WikiPortallus: USAA.html

United Services Automobile Association (USAA) is a Fortune 500 financial services company. The stated company mission is to offer banking, investing, and insurance to people and families that serve, or served, in the United States military and other selected federal agencies.

The company was one of the pioneers of direct marketing and most of its business is conducted over the Internet or telephone using employees instead of agents. Until the 1960's the bulk of its business was conducted via mail. In the late 1960's USAA began a transition from mail to phone based sales and service. A toll-free number was launched in 1978, and Internet sales and service was launched in 1999 via USAA.COM.

History

The organization was originally called the United States Army Automobile Association. In 1924, the name was changed to United Services Automobile Association, when members of other military services became eligible for membership. The company opened offices in Frankfurt, Germany and London, England, early in its history.

USAA is headquartered in San Antonio, Texas, occupying 286 acres (a former horse farm) with one of the largest single-occupancy buildings in the United States, rivaling the Sears Tower and The Pentagon.³

Lines of business

Property, casualty, and life insurance

USAA offers a wide range of personal property and casualty (P&C) insurance including automobile insurance, homeowner insurance, renters insurance, and valuable personal property insurance. In addition to P&C insurance, USAA provides whole life insurance, term life insurance, and annuities. USAA's life insurance policies, while not completely unique in the industry, are different than most offerings since they do not include a war-exclusion clause⁵ (also known as a "war clause").

Banking

Banking services and credit cards are provided by the USAA Federal Savings Bank. The bank was established on December 30, 1983. According to the FDIC, as of March 2008, the bank held over $28 billion in deposits with more than 3.6 million accounts.⁶

The bank has only one physical location in San Antonio, Texas. Services can be accessed in person, by mail, by phone, or through the internet. The bank provides the ability to deposit checks from home (remote deposit),⁷ ATM fee rebates, free standard checks for the life of the account, free online bill pay, and bank-by-mail services. USAA was one of the few major banks to begin offering American Express cards in 2006 in addition to their traditional offering of Mastercard.⁸

Investing and financial planning

USAA provides a limited discount brokerage service and a family of no-load mutual funds. Mutual funds established by other companies can also be purchased and held in USAA investing accounts. USAA also offers limited free Financial Planning advice, as well as a more thorough flat-fee or hourly-rate financial planning service.

Other business

Through its Alliance Services Company, USAA runs a mail-order catalog service specializing in the sale of diamonds and jewelery. In addition, the ASC secures a variety of discounted services for members. These include travel-related services through rental car alliances with Avis Budget Group and Hertz Corporation, as well as discounts on cruise travel. Their retail alliances also include partnerships with Teleflora, FedEx, and ADT Security Services.⁹

For its own investment purposes, USAA operates a real estate company¹⁰ which has holdings including major office buildings, industrial buildings, hotels, and other properties throughout the country.

Target market

USAA's mission statement indicates its focus is to serve its niche market, which consists of members of the U.S. military and their families. To that end, they have always marketed directly to members of the U.S. military. USAA membership is offered to officers and enlisted personnel, including those on active duty, those in the National Guard and Reserve, and those who have retired, regardless of retirement date. All honorably discharged veterans who have separated since 1996 are also eligible.¹¹ Children of USAA members are also eligible to purchase USAA's P&C insurance products, and former members of USAA are allowed to resume membership at any time (without an age limit).

Eligibility can be determined using its website;¹² however, the site does not contain a comprehensive statement of eligibility. USAA has, in the past, published a list¹³ of other eligible persons including special agents of the FBI and Secret Service, agents of the various military investigative services (NCIS, OSI, and CID), U.S. Foreign Service Officers, and officers from a variety of other smaller agencies. Recently, USAA has been sharpening its focus on members of the military. So, people working for certain non-military agencies that were accommodated in the past may find that they are no longer eligible.¹⁴

Historically, only U.S. military officers (among certain other federally sworn officers) were eligible to join USAA, with descendants of USAA members able to purchase insurance from USAA-CIC. It did not matter if one was an active duty or retired officer; one could join at any time. In 1973, membership was opened to members of the National Guard and Reserves, and in 1996, eligibility was expanded to enlisted members of the armed services. As the number of persons who have served on active duty in an enlisted status in the U.S. Armed Forces is quite large, USAA chose to limit the establishment of eligibility to those who were currently on active duty or who had recently separated. The same time limit on establishment of eligibility was then applied to military officers. As USAA's capacity for taking on new members expanded, eligibility criteria relaxed. Membership eligibility is now available to all military personnel and retirees, and all veterans who separated after 1996.¹¹

