USAA
From Wikipedia, the free encyclopedia
| United Services Automobile Association
<tr><td colspan="2" style="text-align:center; padding:16px 0 16px 0;">Image:USAA.PNG</td></tr> | |
| Type | Reciprocal |
|---|---|
| Founded | 1922 |
| Headquarters | San Antonio, Texas, USA
<tr><th style="text-align:right; padding-right:0.75em;">Key people</th><td>Robert G. Davis, Chairman & CEO |
United Services Automobile Association (USAA) is a Fortune 500 financial services business which specializes in serving military members and their families. It was founded in 1922 by a group of US Army officers to self-insure each other when they were unable to secure auto insurance due to the perception that they were a high-risk group. It has expanded to provide both military officers and enlisted members of all US Armed Forces and their descendants an array of property & casualty insurance, banking, life insurance, and investment services. USAA was one of the pioneers of direct marketing and most of its business is conducted over the telephone or the internet.
Contents |
Lines of Business
Insurance
The principal operating entity at USAA group is a reciprocal interinsurance exchange; this relatively unique entity issues automobile and property insurance policies to over over a million members, most of whom have been on active duty in the military or have served in another federal government capacity. Other insurance services are provided by a variety of wholly-owned subsidiaries. Adult children of USAA members, as well as military enlisted personnel with less than 4 years of active military service make up over another million members and are known at USAA as "associate members". Associate members are eligible to be 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 somewhat important when it comes to the return of USAA's profits which is discussed below. Information regarding eligibility is discussed below in the section entitled "Target Market".
High-risk drivers who don't meet USAA's relatively strict underwriting criteria are insured by a different subsidiary, such as USAA's County Mutual Insurance Company or USAA-General Indemnity Company. USAA also insures military drivers in Europe through its subsidiary, USAA Limited; this international coverage is perhaps unique for a company based in the United States.
USAA also issues life insurance. USAA's life insurance policies, while not completely unique in the industry, are different than most as they do not include a war-exclusion clause.
Unlike many of its competitors, USAA does not sell its insurance through agents; rather, both life and P&C policies are sold directly by USAA employees to members over the telephone. These employees are licensed but are paid a salary rather than on a commission basis.
In 2005 USAA paid over $6 billion in property & casualty claims.
Banking
Banking services are provided by USAA Federal Savings Bank, credit cards by USAA Savings Bank. The bank was established in the early 1980s. According to the FDIC, as of June 2006 the bank held $20 billion in deposits with over 2.5 million accounts. The bank has one location at USAA headquarters in San Antonio, TX; because most members don't actually live in San Antonio, the bank provides the ability to deposit checks from home using a common computer scanner via the Internet, ATM fee rebates, Internet services, 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 offerings of Mastercards and Visas [1].
For many years, while USAA did not market to anyone outside its niche, they would open bank accounts for qualified customers requesting USAA's services. In July 2006, USAA chose to further focus serving its target market, and will not extend new banking services to those who are not eligible to purchase property & casualty insurance policies from USAA. They continue to make an exception for residents of Bexar County (San Antonio, TX) and those people who already had a banking relationship with USAA.
Investing and Financial Planning
USAA provides a discount brokerage service and a family of no-load mutual funds; mutual funds established by other companies can also be purchased and held in a USAA investing account. USAA also offers limited free Financial Planning advice as well as a more thorough flat-fee or hourly-rate financial planning service.
Other Services
USAA also runs a mail-order catalog service which, among other things, is known for diamonds & other jewelry; it has also made arrangements with other companies who provide discounts to USAA members on rental cars (Avis, Hertz, Budget), flower delivery (TeleFlora), cruises, home security, home warranties and FedEx services. For its own investment purposes, USAA also operates a real estate company [2] 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 military and their families. To that end, they have always marketed directly to members of the military. They use a set of eligibility criteria to define who specifically is eligible for USAA's services.
Forms available on USAA's website can be used to determine eligibility for USAA's services. However, the site does not contain a comprehensive statement of eligibility. While the site currently indicates that membership is open primarily to military personnel and their dependants, USAA has, in the past, published a list[3] 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 service to members of the military and those federal officers who may have been accommodated in the past may find that they are no longer able to establish eligibility [4].
Historically, only military officers (among 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. However, in the late 1990s, USAA chose to expand eligibility to enlisted members of the armed services. As the number of persons who have served on active duty in an enlisted status in the US Armed Forces is quite large, USAA chose to limit the establishment of eligibility only to those who are currently on active duty or who have recently separated. The same time limit on establishment of eligibility was then applied to military officers. That time limit or grace period extends through the remainder of the calendar year of separation, plus the whole next year.
