USAA Answers Your Insurance And Financial Questions

This was the best conference yet!

For those who are just joining us, last month I polled people’s questions about USAA’s insurance and financial programs. I brought those issues to the Digital Military Experience with USAA’s Communications team, other program managers, and several executives.

But first, it’s time for another snark disclosure.

I’ve been financially independent for nearly 20 years, and USAA’s generous conference has not affected that. However I’ve learned a lot about optimizing your insurance expenses, and you can save hundreds of dollars on your premiums too. You’ll find more links to money-saving insurance techniques in this post.

The group photo of rockstar entrepreneurs and bloggers.

The big-picture answers

Let me address the broad questions first. Over 60 million Americans are eligible for USAA membership, and only about 12 million of them have signed up. (Note: just about every American is eligible to buy USAA’s mutual funds and life insurance.) USAA seems to generate intense loyalty among their military families, but I’ve also heard from many unhappy members. Some people are in both categories.

I’ve spent many hours talking with USAA’s Communications staff and the Member Advocacy team. If you’re unhappy with a claim or a financial product then I can try to help you with that too. Send me the details (NordsNords at Gmail) and we’ll ask a Communications team member to put you in touch with Member Advocacy. I can’t promise satisfaction but I can help you make sure that USAA had the chance to do the right thing.

Big-picture pricing

Insurance companies set their prices from probabilities and statistics (plus the laws of over 50 states & territories). USAA estimates the cost of the potential claims in an area, adds in the price of processing and other overhead, and quotes the premiums. Every insurance product and service offered by the company has to pay for itself— there are no competitive discounts against other insurers to grab a bigger share of their market. There are also no “performance incentives” for executives to reduce claims ratios or build a bigger profit margin.

USAA doesn’t know who’s going to file a claim, but they know that higher risks require higher premiums. The vast majority of premiums are based on ZIP codes, and many times those premiums have nothing to do with your driving record or your finances. If you happen to live in a risky area, or if you happen to own risky property, then you’re going to pay more. Otherwise it’s usually not about you– premiums go up or down as USAA adjusts to new risk data in your area.

And yes, USAA has lowered premiums for many members.

Big-picture service

USAA is a surprisingly small company, with only about 32,000 employees and a host of subcontractors. (That’s over 375 members for every employee.) They also have a unique requirement for their products and services (and our premiums): no loss leaders. Every program has to pay its way, and USAA does not subsidize products or services from other revenue. USAA is owned by us members (not by stockholders or execs) and there are no “profit centers”. Every member pays a risk-adjusted premium for claims and overhead expenses. If USAA has a profitable year (with fewer claims or cheaper processing) then they actually refund part of the premiums of military members.

This leads to some service constraints.

First, we should all use insurance for the financial catastrophes that our assets can’t cover. You buy insurance for the disasters which could destroy your lives or your wealth.

Life insurance replaces a loved one’s income (or pays some debts). Vehicle insurance includes liability protection as well as medical expenses and repairs. Most of us can’t afford to rebuild our homes after fires or flooding, and maybe not even our personal property. Umbrella liability policies protect our assets from lawsuits.

Policy service is a big part of protecting your assets. If you’re flooded out of your home by a hurricane, you don’t want to spend weeks negotiating your claim. You can’t take time off from work (or come home from deployment) to spend hours answering questions and doing paperwork.

Second, you can’t judge an insurance company’s service from the price of their premium. I can predict that the cheapest insurance premium probably comes with the least service. Otherwise you have to figure out the service by depending on third-party quality surveys and customer feedback.

You’ll almost always find an insurance company with cheaper premiums. Usually the company is taking on more risk from that loss leader in hopes of charging higher premiums from you in a year or two. It also gives the cheaper company an incentive to cut back on claims service.

How’s your insurance claims service?

If you need insurance to protect you from a disaster, then don’t go cheap. Your premium should support the potential claim service as well. This is particularly important when you’re insuring life, health, liability, and homes. For example, USAA was the first company on the scene in many neighborhoods after hurricanes Harvey and Irma.

