My last post on the USAA Social Exchange conference answered most of your big questions. This post will finish the Q&A, and then I’ll write one more post about the conference. USAA is improving their existing programs and working on several new initiatives.
Disclaimer
This is the part where I let you know that I have a business relationship with USAA. The FTC wants us bloggers to disclose when we’re being compensated to write about companies and their products. I’ve been a USAA member for over half my life, and three generations of my family are using their products. I enjoyed USAA’s food & lodging at the conference, while the blog’s owner earns money from ads and affiliate commissions. USAA shows us their new programs and cool tech, and then we get to interrogate them on other programs and member service.
More questions? More answers.
Many of USAA’s products are available for anyone, not just members. For example, anyone can open a brokerage account or buy life insurance from the company, not just members. If you’re eligible for membership (“All who have served honorably, and their families“) then you should consider a business relationship with them too. And if you’re a blogger seeking revenue then USAA’s affiliate income will accelerate your financial independence. Contact me if you want to learn more about any of this.
Let’s move on to the questions.
USAA accounts for minors
One member asked:
“I’d like to see them expand the services they offer to teens in their youth accounts. My son is 17 and has a checking and savings account with USAA (my go-to bank/ insurer/ broker). He’s had these accounts for a couple of years now and is adept at managing his money, but last I checked, he is not allowed to transfer money or pay bills online. He also isn’t allowed to transfer funds directly into his Roth IRA (also with USAA). I have to call and order the transfer.
Short version– I’d like my 17-year-old to have access to the full suite of banking services.”
This is a legal issue– the member’s son is considered a minor until at least his 18th birthday. (He may also be considered a minor until age 21 under some state laws.) Once they reach the legal age, then they’re full-power members.
When our daughter started her checking account (age 9) at a credit union, and her Roth IRA (age 14) at a mutual-fund company, she was also very limited in what she could transfer or pay. Once she turned 18, though, both financial institutions gave her adult powers. When she bought her college car (age 19) in Houston as a Hawaii resident, USAA was ready to offer her every service in their membership product line.
Membership eligibility
Another member observes:
“You can pass USAA “down” to a kid or grandkid. Please ask them about passing it “up”, to a parent or grandfather. I unfortunately can’t pass it to my mother-in-law (or, I guess, my husband who got it through me can’t pass it to her), nor can my sister-in-law, her daughter (in the foreign service) pass it up. I’m not really sure there’s much of a distinction to be made in which direction the family line goes.”
This is the first time I’ve heard an “up” version of the question instead of “down”, but when I asked the question at USAA the communications staff exec was shaking her head as soon as I said the words “passing up”.
The policy may change someday, but it’s unlikely. USAA’s membership is now above 10 million, and they’ve estimated that as many as 60 million fit their current interpretation of the “All who served honorably, and their families” criteria. They’re very interested in selling more to the existing members, and USAA is aggressively seeking younger new members. USAA’s Millennial members generally have better financial behavior than the Boomers and they tend to spend more money on more products. For example USAA is still struggling to start a small business division (especially business checking), but they know that younger members are far more likely to use those services than my generation.
Every division of USAA that presented at this conference seems to be expanding existing services via their website and their mobile app. There’s clearly a lot of value to be extracted from those systems. Instead of new members, they’re finding ways to offer more services to current members for the entire circle of life, property, and investments.
In addition the CEO, Joe Robles, has announced his retirement. The new CEO is an internal promote but I suspect there’ll still be a few months of status quo while he gets a handle on the job. USAA will want to see their current programs fully in place before they start pushing the member growth button again.
Expatriate American members
An unhappy member writes:
“USAA is over-rated and excessively insular/US-centric. Prices and service used to be pretty good but have fallen to just average the last few years. I’ve been a customer since 1987 with mixed results. They have really given me a difficult time on homeowners and property insurance the last couple years. They do not seem set up at all for international workers, which is odd since many of their members have the potential for overseas work.
For example, I had a bit of insurance on some household belongings in storage in California while I lived in Australia. When I moved to Brazil, they went completely berserk– lots of drama on the telephone and they canceled the coverage. The “stuff” never left storage in California but they were just outraged I worked in Brazil and stated they would offer no coverage whatsoever for anything I owned anywhere as long as I worked in Brazil.