History
USAA was founded as the United States Army Automobile Association in 1922. Within a year, it was almost bankrupt, through a series of events including a new leader and expansion to serve all military officers as the United Services Automobile Association, it regained solid footing.
It has always been headquartered in San Antonio, TX. One of its earliest buildings is located on Grayson Street across from the Quadrangle of Fort Sam Houston. While the building is in disrepair, it still bears the shield of "USAAA". After some time, it moved to Hildebrand & Broadway near Brackenridge Park, in what has become one of the AT&T buildings. In the early 1980s, it moved once again to its current headquarters in Northwest San Antonio; its large campus spreads out on 286 acres on what was formerly a horse farm.
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 [5]. This insurance exchange is made up of all 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.
SSA
As there are no shareholders, the unique structure of USAA means that profits are only either returned to members or retained for reserves. This is accomplished through an account each member has which is called the Subscriber Savings Account, or SSA. Each year a portion of USAA's profit is retained as "unassigned", the rest is distributed to each member's SSA using a formula that takes into account the amount of premium the member paid in that year. A short time later (usually in November or December), USAA determines what portion can safely be released to each member in the form of a premium credit or check. While the entirety of the SSA belongs to the member, it is only released in full to a member if the member no longer has a USAA policy.
Associate members sometimes receive policy dividends instead of distributions of profits, since they are not members of the insurance exchange.
Miscellaneous Information
USAA has offices at its headquarters in San Antonio, TX, a second major office in Phoenix, AZ, as well as other smaller operations in Sacramento, CA, Colorado Springs, CO, Tampa, FL, Norfolk, VA, Highland Falls, NY, London, England and Frankfurt, Germany.
As of 2005 USAA had over $96 billion in assets under management for approximately 5.6 million members. Its revenues placed it as number 189 on the 2006 Fortune 500 list.
USAA owes a great deal of its success and expansive growth to former CEO, retired Air Force Brigadier General Robert F. McDermott. He was succeeded by retired Air Force General Robert T. Herres.
The USAA building is said to be the largest commercial office building in the country, second only in overall square footage to the Pentagon.
Since it's not a corporation, USAA is not bound by the same corporate governance rules that govern major publicly traded companies. Even so, USAA is subject to insurance regulation and examination by all the states it does business in. In addition, its records are audited by Ernst & Young as well as the major financial rating agencies.
USAA claims over 5 million members; this counts those doing business with any of USAA's financial services companies who are eligible to purchase property & casualty insurance, whether or not they are actually holding a policy.
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.
Ratings
Financial Stability
- A.M. Best Company: A++ (Superior)
- Moody's Investor Service: AAA (Exceptional)
- Standard and Poor's: AAA (Extremely Strong)
Customer Service
USAA consistently receives the highest customer service ratings available to all financial services companies, not just those in its niche. For its consistently highly-rated customer service, in 2002 JD Power awarded USAA with its Chairman's Award, which at that time had only been awarded to 10 companies, none of them in the financial services arena. Since then, USAA has remained at the top of the JD Power ratings for auto insurance,[6] home insurance,[7] and mortgages[8], and has also received high JD Power ratings for home equity loans [9] and retail banking services [10].
Employment
USAA employs over 21,000 personnel at its offices throughout the country, and is frequently cited as one of America's best employers.[11] It has also been recognized specifically as one of America's best employers for former members of the military[12]. It is one of a dwindling number of companies that continues to offer a defined-benefit pension plan as well as a 401(k) with matching, tuition reimbursement, onsite fitness & day care centers, as well as USAA membership. USAA employees from the entry-level service representative to the executive level routinely receive annual bonuses of well over 10% of their regular yearly salary.
Criticism
USAA, like every large business, is not without controversy. Circa 1980 some disgruntled employees tried to form a union and could be seen marching in front of the headquarters entrance on Fredericksburg Road. In 2001, USAA started a reorganization that resulted in approximately 1,400 workers being laid off, many of whom were IT specialists. Shortly after the layoff, but several years after USAA had started using offshore personnel, the local media created a stir when they realized that USAA was outsourcing some of its IT work to Indian based companies.
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
GEICO is a major property & casualty insurance competitor, while life insurance competitors include the government's own Servicemembers' Group Life Insurance, the AAFMAA (Army and Air Force Mutual Aid Association), and the USBA.
Banking
Major bank competitors include Bank of America-Military Bank, Pentagon Federal Credit Union, Navy Federal Credit Union, along with other smaller local military banks and credit unions.
External Links
- USAA home page
- USAA Real Estate Company
- USAA Educational Foundation, a nonprofit organization providing consumer information
- Company Overview
- Texas Insurance Code Subsection on Interinsurance Exchanges
- USAA Employee Surveys
- USAA history
</div> </div>
