What Is AAA, Really?

My AAA membership is up for renewal. I’m talking about the organization that provides emergency roadside service: towing, jumpstarting, and lockout. It used to be American Automobile Association. Now it’s just AAA.

I have been a AAA member for a few years but I still don’t understand what AAA really is. I mean, is it a for-profit company? If so, who owns it? AAA books travel. Who earns the commission? AAA sells auto insurance. Who’s providing the insurance? Does AAA have its own insurance subsidiary or is it just an agent for other insurance companies? If I don’t use AAA travel agents or buy insurance from AAA, am I benefiting from the profits in those areas?

Wikipedia says AAA is a non-profit owned by regional motor clubs. Individuals like myself are members of a regional club, for example AAA Northern New England. It’s still not clear to me whether the regional clubs are for-profit or non-profit. I don’t have auto or homeowners insurance through AAA. Therefore I don’t know who’s behind the insurance. If anyone knows for sure, please help.

Suppose the regional clubs are non-profit. Then they are a form of a co-operative. People band together and provide services to themselves, either in-house or by contract with outside providers. That’s how Vanguard, mutual insurance companies, credit unions, and homeowners associations are organized. A retail chain store I frequent called REI is also organized as a co-operative. Costco, on the other hand, is a for-profit company, although it also charges membership fees. In the health care field, the Kaiser Foundation Health Plan is a non-profit co-operative which contracts with Kaiser hospitals and Permanente doctors, unlike other health insurance companies which are in it for profit.

I wonder why we don’t see more co-operatives. I can see the lack of profit prospect makes people less motivated to start these. But how did these co-operatives get started in the past? The organizers knew there wouldn’t be profit. Was it easier to start a co-operative in the past but more difficult now?

It’s also interesting to note that a co-operative structure does not guarantee the lowest cost or the highest quality. Vanguard does very well in both cost and quality. State Farm as a mutual insurance company isn’t necessarily the least expensive. Other stores often beat REI in prices although REI has a better return policy. For towing and jumpstarting? I don’t know if other companies do it better or cheaper than AAA because I don’t have any experience with others.

The roadside assistance option from auto insurance is cheaper than AAA membership. I wonder if I should use that instead, or just pay out-of-pocket if I need service.

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Comments

  1. Wm Tanksley says

    I’ve been very happy with my AAA… Except that I’ve used the lockout help more than I’d care to recount :-), but it’s always been a positive experience.

    Add in the occasional restaurant discount — if you normally go to any that happen to offer a AAA discount, it’s often reasonably good — and perhaps some of the other member services, if you use them (I don’t).

    Anyone have any experience with the roadside service from other providers (insurance, cell phones, etc)?

    -Wm

  2. daddy dub says

    The downside to using the roadside assistance option through your car insurance is that it can lead to being “uprated”, aka paying more. Most insurance providers would prefer that you have no claims whatsoever.

  3. Mike says

    It’s generally cheaper to self-insure whenever you can afford to take the risk. That said, if the insurance premium is reasonable and it gives you peace of mind, the intangible benefits may make up for the cost.

  4. Dave C. says

    I’ve also been wondering if I should forget about AAA and just use the roadside assistance plans with my car insurance. AAA provides a lot of other perks though, that insurers don’t really give, like discounts on travel and such.

  5. longerDollar says

    I use the roadside assistance with my insurance provider – they charge $8 per 6 months (costing me $16 / year). The only downside to this is – i can avail it only for the insured car. If you have more than 1 car, you have to buy this on each car making it almost as expensive (or more) as the AAA coverage. Also AAA does provide other services home/auto insurance and their rates are competitive.
    I switched to insurance last year, since most of my travel is booked through travel websites which dont let you apply AAA discounts during booking.

  6. JT says

    I joined AAA 3 years back ..I would say I am more than happy with the membership.Every year it gives me back much more than what I spent for the membership.I addition to that I have the peace of mind that I can get immediate assistance if I encounter any issues with the car…

  7. JT says

    I have a health insurance background. I decided to shop my policy around. I am in New England Region. Being a new AAA member I called AAA for auto quote. The representative John was very nice and helpful but BUYER BEWARE when he told me that my policy would be for 6 months and not 12 months.I was surprised. He told me the reason, the State of Nh is now requiring 6 month policies..TRUTH METER FALSE I contacted the NH Div of Insurance There is NO NH law on this Truth IS AAA registered with the state of NH to only sell 6 month polices. Oh Gosh lie number 2, I was told that the State of NH has a law that the minimum amount of Rental Insurance you can purchase is 30,000 .TRUTH METER FALSE . AAA should know better. Telling consumers lies will get you in the end and it looks overall bad for your business.

