Personal e Loans

The AA is charging customers as much as £186.50 for its breakdown and recovery service – yet similar cover can be found elsewhere for just £35. Patrick Collinson asks if the traditional providers are just laughing all the way to the garage

When Peter Ludlow from Gelligaer in south Wales received his AA membership renewal docu­ments last week, he was taken aback by the cost, which had risen steeply from the year before. The AA wanted £186.50 for joint membership for Ludlow and his wife, to cover roadside assistance, home start and relay, compared with £136 last year.

So Ludlow started digging around. On the AA’s website, he found that, if he was a new customer, the motoring organisation would charge him just £120.19. He rang the AA to ask if he could have the same rate as shown on the website. The year before, he had done the same thing, and the AA had agreed. Yet not this time. It offered him a “loyalty discount”, as he has been an AA member for 19 years. But as this would bring down the cost to just over £130, not the £120 quoted online, he decided to cancel his membership.

Ludlow has now used his Tesco Clubcard vouchers to buy membership of the RAC, with the same level of cover he had at the AA, for £49.

“I wonder how many people just renew their membership automatically without checking on the web?” says Ludlow. “Probably quite a lot, otherwise they would not give these high renewal quotes.

“I can’t understand the logic of having a higher renewal rate for existing members than is advertised on the web for new members. The administration costs to renew an existing membership must be much lower than processing a new application.

“Also, as more and more people check the prices on the web and realise how much more they would pay if they just automatically renewed, they would have to deal with more queries, taking up staff time, or more people will do as I did and leave.”

We asked the AA why it was charging long-standing loyal customers more than new customers. It said: “The size of our membership is important in controlling the overall cost to all members. Periodically we run introductory offers to new members in ­order to increase our total membership. Over time we seek to equalise pricing for all members.”

Critics of the AA, including former patrolmen, say the organisation ­became too profit-focused after it was sold to private equity owners in 2004. This was followed by 3,500 job losses, including 500 patrol staff. A debt-heavy merger with Saga in 2007, at the height of the private equity bubble, netted a paper profit of £1.6bn, including around £40m for its then-chief executive, but has left the combined organisation burdened with billions in personal loans.

The RAC charges approximately the same (without Clubcard vouchers) as the AA, but drivers facing £180-plus ­renewal bills can save nearly £150 a year by switching to alternative providers that promise to match the service of the big recovery specialists.

The best value basic deal

The Green Insurance Company offers a roadside repair service or will tow your car to a local repairer within 20 miles for £21.95 a year. It promises an average call-out time of 40 minutes and a refund of £10 if a mechanic doesn’t reach you within an hour. It gives 5% of its profits to good causes, and offsets the carbon emissions of any recovery vehicles used.

The next best offer we could find was from Rescuemycar.com, which was formed in 2000 and claims to have a national network of more than 4,000 breakdown recovery experts. It does not charge a flat rate. Instead, it takes into account individual circumstances, such as the make of the car, its age and the driver’s age, and calculates a prem­ium accordingly. We asked for cover on a five-year-old car and were quoted £28.75.

The best value full-service deal

For just a few pounds more, you can buy a policy that includes home help, provision for alternative travel and car hire and hotel accommodation if necessary, as well as basic roadside ­assistance.

The Green Insurance Company again came top, following a check on ­gocompare.com. It offers roadside repair, recovery, and home start for £34.95. Next best were tickdirect.co.uk (in association with EuropAssistance) at £37.90 and Rescuemycar.com at £37.95.

The AA asked for £135.38, and the RAC wanted £134.63.

Pay and reclaim

This is the name given to insurance-based services that will organise a ­recovery for you, but expect you to first pay the bill, then reclaim the money later ­using receipts. The leading player here is AutoAid, which gained hundreds of thousands of members when it launched. Today its deals start at £37, which, although cheap, is no longer the absolute cheapest on the market. If you’re ­forgetful or hopeless at paperwork, this deal is not for you.

Old cars and young drivers

If you’re young and your car isn’t, you might want to try First Call. It has a full-service deal that is priced at a flat rate of £42.50, no matter how old the vehicle or how young the driver.