They must have flagged my account because now every time I call, I seem to get routed to the difficult agent who demands to know where I am calling from, all sorts of details, etc. They don’t seem to want my business. I haven’t had a claim since 2000 when someone totaled my parked car.
I have moved some insurance to GEICO now since they offer better service and price.
My question for USAA is when are they going to become a modern global company?”
I had an interesting talk with several USAA staff about this. Their sentiment is that the company has plenty of business with members who live in the U.S. USAA is owned by the members and licensed to do business in America, and there’s no interest in expanding overseas. There’s not even much interest in serving expats. The call centers already spend a lot of time with servicemembers stationed overseas, and the data security center is busy enough with overseas system attacks. Expats are a whole new category of business that’s perceived to cost more money than it will generate.
Some members will find better prices at GEICO, Progressive, or even State Farm. I’m ambivalent about this choice myself. We only carry liability insurance on our old cars– no collision or comprehensive or other riders– so GEICO doesn’t offer us much savings (but they are very persistent at “following up” on a rate check). On the other hand GEICO is saving hundreds of dollars over other insurers for young adult drivers, especially males under the age of 25.
However USAA is far ahead of the rest of the insurance industry with their claims-adjuster tech (quadcopters, imagery drones, pole cameras, mobile insurance centers, the mobile app, and other processing systems) so their service scales on cost– and speed.
While researching this post I tried out a quote on USAA’s homeowner insurance, and for the first time in over a decade they seem to be insuring Hawaii homeowners. Hurricane insurance is not cheap (over $1000/year in USAA’s quote) but the rest of the prices are within 25% of Armed Forces Insurance. I’m going back to USAA for a line-by-line quote on a package deal of our home, a rental property, and a high hurricane deductible– and then I’m going to compare it to AFI’s latest offering.
If USAA is within a few hundred bucks per year of AFI then I’m going to pay extra for insurance now in order not to have to litigate over thousands of dollars of damage later. I’m a bit surprised in my change of attitude, but maybe my quality of sleep has become at least as important as optimizing my finances.
Mortgages
One of my first readers asks:
“While you are there would you ask them why their mortgage department is not more up to date? We are in the process of using a VA loan(first time) to purchase our retirement house. We filled many forms out online just to have them sent to us again to be faxed. We were even asked to print off our USAA accounts and send a hard copy to the mortgage department.
The oddest thing was being asked to send in a letter asking for their ability to seek the VA eligibility approval letter. Not only had we sent the eligibility letter (easy to get), but the VA automated this process several years ago. There was no need for a letter to ask for a letter of eligibility.
We have been with USAA for over 30 years. This is the second home loan we have had. The process has not changed since our first one twenty years ago. Even being FI, with most of our assets at USAA, the process is cumbersome.”
They’re working on it. The 2008 financial crisis is still casting a long shadow over the mortgage industry, and lenders are reluctant to get ahead of the FHA criteria that allow loans to be repackaged and sold to investors. (Otherwise USAA would have to hold on to member mortgages instead of lending more money to members.) Although a VA letter of eligibility has been automated, USAA is lagging that improvement.
The good news is that the Federal Housing Finance Agency is loosening some of the mortgage rules (and this time I hope it’s an improvement). USAA is also upgrading their “Home Circle” services along with their mobile app. I’ve added this question to my list and I’ll keep an eye on the progress.
Accident forgiveness
A poster who definitely wants to remain anonymous asks:
“My teen driver has had three accidents. Two were not their fault. Will USAA cancel the coverage?”
It’s possible. USAA monitors driving and claims records, and they may decide that your teen is not the type of driver that they care to insure. However the decision is tied to many factors, not just your teen’s driving record, and the company may be willing to see whether the situation improves.
If USAA decides not to insure your teen, you’ll be notified with an offer of assistance to transfer her policy to another insurance company like Progressive.
Of course your teen would want to maintain their “good student” standing. Another option would be USAA’s “Young Driver Intelligence” monitoring system. Telematics are controversial with drivers and insurers, but if your teen is already driving safely then this could convince USAA to justify continuing their coverage.
Another option might be too late for this teen, but USAA offers an “Accident Forgiveness” rider.
Motorcycles and other vehicles
“Can USAA offer motorcycle insurance directly, or is it still offered through another company?”