  8. Fern says

    Did you ever find out the answer to your question of what is the nature of AAA, cooperative or other?

    By the way, coops are not necessarily non-profit. I am a member of a food coop which is counted as for-profit. For any profits, the Board of Directors decides how much to reinvest into the business, use to pay down debt, or send out as patronage refunds or dividend checks to the membership. Such distributions are usually tied to the amount of one’s purchases for the year.

  9. Fern says

    I meant to add that I have AAA membership and car insurance, and have been wondering about what AAA is, too – so I was looking for answers and found your page here.

    I will click the box to get follow-up comments via email.

    Thanks!

  10. john says

    Great service and great AAA member discounts. Just beware that once you sign up, they will raise your rates EVERY year. Not much, but a slow bleed. There is “nothing they can do.” Good economy or bad economy, they go up. I know it’s nit picking and value outweighs cost, but c’mon. I can’t raise my rates every year. Looking at BP Auto club again.

  11. Ty says

    Do NOT get road side assistance from your Insurance company. Every time you use it they count it as a claim and you don’t want claims because it increases your insurance rates.

    Stick with AAA, it’ll save you money in the long run.

  12. R. Fox says

    It’s funny- the original question”Who really owns AAA has never been answered ?

    I am a CAA member. I bet it is all owned by some family in the US and it is really a private for profit company running under the guise (costume) of coop type membership organization.

    I have never seen Board of Director ballots or annual (or quarterly ) financial statements nor have I seen any discussion of financial surpluses.

    Does anybody know the answer ?
    Who really is making the money from AAA ?

  13. D. Barthlow says

    Here goes:

    The insurance agency component writes policies for both a AAA subsidiary, as well as other companies. The insurance company that AAA Northern New England uses is owned by Auto Club of Southern California, and it is one of the largest insurance companies in California.

    There are some independent clubs and several regional super clubs in therm of size. AAA Northern New England is owned by Auto Club of Southern California.

    The organization is set up a private not for profit, similar to what health insurance companies like Blue Cross were before privatizing. Profits from areas such as travel or insurance go back in to defray the actual costs of dues, as road service costs are actually higher than what you actually pay. This collateral income keeps those costs lower.

    You do not get a “vote” or financial statements, as a member you are not an owner, there are no owners, and the Board of Directors for the next term is nominated and elected by the existing Board, so if you want reliable road service stick with AAA, if you’re looking to have control over the organization then go out and start your own damn auto club. Get a life!!

  14. R. Fox says

    “There are no owners” There are assets ! Don’t think so.

    Seems to be a big commitment to a message here ! Why ?

  15. D.Barthlow says

    In the event that the organization were to disband or convert to For-Profit, then the proceeds would be converted to a charitable trust that would advance the original mission/purpose of the Organization. This is exactly what Health Insurance Companies (Blue Cross) , Student Loan Companies (Sallie Mae) and others have done throughout the Country, and is provided for as an option in the Tax Code revisions from 1996. In the event that no such conversion occurs, any profits are simply poured back into

    You never voted on Blue Cross’s Board of Directors, or Sallie Mae’s directors before they converted to a for profit, now publicly traded company. You never have voted on AAA Northern New England’s Directors. The law specifically allows for not for profits to provide this mechanism to the Board of Directors of an Organization to perpetuate its own nominees.

    Sorry to disappoint you, but your meager membership dues aren’t going to entitle you to a “Share” of AAA.

  16. Miss D says

    Speaking from the roadside assistance providers standpoint, AAA is NOT your best option. While they do treat their members well, they have no respect towards their towing vendors. They will tell the member 30min ETA when in fact the towing vendor told AAA it would be at least an hour, making the vendors looks bad. They also took away business from several small companies that had been working with AAA for years, giving it to a new company that just started up in our town. They randomly decide not to pay the vendors on invoices, and when we call for help, we are dealing with rudeness.

