We are proud to comply with the FCA’s requirements on renewal transparency.”
In regard to customers moving home and not seeing renewal letters, King says: “We have strengthened all of our procedures for following up on returned mail when people have moved. We use a range of methods to re-establish contact.”
What you tell us
Our consumer champions have received a number of letters from disgruntled AA customers. As MM says: “We have been with the AA for 30 years and been impressed by the service. This week, however, our account was in the red with a massive debit of £353 for our joint breakdown cover – a 50% increase.
“I called the AA to cancel and was immediately offered a refund of £123, taking us back to the previous price. I was told ‘We did not overcharge you – we charged you the full price and now we are giving you a discount’.
“Our annual fee has never increased by more than a few pounds. Given its undoubtedly large customer base, this policy of overcharging by 50% means a massive windfall for the company.”
Our consumer champions have received a number of letters from disgruntled AA customers. As MM says: “We have been with the AA for 30 years and been impressed by the service. This week, however, our account was in the red with a massive debit of £353 for our joint breakdown cover – a 50% increase.
“I called the AA to cancel and was immediately offered a refund of £123, taking us back to the previous price. I was told ‘We did not overcharge you – we charged you the full price and now we are giving you a discount’.
“Our annual fee has never increased by more than a few pounds. Given its undoubtedly large customer base, this policy of overcharging by 50% means a massive windfall for the company.”
