Private equity tactics still showing through at the AA

The AA is a Brtitsh institution. Its vehicles have been patrolling our roads and rescuing people in distress for over 100 years - and it remains one of the most recognisable brands in the UK.

What most people don't realise, however, is that for most of the last 20 years, it's been in the hands of private equity owners who have, quite frankly made a fortune from it - stretching the AA brand just about as far as it would go in every direction. Today, you can get everything from pet insurance to personal loans with the AA - not to mention its core breakdown cover.

Although the AA still offers a fantastic service out on the roads, it's long been clear to me that the philosophy that governed the company back in the days when it was owned by its customers is long gone.

50% price hikes at renewal

Each year my renewal comes through for my breakdown cover, I'm astonished to see how much they've tried to increase the price. This year, it was an enormous 54% - more than twice what I could have got the same cover for elsewhere. A simple phone call is usually enough to get them to cut tens of pounds off the quote - though of course, a large proportion of people never make that call. And for the first time this year, I forgot too. More fool me.

As I wrote in my blog earlier this week - I understand that low premiums in year one are paid for by price hikes - but 54% feels excessive.

But my observations about the AA are not purely based on my personal experience. At Fairer Finance, we carry out transparency analysis, looking at whether banks and insurers give you all the information that you need when you're buying a financial product - or whether their purchase process is all about squeezing a few extra pounds from the customer.

Auto-opts ins

In our latest analysis, which we carried out a few weeks ago, we found that the AA are continuing to automatically opt customers into home emergency cover, when they buy car insurance. The cover's free for six months, but at the end of the six months, you start to pay - and there's no mention of what the cost will be. It seems no coincidence that the six months also then puts the home emergency cover policy out of sync with the car policy - forcing the customer to remember to call up to cancel or beat them down on price at two different parts of the year.

When the AA were challenged on this in September, they told the Telegraph that their home emergency cover is a good product. Maybe it is. But the way it's being sold is not transparent and is not good practice. I'm surprised that they've not yet had a call from the FCA.

The AA was floated on the stock market earlier this year, and has had an impressive run since its IPO. I hope that being a listed company brings greater scrutiny and some better ethics to the group. In spite of its unscrupulous tactics, it's still one of Britain's best known and most visible brands, and has all the ingredients to be great again.