I get many questions about USAA’s services & products. After six years of their financial conferences and dozens of
interrogations interviews of their executives, I think I’ve learned enough about their business model (and the insurance industry) to help you navigate your choices. My spouse and I have been USAA members since 1981, and now our active-duty daughter (and her active-duty spouse) are also members. We’ve all had plenty of experience with USAA’s customer service around the globe.
This post describes a couple of big-picture issues and then summarizes the statistics in USAA’s annual report. In the “Related articles” section at the bottom of this post, I’ve also linked several of my previous USAA posts.
Bottom line: USAA is one of the country’s best insurance companies. They’re not always the top choice for everything else, and they’re not always the cheapest. However they’re the best in a few areas and very good in many others. Use their insurance strengths to take care of you (and your family). Spend for the insurance (where quality service is important) and consider how their military experience can make your military life easier. For other products & services, compare prices where different financial companies might do better.
The Big Picture
Here’s the fundamental dilemma with the entire insurance industry: you hope that every dollar you spend on premiums is “wasted”. You never want to have a catastrophe. You never want to experience how good an insurance company can be. You never want to deal with adjusters or the bureaucracy.
Yet every time you decide to file a claim, it’s after a casualty. The claim may be the first time you personally experience the company’s service, and you’re probably already stressed. You’ve already suffered trauma, yet only now are you going to learn whether your insurance is really worth your money.
It’s even worse when you’re constantly pelted by advertising about lower premiums. If a corporate cartoon mascot tells us we’re “paying too much for insurance” then we feel like idiots for missing out. People don’t make insurance claims very often so we can’t really tell whether the competing companies are that much better, or whether they’re just cutting corners. Are corporations really that technologically advanced, or are they simply grabbing for market share with incredibly risky policies while hoping that nothing bad happens?
When you’re in uniform, every transfer starts a new round of shopping for vehicle and property insurance in a new location with new rules (and new prices). Even after the military you’re still changing your insurance for different stages of your life (like a bigger umbrella liability policy), and each situation is new to you.
The Big Choices
How do you solve the puzzles and make your choices?
The short answer: use third-party ratings from customers like you, and check the information in the annual reports.
Individual customers post their experiences in every Facebook group (especially when they’re bad), but you can summarize millions of those ratings by checking the third-party customer-service surveys and awards. When customer advocates rank a company’s service, you can see how that stacks up against other companies. When industry groups report their best corporations, you can see who’s doing a good job.
Annual reports go on for dozens of pages, but most of us only need to care about the summary. Did the company earn a profit (to pay your claims)? Are they growing bigger and stronger? Do they list their high rankings and awards in those service ratings & surveys, or do they only promote their cheaper premiums?
The Big Numbers
Here’s a summary from USAA’s annual report:
- Annual revenue of $30 billion.
- Nearly $2.3B paid in catastrophe claims. (USAA’s largest annual loss ever.)
- More than $1.5B in distributions, dividends, bank rebates, and rewards.
- Prevented nearly $3.2B in fraud losses.
- Net income of $2.4B.
- Assets over $155B.
- A net worth of $30.6B, up nearly $2B in 2017.
- Membership growth over 500,000 to 12.4 million.
USAA handled nearly 85 million calls from members. (The mobile app handled hundreds of millions of other transactions.)
Member service reps answered 800,000 catastrophe calls.
Nine out of 10 members reported that they were extremely satisfied by USAA’s service.
USAA did this with fewer than 33,000 employees. That’s nearly 400 clients per employee handling over 10 member calls per workday.
Over 25% of new hires in 2017 were veterans and military spouses. My spouse and I are a dual-military couple (and our daughter and son-in-law), so I was interested to learn during my last visit to USAA that literally hundreds of spouses are dual-USAA employees. There’s a reason that veterans want to work at USAA.
USAA’s new employees participate in simulated military training (led by USAA’s military veterans) to better understand what it means to serve.
USAA earned the highest ranking among financial services companies in the RepTrak 100 Most Reputable Companies in America list, and #36 overall.
USAA’s Educational Foundation discussed financial readiness with nearly 250,000 people through formal military training, seminars, sponsored events and ROTC programs. We all complain that the military needs better financial literacy training, but I’ve watched USAA in action– and our daughter learned a lot too.
The Other Big Companies
Let me help you expedite your insurance shopping. Compare USAA’s numbers above to some of their competitors:
(GEICO is a subsidiary of Berkshire Hathaway, and their numbers are not as detailed. You can start with the GEICO summary on page 65 of Berkshire’s annual report. And, yeah, I’ve owned Berkshire “B” shares since 2001.)
Armed Forces Insurance is still working on their 2017 annual report, but you can check their 2016 annual report. (My spouse and I have been AFI members since 1979.) They also offer vehicle insurance in some states.
The Big Conclusion
USAA’s insurance is the biggest part of their business, but it’s just one part. They’re happy to offer trust, consolidation, and convenience with other financial services at a small markup.
However USAA’s core business will always be insurance, and their policy is that every product or service has to pay for itself. They won’t compete on loss leaders in financial investments, CDs, business checking, rewards credit cards, mortgages, or anything else which other companies may subsidize with “soft dollar” marketing. (Don’t get me started on business checking for military entrepreneurs.) USAA’s insurance products won’t even compete on price for market share, let alone their collateral business lines.
USAA’s insurance decisions are based on risk, and they’re priced appropriately for that risk. Our member dollars are not spent on a frantic grab for market share in a race to the bottom. If your vehicle premiums seem expensive, or if USAA won’t even insure your home, then it’s a sign that other hypercompetitive insurance companies could be taking imprudent risks with your premium dollars.
(Pro tips: If USAA seems expensive then try boosting deductibles or dropping vehicle comprehensive/collision insurance. Years ago when USAA temporarily stopped insuring some Hawaii homes against hurricanes, we went with Armed Forces Insurance.)
USAA has an outstanding track record at putting your military financial life in one member number with full service for those 3 AM calls from overseas. They’re frequently the first team to visit your neighborhood after the hurricane destroyed your home. They’ll answer the phone when you have an auto accident during a PCS. You can also speed up your claim by using the mobile app.
USAA still wants members for life: from military kids through military service, and all the way to your estate planning.
What questions do you have about USAA’s products or services? If I don’t have the answer in the comments, then I’ll find out!
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