Third, when you buy insurance to cover your vehicle or other property, consider your goals: Reimbursement for the depreciated value? Replacement value? Minimal disruption to your life by offering towing and rental vehicles? Minimum coverage required by state law? Overseas protection during travel? Are you going for high-end service or do you simply want asset protection?

If you shop for policies with low premiums, then don’t count on service. I recommend that you buy as little property insurance as you need, set the deductibles as high as you can, and file as few claims as possible. Your goal should be to self-insure whenever possible. Pay up for liability insurance but consider minimizing your vehicle’s comprehensive or collision coverage.

If you shop for service then be ready to pay for it. Review the insurer’s satisfaction surveys from its members and from third-party ratings companies. Consider a member-owned exchange instead of a publicly-listed corporation.

Finally, USAA sets its prices and services for the majority of its members. They’re going to control our expenses with cost-efficient service. This also means huge efforts at technology, automation, and some outsourcing.

USAA offers individual claims service, not individual manual underwriting. If your application requires manual underwriting for life insurance or mortgages or credit cards, then you’re probably going to be unhappy with the extra requirements. (See the paragraphs above about loss leaders and subsidies.) This is a problem if you have a thin credit file (no credit cards or no debt) or if you followed Dave Ramsey’s advice to cut up your cards and close credit accounts.

If you don’t generate much revenue (or if you file more claims than average) then you’re costing the other members money. A minimum-balance requirement can also be an issue if you’re just starting out or have few assets (beginning investors with less than the $3000 minimum for some mutual funds). The good news is that USAA has reduced some of those investing minimums to as little as $500.

Growing the membership

USAA’s advertising and public awareness is a constant sore point with a few vocal members.  “Why is the company wasting our premium dollars to subsidize the National Football League and the Army-Navy game?” Word of mouth should be good enough, right?

A few members even complain about opening membership to enlisted servicemembers, vets, & families. On the other side of the debate, some enlisted veterans refuse to patronize a company which used to be too good for them and is clearly just pandering to them for more revenue.

A few veterans with bad-paper discharges (often unjust and perhaps subject to appeal) are angry that they can’t get USAA policies because the company only insures:

“All who served honorably, and their families.”

My perspective: it’s not about scarcity but rather an attitude of abundance. It’s about all of us sharing our insurance risks across a larger group of members with good financial behavior. It’s about showing more of those 60 million potential members how to reduce their insurance premiums (and to carry their share of our expenses). Insurers want clients who pay for products and services without costing a lot in claims. When there are more members, then the corporation can invest more money in automation and streamlining to reduce its fixed expenses and spread them across more people.

USAA wants more members to help reduce our expenses, and the company’s marketing is simply going where the prospective members are already watching. USAA spent years researching and surveying the entertainment preferences of military servicemembers, veterans, and families. Football was a winner among sports (sorry, NASCAR) while television & YouTube reach millions more prospective members than any other advertising channel. (That’s a lot cheaper than magazine ads and junk mail, too.) USAA is not lining the pockets of sports leagues– NFL execs know what it means to serve, too. USAA tracks these member-acquisition expenses very closely and ensures they have a return on investment.

Meanwhile, during the Salute To Service features, a surprising number of fans are discovering that they’re eligible for membership. (I’ve personally seen this at Pro Bowl fan events— even some active-duty military didn’t know they could join USAA.) Younger members spend more on products and services while they tend to file fewer claims and exhibit better financial behavior with less claims fraud. In this case, my fellow Baby Boomers should be happy that new Millennials and Generation Z members are stepping up on our behalf. My generation’s membership has peaked and frankly it costs more money to take care of our insurance needs.

If your enlistment meant that you couldn’t join USAA before 1996… well… it’s been over 20 years. How long will you hold a grudge? When a military veteran is a USAA member then their family is also eligible for membership. Would your spouse & kids appreciate those benefits?

For those who were separated with inappropriate discharges, I hope the Department of Defense does the right thing for your appeal. Once that’s taken care of, USAA is waiting for you too.

During Digital MilEx we saw a new series of USAA videos for their YouTube channel. If you think NFL Salutes To Service are over the top then you’re going to be blown away by this new lifestyle enthusiasm. (We’ve been asked not to name the topic yet.) Many of you will appreciate what USAA has done to help honor servicemembers, and people in all generations will find that they have more in common about this honor than they realize.