While most USAA services require that the customer meet membership eligibility criteria, USAA investment and life insurance products are available to non-members.¹⁵

Legal structure

One of the characteristics that allows USAA to operate differently than almost every other Fortune 500 company is that it is not a corporation. The parent company, United Services Automobile Association is an inter-insurance exchange, the establishment of which is provided for under the Texas Insurance Code.¹⁶ This insurance exchange is made up of current and former military officers and NCOs who have taken out P&C policies with USAA; thus they simultaneously are insured by each other and, as a group, own USAA's assets. Theoretically, this implies that each member could be held completely responsible for all the losses of all the other members. However, the insurance code (Sec 942.142) stipulates that should an entity such as USAA accrue a substantial amount of assets, member liability is limited only to the premiums they have paid to USAA. In other words, if an enormous disaster were to result in claims that would wipe out all the assets of USAA, individual members could not legally be called upon to pay for any amount USAA is unable to pay out in claims.

Other insurance services are provided by a variety of wholly-owned subsidiaries. Adult children of USAA members and U.S. military junior enlisted personnel make up a group known at USAA as "associate members" insured through a subsidiary called USAA-Casualty Insurance Company (USAA-CIC). USAA-CIC is not an insurance exchange but rather a Delaware Insurance Corporation. This is a subtle nuance but is important concerning the return of profits - described below. Non-standard-risk drivers are insured by subsidiaries like USAA's County Mutual Insurance Company or USAA-General Indemnity Company. USAA also insures members in Europe through its subsidiary, USAA Limited. Providing international P&C coverage is uncommon for U.S. based insurance companies, but is provided because so many military families are stationed out-of-country.

Returning profits to the insured

Since there are no shareholders, profits are retained for financial strength or returned to the members. Returns are accomplished through a Subscriber's Savings Account, or SSA. Each year a portion of USAA's profit is retained as "unassigned," the rest is allocated to each member's SSA using a formula based on the amount of premium the member paid that year as well as the member's SSA balance. The allocation of capital to a member's SSA account occurs early in the calendar year. Late in the calendar year a portion of the member's SSA is distributed to the member via checks or electronic funds transfer. Members with more than 40 years of membership also receive a special yearly "senior bonus" distribution which amounts to 10% of the member's SSA balance. The entirety of the SSA belongs to the member, but is only completely distributed until approximately 6 months after the member no longer has a USAA P&C policy.¹⁷ In 2007 the distribution amounted to 4% of the member's SSA balance.

Associate members sometimes receive policy dividends instead of distributions of profits, since they are not members of the insurance exchange.

Miscellaneous information

The stated mission of USAA is to facilitate the financial security of its members, associates and their families through provision of a full range of highly competitive financial products and services. In so doing, USAA seeks to be the provider of choice for the military community.¹⁸

USAA experienced much of its growth under former CEO, retired Air Force Brigadier General Robert F. McDermott. The USAA building was constructed under his tenure and McDermott was also the driving force behind USAA's shift from service-by-mail to service-by-phone.²⁰ He was succeeded as CEO by retired Air Force General Robert T. Herres.²¹ It was under the leadership of Herres that USAA expanded its services to enlisted members of the military and ventured into Internet based financial services.²²

Financial ratings

Since it is not a publicly traded corporation, USAA is not bound by the same corporate governance rules as publicly traded companies. Even so, USAA is subject to insurance regulation and examination by all 50 states as well as federal entities like the SEC, FTC, and FDIC. In addition, its records are audited by Ernst & Young as well as the major financial rating agencies.

Service ratings

USAA has consistently received the highest customer service ratings available to all financial services companies, including those not in its niche. For its highly-rated customer service, in 2002 JD Power awarded USAA with its Chairman's Award²³, which at that time had been awarded to ten companies, none of them in the financial services arena. Since then, USAA has remained at the top of the JD Power ratings for auto insurance²⁴²⁵ ²⁶, home insurance ²⁷, mortgages ²⁸, and home equity loans ²⁹.

In their March 5, 2007 issue, BusinessWeek³⁰ ranked USAA first in their list³¹ of "Customer Service Champs", a list of 25 national businesses which included the likes of Four Seasons Hotels, Lexus and Starbucks. USAA repeated as first on BusinessWeek's list in their March 3, 2008 issue.³²

A 2007 Forrester Research report referenced in the San Antonio Express-News on June 27, 2007,³³ identified USAA as the leader in customer advocacy based on a customer survey. Eighty-eight percent of the USAA customers surveyed said "My financial provider does what's best for me, not just its own bottom line." No other company evaluated scored higher than 78%. USAA retained the top spot on Forrester Research's study in 2008.³⁴.