Nope. Motorcycles, boats, motor homes, airplanes, collector vehicles, and business vehicles are not directly insured by USAA. They’ve partnered with other companies to offer the actual policy. There does not seem to be any interest in changing this practice.
Spending member dollars on TV ads and financial service centers
This question comes up a lot:
“I am now seeing USAA advertisements, and they have opened financial centers near several large military communities…is the increased cost for these new initiatives responsible for their higher prices? Or, are these initiatives bringing in enough new customers that it is actually helping to drive down costs?”
The football sponsorships, the financial service centers, and the advertising have paid for themselves. All of these campaigns are attracting younger new members who are spending more for insurance, financial services, and investment management.
Filing a claim… or not.
Finally, I’ve saved the worst for last.
One former member had a miserable experience. They were in two auto accidents (not their fault) during several years, resulting in lengthy medical care and extensive physical therapy. USAA at first doubled their premiums and then canceled their auto insurance after a “review”, even though the member was still in treatment for one of the accidents. The member commented “They had my back until I had a claim“ and successfully litigated a lawsuit against the company.
How can a member have more warning of adverse actions and appeal them? USAA won’t discuss individual member claims with the public. If there’s anything good about the resolution of this dispute, it’s that I’ve only heard of one case like this in four years of blogging. USAA apparently decided that the member’s insurance risk was higher than their premiums would support, and they inappropriately handled the situation. Insurance companies are licensed by state regulators, so there’s a path for appeals (and lawsuits).
The member also recommended not filing minor claims whenever possible. For example if a fender is scratched in a parking lot, the repair cost may be less than the policy’s deductible. It’s not worth reporting that to the insurer since these minor claims may be considered part of a pattern of careless or risky driver behavior. This member doesn’t even buy roadside assistance or towing insurance from USAA– they use AAA instead. They feel that a small annual fee to AAA is better than the possibility of facing a premium hike if they needed a tow or roadside help.
Although USAA strives to provide outstanding insurance service to every member, we members still expect the company to avoid losing too much member money on claims. Every insurance company has to charge enough in premiums to cover the expense of diversifying the risk of claims, or they’ll run out of money. They also have to control for fraud or claims abuse, which means that they make mistakes. Each policy can be reviewed (by a computer algorithm and by adjusters) to determine whether the premium is appropriate or whether USAA should even insure a certain market or type of coverage.
As a member, you want to protect yourself against catastrophic risks while paying as low a premium as possible. You’ll always lose money on insurance because you’re paying the company thousands of dollars over the years while expecting reimbursement for incidents that could cost you millions of dollars. You’ll never break even, but you’ll avoid financial ruin.
One way to reduce your premiums is self-insuring against smaller risks. The simplest way to do this is to carry as high a deductible as you feel comfortable with. You’re still covered against a catastrophic incident but you agree to pay the cost of the small incidents. The “reward” for self-insuring is saving more in premiums than the cost of the small incidents. You have to put those premium savings in your “damage fund”, but if there’s no damage then the fund is yours to keep. You’re only going to file a claim if repairs will cost more than your deductible. Maybe you’ll decide not to repair the damage at all.
If you buy cheap used cars then you can choose not to insure them against collision or comprehensive risks (fire, theft, weather damage). You’re taking all of the risks for the car’s longevity but (here’s the important part) you’re putting the premium savings in a replacement-vehicle fund. You’re still insured for liability and personal injury, and your family will be cared for if there’s an accident, but you’ve decided not to pay an insurance company to fix the car. This has saved me thousands of dollars over the last three decades, and today we’re able to buy a newer used car with cash if the old one is destroyed.
The next USAA post
That’s the end of the reader questions for this conference, but I’m talking to USAA’s execs and communications staff all year long. If you have a question then I’m happy to help you figure out the answer. Some answers (like business checking...) take longer than others but I keep a list.
My next USAA post (in a couple of weeks) will talk about the conference presentations and USAA’s improvements to their existing programs. I’ll also mention some of the other attendees and the projects that we’re working on.
(Click here to return to the top of the post.)
The Military Guide To Financial Independence & Early Retirement
Related articles:
Answers from USAA’s 2014 Social Exchange Conference (the first part of this series)
Are You Moving To A USAA Top Military Community?
Hiring Our Heroes: Teaching Employers to Hire Military Veterans and Spouses
New USAA Brokerage Services
Reduce Your Driving Risks After Deployment
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