If you have ever had a subscription auto-renewed without realising, then spare a thought for Ben Wright*. His family’s AA car breakdown cover was rolled over for an incredible £747. Had he gone on to the AA website as a new customer, he would have paid just £170 for the same policy.
While many firms offer discounted prices to entice customers only to charge dramatically more in subsequent years, it seems few can match the private equity-owned AA for the increases it hands out to longstanding customers.
Wright, who has been a customer for more than 20 years, paid the equivalent of £575 the previous year, so the new price represented a 30% increase.
After complaining to the company about his treatment he was refused any kind of refund leaving him, he says, with the impression that the AA has deliberately disguised the massive price rise in the hope he wouldn’t notice.
The self-employed construction consultant has the “family” cover, which gives him, his wife and their daughter breakdown assistance in any car they are driving. The package includes home start, relay and onward travel.
Wright says the first he knew of the renewal was when he spotted the £747 on his bank statements. It emerged that the renewal email had been sent to his junk mail.
He is just the latest AA customer to complain about this problem. In 2020 another Money reader complained his premium had been raised by 50%.
“I wasn’t even aware that I had signed up for auto-renewal, and had been too busy with work to realise it had expired,” says Wright.
“When I complained they suggested it was probably reflective of the discount I received last year – which is all in their imagination as I received no discount last year.
“Because I was outside the 14-day cooling-off period, the inflated price stands. To say I feel ripped off is a huge understatement. I certainly won’t be renewing next year.”
His mood took a further downturn when Money told him of the £170 being offered to new customers on the AA’s website. This was a first-year discounted rate reduced by 50% from £340. Even the “full” price is less than half that paid by Wright.
His case is the latest example of what Which? has called the “loyalty price premium”, which sees customers who auto-renew each year paying far more than those who shop around.
In 2022 the Financial Conduct Authority banned insurers from charging existing home and car policyholders high premiums in order to fund discounts to attract new customers. Car breakdown firms were not covered by the rules.
The AA says Wright’s case was complicated by the fact that he had increased the level of cover in the previous year and he had made callouts. It says he also had extra cover, such as lost key insurance, not offered to new customers.
“Our pricing reflects the service offered. You can pay a lot less but what our members want is great service. We have been a Which? recommended provider for the last five years. The renewal note encourages a member to contact us if they would like to discuss their policy. It also states clearly they can shop around,” it says.
The AA, which was founded in 1905 as the Automobile Association, had debts of £3bn when it floated on the stock exchange in 2014. The private equity firms CVC, Permira and Charterhouse made £1.2bn in the float. However, the AA endured a torrid time and it struggled under the weight of £2.6bn in debts. In 2020 it was taken back into private ownership by two new private equity firms.
* Not his real name