    If possible use ANYONE but AAA. Other roadside assistance programs offer just as good rates, services, etc and they treat their vendors with respect. AAA just abuses towing vendors.

  17. MIKE NIKOLAS says

    AAA is more about cross selling products and services then they are about Road Side services. It would be very interesting to see an audited breakdown of their revenues and expenditures. Roadside service vendors are paid substandard fees. It would be interesting to see a study conducted to calculate what the true costs of road side services is. AAA looks like a hero the motoring public but the truth is this so-called non-profit has done more harm than good to the economic well being of the Towing Industry.

  18. Mary Shiner says

    My AAA insurance went up $300 for 2012 and we both have good driving records and no accidents. The agent said it was because Michigan has the highest unlimited medical than anyone and that is what went up. She said she could drop my rate considerably (like $700 for the whole year) with a 6 mo policy through one of their other AAA companies. What other AAA companies? This is what I don’t understand and it was never offered to me before. Any comments would be welcomed.

  19. Louis Horman says

    I see no clear answer to “what is AAA”? AAA Mid-Atlantic has financials for 2008 and 2009 on it’s web site with an unbelievable range of income/loss shown (millions). Most of expenses seem to be “other” with no indication of what executives and board of directiors are paid much less any bonuses/fringe (free cruises?). There is some indications of “taxes”. With membership in the millions, it would seem we would know where and who we are sending our dues/premiums to each year.

  20. jm says

    WHAT AAA HAS DONE TO THE TOWING INDUSTRY
    WHAT STARTED THIS INVESTIGATION/STUDY WAS WHY DRIVERS WERE BEING PAID VERY LOW WAGES?
    I WANTED TO FIND OUT WHY TOW TRUCK DRIVERS IN GENERAL ARE PAID FAR LESS THAN MOST PROFESSIONS.
    WHAT IS COMPENSATION PAY FOR DRIVERS DOING AAA TOWING?
    MY FACTS SHOW HOURLY ARE PAID LESS THAN $11.00 AN HOUR NO BENEFITS.OTHERS ARE PAID COMMISSION WHICH IS 35% OF TOW,THAT WOULD BE $9.45 PER $27.00 CALL.BASIC TOW OR SERVICE AAA RATE IS $27.00
    DRIVERS WORK MORE THAN 48 HOURS A WEEK AND DON’T EVEN MAKE $25,000 A YEAR AND NO BENEFITS.

    WHAT I UNCOVERED WAS THAT $27.00 A CALL FOR TRUCK,DRIVER AND FUEL BARELY COVERED EXPENSES.THERE IS ABOUT 15% CHANCE THAT YOU WILL NOT COVER YOUR COSTS.
    FACTS
    AAA CONTROLS MORE TOWS THAN ANYBODY IN THE WORLD.
    AAA HAS TAKEN ALL PROFIT OUT OF THESE TOWS.
    AAA MAKES MILLIONS AND MILLIONS IN PROFITS.

    THE COMPANIES THAT TOW FOR AAA
    WHAT I UNCOVERED WAS THAT THERE WERE TWO DIFFERENT KINDS OF COMPANIES THAT TOW FOR AAA.
    THOSE THAT DO LESS THAN 4O% AAA TOWS.THEY USE AAA FOR FILL-IN WORK. THE TERM THEY USED IS BREAK-EVEN TOWS.
    2. COMPANIES THAT DO MORE THAN 75% AAA TOWING.THESE COMPANIES ARE THE ONES THAT ARE DOING MOSTLY AAA BREAK EVEN TOWS.