I can also guarantee that you’re not going to see these topics covered by Flo, geckos, or “good hands”.

USAA corporate culture

This was my sixth Digital MilEx since 2011. For the first time ever, we attended a company-wide meeting with the CEO and other executives.  The CEO followed up with a personal brief(!) to us Digital MilEx attendees where he highlighted a few key pieces of data.

It’s flattering that we bloggers have access to the corner office. Even more critically, the employees have personal access to the executives. The CEO’s ID badge has his name on it, but his first name is in the biggest font. He’s addressed by the employees as “Stuart”, not “Mr. Parker” or business acronyms. (I also saw this with the previous CEO at earlier Digital MilExs. He’s retired now, but when he was in the job his name was still “Joe”.) The words “sir” and “ma’am” are part of Texas culture (and respect for age), not required by the chain of command. There wasn’t a necktie in sight during Digital MilEx, let alone a three-piece suit. I saw one very senior exec in old jeans and a USAA polo shirt.

I watched this team camaraderie and information sharing everywhere, not just up on the stage. I’m not looking for a job, but if I was then USAA would be the first place I’d contact.

When Stuart talked with us Digital MilEx attendees after the meeting, he mentioned that USAA has a high member satisfaction rating.  He said he was happy with the company’s general progress, and he’s watching closely as the execs work on a few particular metrics. I’ll watch those too, and I’ll report more progress next year.

Questions and complaints

I’ll address specific reader comments below (anonymously) and follow up in Facebook groups. If you’ve sent me an e-mail then I’ll answer that too. Some of you are already hearing back from USAA.

Declining service

I got a ton of comments on member service.

Mentors? Idols? Inspiration!

Amazingly, USAA’s phone calls only make up 5% of their member interactions. 95% of USAA’s members do their business digitally, and over two-thirds of that 95% are using smartphones. That’s over a billion online transactions per year without even contacting a member service representative. Good thing, too, because there are thousands of members for every rep.

We spent a couple hours at USAA’s headquarters with a dozen frontline member service representatives from all the insurance & financial departments. Part of that included a tour of their MSR Lab.

The good news is that the lab uses rapid-prototyping teams to observe how the MSRs do their jobs and to give them better tools. When you’re unhappy, the MSRs hear about it from hundreds of members and feed it right into the MSR Lab for a fix.

The lab is a small replica of USAA’s call center, with actual reps and actual member calls. The reps can volunteer to work in the lab (instead of in the main call center) for about a year. They offer feedback (“The checkboxes on our screens are too small, and it’s too easy to misroute a call”) and the lab staff can run split tests on software and other techniques. They even test-drive new desks, monitors, chairs, office layouts, and other ergonomics. (Office furniture is one of USAA’s biggest expenses.) “Rapid prototyping” means that the programmers are constantly changing the software (as quickly as a few hours) and rolling out new improvements. They don’t have to ask the CIO or the security staff for permission at every little tweak– they just make better tools and fix things.

The “other” news is that the federal and state regulations are constantly changing, and these rules limit what a rep can discuss with a member– or even see in a member’s file. An auto insurance MSR may be tracking as many as 100 claims at once, and it takes time to hop in & out of the database. A MSR in home insurance might have to transfer a question about life insurance to a different MSR, and that other MSR won’t necessarily have the member’s home-insurance conversation on their monitor.

The better news is that the MSRs have smarter knowledge tools for looking up the details. One rep said that they all have pretty much the same permissions to waive some exceptions in member service. Escalation only has to happen when a rep lacks experience in an area or the member’s needs require coordinating across multiple departments. If you have a gnarly question for a USAA phone call, let them know up front that it’s complicated or covers multiple areas so that they can escalate sooner. Both of you will be happier, too.

Last year a USAA program manager said that the phone system’s Interactive Voice Response software was so old, and its use was declining so rapidly, that for a while they actually considered eliminating it. Today they’re working on a complete replacement. IVRs are going the way of buggy whips, and they’re expensive to create, but it’s important to the members when something can’t be done online. Part of the IVR fix involves figuring out whether the question is routine, so that simpler tasks can be outsourced. Today’s IVR system routes as many as a third of USAA’s calls to (American) contractors.