European cover

European breakdown cover offers roadside assistance and recovery back to the UK. On gocompare.com, the cheapest deals we found for a five-year old car were £64.75 at rescuemycar.com (for UK plus maximum 60 days in Europe) and £64.99 at tickdirect.co.uk. Vehicle Rescue Direct has single-trip policies from £12.50, or UK plus up to 90 days in Europe for £67.95, supported by the Axa Assistance network.

Buy it with your car insurance

In some cases, UK and European breakdown cover is included as standard with motor insurance policies, so you may not need to pay extra for it. For ­example, Marks & Spencer’s car insurance includes cover for the individual in both the UK and Europe with their motor policies. And other providers, such as More Th>n, offer deeply discounted breakdown cover when you take out their car insurance policies.

Bear in mind call-out times and limits

The most frequent complaint about recovery services is having to wait a long time at the call centre, and even longer for a vehicle to come out. Most providers now give average times for call-out, but, as they are nearly all bunched in the 35-40 minutes range, it is not very helpful when selecting a provider.

Also, many providers cap the number of call-outs each year. For ­example, First Call’s policy (see above) is limited to six a year.

An online law firm says it can marginalise costly claims management companies by directing applicants straight to a lawyer. Tony Levene reports

Claims management companies are raking in £400m a year for doing nothing more taxing than passing on customer details to solicitors, according to the lawyer behind a new legal website. The CMCs, which often advertise on daytime television, offer to sort out compensation for anything ranging from accidents at work to financial mis-selling in return for a percentage of the winnings, an upfront fee, or both.

They also came under fire this week from the financial ombudsman which has accused some of causing consumers with good cases to lose because the claims managers concentrate on obscure technicalities.

But now an online law scheme promises to bypass CMCs. The big, unnecessary costs, according to lawyer Costas Andrea, are led by the up-to-£750 that CMCs charge solicitors for each case they refer.

He says: “Lawyers are paying big money to buy in cases. Based on recent injury claim statistics, CMCs earn £400m from the fees solicitors have to pay them for introducing new customers. These charges do not benefit consumers because these costs have to be found from somewhere.”

This week Andrea launched a website to take on “rip-off claims farmers” and potentially return money to those needing legal help. “I intend to change the way personal injury and other legal claims are handled in the future,” he says. “Why should lawyers pay middlemen a fee for your business, when people could go direct? The savings could result in the claimant being paid by the lawyer who takes on their case.”

Andrea, 46, has been a solicitor for 20 years. He realises that most will find choosing a lawyer a daunting task.

“They need to look at costs, specialisms, and other factors. Ordinary consumers really have no way of checking lawyers. Even if they find out hourly rates, they have no idea of how many hours they will pay for,” he says.

The new site, The Law Bazaar, intends to take on the claims farmers and legal insurers. The idea is to help the claimant and the lawyer come together directly via the website, with both benefiting financially. “I created The Law Bazaar to highlight the greed of those who are cashing in on the unsuspecting public. There is nothing a claims management company does which the solicitor handling the case cannot do, and therefore there really is no need to involve them,” Andrea says.

With The Law Bazaar, the claimant registers the injury, or other case, online. Andrea explains: “An experienced lawyer will contact the claimant directly­ and pay £150 to The Law Bazaar when taking on the case. The lawyer, who is around £600 better off than buying claims from CMCs, is in a position to offer money to the claimant in addition to the damages relating to the case. Our site is free and anonymous.”

But Barry Fitton of The Claim Squad, which specialises in accident and injury compensation, disputes some of these assertions. “We’ve been around for over 10 years, so I don’t have a problem with competition. But it has to be like-for-like. We do charge lawyers more because we offer more. We only get paid once a case is accepted, so we have to filter out the no-hopers.

“We put together a lot of the documentation, so saving lawyer time and we give many hours free advice. And because we spend a lot on selecting the right lawyer for the right client, we can offer the best possible service.”

t.levene@guardian.co.uk