    THE DRIVERS

    DRIVERS WORK IN SNOW,RAIN,HOT OR COLD.WORK PERFORMED TIRE CHANGES,JUMP-STARTS,LOCKOUTS,AND TOWING.WHEN YOU BREAK DOWN ANYTIME AND ANYWHERE THERE WILL BE A TRUCK AND DRIVER.I TALKED TO OVER 20 DRIVERS AND ASKED IF ANY EVER MADE OVER $30,000 IN A YEAR WORKING AS TOW TRUCK DRIVER,THEY ALL SAID NO.ALL DRIVERS SAID THEY WORKED OVER 48 PLUS HOURS A WEEK.DRIVERS WHO WORK ON COMMISSION DON’T GET PAID FOR WAITING FOR A CALL OR IF TRUCK BREAKS DOWN.A DRIVER CAN GO ALL NIGHT 12 HOURS AND MAKE NOTHING.IMAGINE THAT WAITING ALL NIGHT FOR A CALL YOU FINALLY GET ONE AND YOU MAKE $9.45 ON IT,THAT IS THE AAA WAY OF LIFE.WAS TOLD BY OWNERS AND DRIVERS AAA ABOUT GOA’S[GONE ON ARRIVAL].WHEN A DRIVER SHOWS UP AND CAR IS NOT THERE,THEY DO NOT GET PAID FROM AAA.COMPANY LOSES FUEL COST AND DRIVER LOSES HIS TIME.IT IS VERY DANGEROUS JOB.I READ AN ARTICLE THAT SAID ONE TOW TRUCK DRIVER EVERY WEEK IS KILLED PROVIDING SERVICE.

    CONCLUSION

    WORKING LONG HOURS AND PUTTING YOUR LIFE ON THE LINE,DOES NOT PAY VERY WELL.AAA HAS TAKEN BILLIONS OUT OF TOWING INDUSTRY AT THE EXPENSE OF PEOPLE AND COMPANIES THAT SUPPLY THE SERVICE.I LOOKED AT A LOT OF PROFESSIONS THAT ARE CLOSE TO TOWING AND NOBODY EVEN COMES CLOSE TO MAKING AS LITTLE MONEY AS THEY DO.WHY SHOULDN’T THESE PEOPLE BE ABLE TO MAKE A GOOD LIVING.I COULD NOT FIND ONE AAA DRIVER WHO GOT ANY BENEFITS OR DECENT PAY. I DO HAVE A LOT MORE INFORMATION ON THIS MATTER.I CONTACTED AAA SEVERAL TIMES. IF YOU WANT TO HELP OR WANT MORE INFORMATION EMAIL AT [email protected] [thank you]

  21. nellai says

    AAA do not have their own car insurance. They do the service of an agent for you to pick best quote from the AAA rated companies in your state. You can switch between the partners if you are not satisfied with the one you have. They are doing the job of finding good car insurance quote with low price and best coverage. But they are not providing car insurance. I know only this much.

  22. Emencee says

    I have AAA roadside asst. Auto ins. Home ins. I also have a gold card for being a member for over 20 years. I’ve had one claim on a new car when an overpass crumbled down on me driving on the express way. One claim when my wife hydroplaned into a car during a rainstorm. Raised two teenage daughters with them. Used them to cover my house ever since I had it built. Never had a claim on my home.
    What do you get for that kind of dedication. Well, you get to feel like an idiot. I currently have full coverage on one car and insurance for the same 1100 square foot house, (tiny). I’ve gone from a few hundred dollars in rates (sure everything used to be cheaper) to now being told my rates are over $4,500 just for auto & home. I could get a better deal if I walked in as a new customer. Of course my $100.00 for my roadside assistance per year does not cover my wife. We have to buy a rider policy of $40 to $60 a year depending on which time of year you buy it.
    AAA is no better than any bank now you would go to for a loan. All the personal attention that was there when I first signed up is completely gone. I had a fantastic agent that went out of her way to do a service that you’re charged for now. Like, getting a monthly service fee to pay your own bill. Isn’t that what they’re there for? To take your money? Are they so busy that they have to charge us extra to take our money?
    Whenever I tried to start a new relationship with a new agent I was told I could just call any agency to speak with any representative. My file could be looked up by anyone. Well, my money will be accepted by anyone. I’ll just have to give less of it.

  23. Bob Thompson says

    AAA has changed since Insurance Agents are no longer being paid renewals. Their focus is selling new business and doing whatever it take to convince you to move forward with the purchase. However, servicing will be promised but now delivered by the agent who sold you the policy. His or her job is to sell X number of policy or he or she will be terminated so who do you think he or she cares more about. There are so many way to make the policy cheaper and you the general consumer will NEVER understand. Be Careful. I am agent and know how the game is played [ unfortunately I can only express this to make myself feel better] AAA has a pending lawsuit here in Southern California for an illegal commission scheme…..google Jill Rogers vs Auto and read all about it !!!!!!!

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