NEW YORK - Arthur Laupus joined AARP because he thought the nonprofit senior citizen advocacy group would make his retirement years easier. He signed up for an auto insurance policy endorsed by AARP, believing the advertising that said he would save money.

He didn't. When Laupus, 71, compared his car insurance rate with a dozen other companies, he found he was paying twice the average. Why? One reason, he learned, was because AARP was taking a cut out of his premium before sending the money to Hartford Financial Services Group, the provider of the coverage.

Laupus stumbled onto something that many members of the world's largest seniors' organization don't know: The group, formerly called American Association of Retired Persons, collects hundreds of millions of dollars annually from insurers who pay for AARP's endorsement of their policies.

The insurance companies build the cost of these so-called royalties and fees, which amounted to $497.6 million in 2007, into the premiums they charge AARP members, according to AARP's consolidated financial statement for that year.

AARP uses the royalties and fees to fund about half the expenses that pay for activities such as publishing brochures about health care and consumer fraud - as well as for paying down the $200 million bond debt that funded the association's marble and brass-studded Washington headquarters.

In addition, AARP holds clients' insurance premiums for as long as a month and invests the money, which added $40.4 million to its revenue in 2007.

"At the end of the day, it's all about fattening the coffers of the organization," says Thomas Orecchio, who was chairman of the Arlington Heights, Ill.-based National Association of Personal Financial Advisors until September. AARP, he says, is sponsoring insurance for its members at inflated prices.

"It's the dirty little secret," he says.

During the past decade, royalties and fees have made up an increasing percentage of AARP's income, rising to 43 percent of its $1.17 billion in revenue in 2007 from 11 percent in 1999, according to AARP data.

Laupus, a former teacher in Baltimore, and millions of others joined AARP in the belief it would provide discounts, services, and publications. The organization ranks behind only Consumer Reports and the American Red Cross as the most trusted large group that influences US politics and business, a 2007 Harris Poll found.

AARP has helped millions with tax returns, estate planning and health care advice.

With stock markets around the world plunging, savings plans in turmoil, and medical costs soaring, older Americans need an advocacy organization in their corner.

"The turbulent economy puts more people in the difficult situation of being under- or uninsured," says Iowa Republican Senator Charles Grassley. "That's why we need to make sure individuals aren't taken advantage of with misleading marketing, especially by a name brand advocate who carries a high level of trust."