Pro tip: the Member Service Lab reps said that USAA’s databases put our addresses in a half-dozen different places. When you change your mailing address in the app, it does not necessarily change your address in those other places. (They’re trying to untangle this issue, but it’s a hairball.) If you’re changing your address then send a separate e-mail or text to a member service rep and ask them to change all of your addresses so that all of your mail goes to the right place.

High interest rates (and low interest rates)

We all want higher rates on CDs and lower rates on mortgages.

You’re probably not going to get that loss-leader product from USAA. Every interest rate has to pay for itself, and if you get a higher or lower rate than the competition then it’s pulling dollars out of other members’ pockets.

What you can get from USAA is consolidation, convenience, and trust. All of your insurance and financial accounts can be in one place and handled on one mobile app. If you call from Afghanistan at 3 AM and can’t be home to meet a claims rep, then USAA understands that too. If you want to compete on loss-leader interest rates and market share then try Ally Bank, Navy Federal Credit Union, LoanDepot, and Vanguard. If you want more service and customer support then consider USAA.

USAA mortgages (or not)

Many, many readers commented that USAA’s mortgage approval process is broken. I spoke to the mortgage execs, and they’re keenly aware of the feedback. They’re building a better dashboard for all of the mortgage staff to track the processing of their applications. The status will be visible to both USAA and the member so that each side will know what the other needs and the next step.

874 out of 1000, 40 points ahead of the industry.

USAA constantly reviews the performance of their contractors. I got the distinct impression that there’s going to be some turnover.

If you feel that USAA’s mortgages suck, then I have bad news for you: according to J.D. Powers, the other mortgage companies suck at least as badly.

Last March, a special J.D. Power report found that USAA had the industry’s highest mortgage satisfaction score in the industry. Over 5000 people who borrowed a mortgage or a refinance between 2015-2016 ranked USAA at 874 points (on a 1000-point scale), an improvement of over 70 points from 2015’s survey and over 40 points ahead of the average.

Business checking

USAA has perpetually and consistently frustrated entrepreneurs for years with their lack of business checking. It took us bloggers over a year just to get the execs to understand that there’s a demand for it. In 2011 (over six years ago!) during a Digital MilEx presentation, a banking exec told entrepreneurial military spouses that members just don’t appear to need it. A Facebook poll quickly updated that statement before the exec’s talk was over.

Even when business checking was added to the roadmap, it seemed to take the execs years to figure out how to put the USAA logo on it. (One senior military retiree told me that he could send an entire fleet to sea overnight but he couldn’t get USAA to offer business checking in less than three years.) We’ve found it surprisingly challenging to contact a banking exec for progress reports.

That era may finally be ending. (And this time I really mean it.) USAA’s Innovation Lab showed a prototype service that could be the right way to handle your banking from wherever you run your business. The seed planted all of those years ago is finally growing into a full program. I’ll let you know when the announcement is public.

More questions or complaints for USAA?

I’m linking this post in a number of Facebook groups and forums, and I’m answering all of the messages & e-mails. If you have more issues that you’re not ready to raise with the company yet, then feel free to comment on this post or use the “Contact me” box or e-mail NordsNords at Gmail. I can’t fix it for you but I can share the company’s perspective.

If you’re curious about USAA careers or you’re networking for more info, well, I know people who can help with that too. Many military veterans pursue financial independence because their corporate career is too stressful (for many reasons), but I know several vets & family members at USAA who may just keep showing up for work as long as their badge gets through the door. Just like their military years, they enjoy taking care of people and helping out.

Related articles:

• Your Auto Insurance Premiums Are Rising, But It’s Not Just You
• USAA’s Military Retirement Comparison Tool And The Blended Retirement System
• Lower Life Insurance Premiums From USAA
• USAA’s Digital Shift Is Saving Millions Of Dollars
• Using USAA’s Financial Readiness Score
• Reduce The Cost Of Insuring Your Teen Driver With USAA

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