Is AARP making money but losing its way?

I rarely get as much response as I did from a recent column about a Philadelphia consumer who was disturbed by high price quotes he'd gotten for AARP auto insurance. He's still waiting for an explanation beyond the obvious - that auto coverage is so complex nowadays that next-door neighbors may get widely varying quotes from the same company, and no single company offers the best deal to anyone - for premiums that were three or four times as high as his current coverage.

Many readers focused on the devil's bargain made by AARP: It supports its extensive advocacy work by licensing its name and marketing products through a for-profit subsidiary, and sometimes the potential conflicts-of-interest are painfully obvious. AARP threw its weight beyond President Bush's prescription-drug plan for Medicare - its support was probably the single biggest key to its passage. Now AARP stands to profit from marketing a Medicare Part D prescription plan.

Last year, I discovered when I looked at AARP's financial reports, its royalties and related fees brought in $350 million. Today's New York Times points out how AARP is upping the ante on its commercial ventures.

As the Times' Claudia Deutsch reports, AARP has big plans for next year, with these products in its wings:

There is an investment fund aimed at people over 50, the first such product it has developed on its own. There is a consulting service to help companies develop their own products for the 50-plus crowd. There is a "seal of approval" program in which, for a fee, AARP will endorse products it likes.

AARP is also talking to several drugstores about possibly selling AARP-branded items that are now available only by mail. And it is prodding companies to develop new products for older people, not just passively vetting the products that industry comes up with. For example, it is looking for a telecommunications partner to help it devise an elder-friendly cellphone service, and for vendors who will make easy-to-open luggage, better home lighting and other products that AARP can sell.

"We're finally being proactive, instead of waiting for companies to come to us with ideas, " said Dawn Sweeney, president of AARP Services, the for-profit subsidiary that handles product sales.

Judging from what I heard - much of it from AARP members - the group has a big-time brand identity problem. It risks losing at least a little credibility each time somebody discovers that just because it says AARP, it isn't necessarily a good deal for seniors.

Is AARP an advocacy group, or is it something else?

Could rogue geeks raid my bank account?

We've been chattering for years about the checkless future, but this new study by MasterCard still takes me by surprise. Does anybody else worry that this flood of direct debits may magnify the potential for huge frauds? Those concerns aren't theoretical. We recently learned, for instance, how an insiders' scheme almost took down Britain's ATM system in the 1990s?

I advise people all the time to scrutinize every statement, not only from their credit-card companies but also from their banks and phone companies. Any business that has the ability to sneak off with small amounts of money from large numbers of people is at risk from computer-savvy employees who've "gone rogue," as the Brits so smartly put it. Nowadays, the booty could wind up with terrorist cells as well as with ordinary criminals.

I use my American Express card and direct bank debits to pay bills, for the convenience and because some companies offer incentives. The MasterCard study is oddly silent on the latter method, though it may wrap them in with "debit-card" payments. If it's a MasterCard or Visa debit card, of course, the business probably has to cough up a bigger service fee - a cost you'll end up paying eventually, of course, in higher prices.

But convenience aside, the new system we're so blithely adopting gives me the creeps: It vastly increases the number of businesses that have the keys to my bank account, and offers a wider playing field for the rogues.

This new efficiency could come at a very high price.

For Recurring Bills, Automatic Payments Now Surpass Checks, Study Says

Surprising data put out today from MasterCard International. Here are some excerpts from its news release:

Automatic payments have for the first time surpassed check writing as the dominant method for paying recurring bills, according to the results of a MasterCard International consumer research study released today.

The 2005 MasterCard Recurring Payments Awareness, Behavior & Attitude study showed that more than two thirds ofU.S. households (67 percent) now pay some recurring bills automatically compared to those writing checks (64 percent). Nearly four in ten households link payments automatically to a credit card (38 percent) and three in ten households charge them automatically to a debit card (31 percent). [What about direct debits from a checking account not linked to a MasterCard or Visa debit card? The release doesn't say, but presumably they're wrapped in with the debit-card payments, even if they don't generate the same rich service fees.]

In addition, among automatic bill paying households, the number of bills paid automatically rose in the last five years, from an average of 3.1 bills per household in 2000 to 4.4 bills today. During the same period, the number of checks written declined by nearly 50 percent, from 4.4 to 2.4 among these households.

"Consumers have enthusiastically embraced the convenience of using their credit and debit cards to automatically pay their recurring bills," said Donna Johnson, Vice President, New Markets, US Acceptance, MasterCard International. "They value knowing their bills are paid on-time, without worrying about late fees, and even earning rewards, depending on the payment card they use. While there’s still plenty of room to grow, our study shows that more consumers than ever realize that checks simply cannot match the advantages of automatically paying recurring bills through a credit or debit card," added Johnson.

While credit card-based recurring payments remain the number-one method of automatically paying bills, debit-card payments have shown the most growth, with the proportion of households using debit cards to automatically pay recurring bills increasing from 26 percent in 2000 to 31 percent in 2005.

The survey also found that nearly half of the credit cardholders (47 percent) and more than half of debit cardholders (53percent) would consider adopting or adding additional recurring payments. The service categories with the highest proportion of customers using an automatic method for paying recurring bills include telecom, online/internet services, health club memberships, Internet service providers, commuting expenses and toll-paying.

Nearly six in ten (57 percent) consumers who use debit card recurring payments, and half (50 percent) of those using credit card recurring payments, cited convenience as their primary motivation to begin automatic recurring payments. About two-thirds of consumers (67 percent who use debit card recurring payments; 64 percent who use credit card recurring payments) said convenience was the reason they continued to use the recurring payments option.

About the 2005 MasterCard Recurring Payments Awareness, Behavior & Attitude Study MasterCard International commissioned the study as a part of an ongoing effort to better understand recurring payment behavior and attitudes among consumers, including the use and appeal of different payment methods. In 2000 and 2003, MasterCard commissioned related studies, which were used as benchmarks for this year’s findings.

From May 25 - June 5, 2005, MasterCard International conducted in-person interviews with 762 consumers from 25 geographically dispersed markets. Of the 762 respondents, half were men and half were women. All respondents were between the ages of 21 and64, responsible for most/all of their household bill paying, and owned a personal credit card and/or debit/check card. The margin of error for 762 completed interviews is +/- 3 percent.

Tales of the Marketplace, Vol. 2

I wrote a column this morning about a Philadelphia resident who keeps on getting outsize auto-insurance prices from AARP – triple or even quadruple what he’s currently paying, and twice as high as any quote he’s gotten in the same period from any other insurer.

So far, readers’ response seems to be split. Some think I was unfairly trashing the Hartford subsidiary that offered coverage for prices ranging from about $6,000 to $7,500 a year. Usually their reason was that Hartford had been good for them.

Others think I was unfairly trashing AARP, which essentially licenses its name to Hartford, as it does to other companies for other kinds of insurance. Usually their reason was that AARP insurance had been good for them.

And some said right on, often because they, too, had gotten expensive quotes or coverage through AARP or directly from Hartford.

I’ll post some of their stories later, but many of the responses missed a key point: that with auto-insurance prices based on complicated formulas and personal data – including credit information and territories that companies are free to draw however they wish – it’s impossible to say that one company or another in general offers the best prices. That's why it's absolutely essential to shop around.

I’ve seen this over and over again, and I see it in the calls and e-mails from readers today: The same company can offer the best deal to one customer and the worst deal to another – and that second person can living across the region or across the street.

The point is to check as many prices as possible. And that' no slap at Hartford or AARP.