Employment

USAA employs more than 22,700 personnel at its offices throughout the country.¹ It has been recognized for many years as one of the 50 best corporations for career advancement for Latinas in the US.³⁵³⁶ It has been recognized as a "Military Spouse-Friendly Employer"³⁷ and has also been recognized by GI Jobs as one of America's best employers for veterans and reservists.³⁸

USAA was ranked 17th on the Computerworld 100 Best Places to Work for IT Professionals in 2006,³⁹ 39th in 2007,⁴⁰ and 20th in 2008.⁴¹ In the 2007 Computerworld rating only one company with more IT employees was ranked higher than USAA and only one Texas company with 100 IT employees was rated higher. Like many Fortune 500 companies USAA utilizes third party IT contractors.

Competition

In focusing its efforts to serve only its niche, USAA is unique in that it is the only Fortune 500 financial services company that focuses primarily on serving members of the U.S. Military and their families.

Insurance

Of the top ten automobile insurance competitors, USAA is the only provider that restricts service to members, and their families, of the United States military.⁴²

Banking

References

^ ^a ^b ^c ^d ^e ^f ^g "USAA 2007 Report to Members." Retrieved on July 31, 2008.
^ Spechler, Jay W. (1996). Reasonable Accommodation: Profitable Compliance With the Americans With Disabilities Act. , p. 229.
^ Chordas, Lori (November 1, 2002), "The ultimate niche: USAA's commitment to serving only people connected to the military, and its unusual structure and sales strategy, set it apart from the rest of the insurance industry.", Goliath Business News, http://goliath.ecnext.com/coms2/summary_0199-2199998_ITM, retrieved on 8 February 2008
^ USAA fact sheet retrieved April 16, 2008
^ Answers.com
^ FDIC Bank information search results for USAA, retrieved August 15, 2008
^ USAA, com secure site
^ American Express.com
^ [1]
^ [2]
^ ^a ^b "http://www.armytimes.com/news/2008/08/military_usaamembership_080908w/ USAA expanding its membership base, Army Times, Retrieved August 10, 2008"
^ usaa.com
^ Eligibility
^ Afsa.org
^ BusinessWire Press Release
^ http://tlo2.tlc.state.tx.us/statutes/docs/IN/content/word/in.006.00.000942.00.doc
^ USAA Subscriber Savings Account Brochure, January, 2008
^ About USAA
^ List of USAA locations from their employment site
^ Former USAA CEO McDermott dies at 86, San Antonio Business Journal, August 28, 2006, retrieved September 18, 2008
^ Herres, former CEO of USAA and space program leader, dies at 75, San Antonio Express-News, July 25, 2008, retrieved September 18, 2008
^ Hendricks, David; "Herres took action to strengthen USAA", San Antonio Express-News, July 25, 2008, retrieved September 18, 2008
^ "USAA Receives Chairman's Award", San Antonio Business Journal, Retrieved on 15 Sept 2008
^ JD Power 2008 National Auto Insurance Study
^ JD Power 2007 Collision Repair Satisfaction Study
^ JD Power 2008 Insurance New Buyer Study
^ JD Power 2007 National Homeowners Insurance Study
^ JD Power 2008 Primary Mortgage Servicer Study
^ JD Power 2007 Home Equity Line/Loan Servicer Study
^ Business Week
^ Business Week
^ Business Week
^ San Antonio Express-News
^ 2008 Forrester Research Press Release
^ Latina Style 2008 Press Release
^ USAA press release regarding Latina Style rankings
^ Military.com article about Military Spouse rankings 2007
^ GI Jobs 2007 List of Best Employers
^ 2006 Computerworld rankings
^ Computerworld 2007 rankings
^ Computerworld 2008 rankings
^ http://www.iii.org/media/facts/statsbyissue/auto/
^ 2nd richest man pays call on S.A., San Antonio Express-News, December 9, 2006, Retrieved September 18, 2008
^ USAA Testimony to U.S. House Committee, June 16, 2005 retrieved September 22, 2008
^ Choosing the right ATM in Germany a high-stakes decision, Stars and Stripes, March 23, 2005 retrieved September 24, 2008

USAA.html

Contents

History

Lines of business

Property, casualty, and life insurance

Banking

Investing and financial planning

Other business

Target market

Legal structure

Returning profits to the insured

Miscellaneous information

Financial ratings

Service ratings

Employment

Competition

Insurance

Banking

References

External links