INCREASE USAA MEMBERSHIP
Increase in USAA Membership The End Of Great Rates?
Sheila Teal
MBA 617
University of Alaska Fairbanks
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INCREASE USAA MEMBERSHIP
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Abstract
United Services Automobile Association (USAA) is a financial institution with limited
membership. They have evolved since they were created to increase their customer base by
lessening restrictions on membership, making advances in technologies, and increasing their
physical presence throughout the world. USAA needs to continue with innovative behaviors to
remain competitive in their current environment and continue to increase their financial strength
by growing their net worth.
Key Words: USAA
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Increase in USAA Membership The End Of Great Rates?
United Services Automobile Association (USAA) offers personal banking, personal
insurance, personal investment, personal retirement, and money management services to its
customers. Although USAA has limited membership, they have 10.3 million members
worldwide. Customers of USAA have United States military affiliation in the following
categories: active, retired, and honorably discharged officers and enlisted personnel; cadets and
midshipmen at military academies advanced ROTC or ROTC scholarships, officer candidates
within 24 months of commissioning; individuals whose parents had USAA auto or property
insurance; former USAA members who had auto or property insurance; and widows, widowers,
un-remarried former spouse of USAA members who had USAA auto or property insurance
while married (“Who Can Join”, 2015).
The main USAA campus is on 280 acres in San Antonio, Texas. Additional USAA
campuses and offices are located in Phoenix, Arizona, Colorado Springs, Colorado, Tampa,
Florida, London England, Frankfurt Germany, Highland Falls, New York, and Annapolis,
Maryland. In addition to the offices, financial centers are open throughout the United States in
California, Colorado, Washington DC, Georgia, Kansas, New York, North Carolina, Maryland,
Tennessee, Texas, and Virginia. USAA also has a variety of bank-owned properties that were
repossessed from members (“Locations”, 2015).
USAA has approximately 26,000 people employed worldwide. More than 16,000 people
are employed for USAA in San Antonio, Texas, making it one of the city’s largest private
employers. USAA plans to add 3,500 positions in San Antonio, Phoenix, Tampa, and Dallas
markets by the end of 2015 (Business Wire, 2015). In addition to regular full time employees,
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USAA plans to hire 300 college interns and 300 new college graduates in 2015 (“University
Recruiting”, 2015).
USAA was founded in 1922 by 25 Army officers who decided to insure each other’s
vehicles. By 1928 membership had increased to 8000 people. Despite the Great Depression,
membership doubled from 15,000 to 30,000 and USAA closed out the 1920s with net profit of
$144,000. The first office outside of San Antonio was opened in Frankfurt, Germany in 1952
and the London office was opened 10 years after that. Automation of operations began five
years later, which continues to grow even today. Initial membership was only open to Active
Duty military officers. Allowing officers to continue their membership after their commission
was resigned or after they left the military was enacted in 1961. The 1960’s brought about
changes in employment opportunities. Women were offered employment and were required to
finish school at night. Persons with disabilities were also hired by USAA and they were awarded
the President's Employer Merit Award. The 1970 brought the opening of the mutual fund
branch, insurance membership benefits extended to ex-dependents, a toll free phone number for
members to conduct business using a method other than mail or telegraph, and assets reached $1
billion. USAA Federal Savings Bank opened in 1983 as the company continued expansion. The
1990’s brought with it the two-millionth member to USAA. Membership was extended to
enlisted personnel in 1996. Finishing out the 1990’s, USAA owned and managed assets were at
$58.9 billion. By 2003 96% of active duty officers and 44% of active duty enlisted personnel
were USAA members. Membership was expanded again in 2008 allowing retired military
personnel, those with an Honorable discharge after 1996, and their spouses and children. They
continued to make access to services easier for their members by being the first mobile deposit
capability and continuous updates to their website for ease of member access (“History”, 2015).
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Despite wars, natural disasters, and economic downturns, USAA continued to grow their
membership and services and pay dividends to their members.
Today USAA offers many services to its members. The services USAA provides
customers with the following services: banking, insurance, investment, retirement, and financial
planning (“Our Products”, 2015). They also assist their members by taking advantage of new
technologies and trends in information technology to enhance their customers’ experiences.
Some of these technologies are: video chat between members and USAA financial centers;
mobile check deposit; phone, web, and mobile device banking; and a low bandwidth website,
used by military personnel in remote areas where high bandwidth connection is not available.
They are also expanding the network of financial centers located mostly near military bases that
rely on remote-access technology and new video capabilities for members (Adams, 2012).
The top competitors of USAA are Geico Corporation, Metlife, Inc., and State Farm
Mutual Automobile Insurance Company (“United…”, 2015). Insurance companies who provide
the same auto, home, and life insurance policies are also competitors. In addition, any financial
institution which provides banking, retirement, and investment services can also be considered a
competitor to USAA.
As with any large company, the employer reviews are varied. One person sees working
there as a “fun and productive place to work” while another sees it as a “great job, uneasy
workplace” (Indeed, 2015). There are no common themes among unhappy employees that
would point to a single problem internal to the company. Whether people ranked working for
USAA high or low, many of them commented on the great benefits and heavy workload.
Indeed.com ranks companies based on individual inputs, with 1 star being the lowest and 5 stars
being the highest. USAA ranked just under 4 stars for Job Work/Life Balance; over 4 stars for
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Compensation/Benefits; three and a half stars for Job Security/Advancement; slightly under three
and a half stars for Management; and four stars for Job Culture (Indeed, 2015). For a company
in the financial world, a fast paced environment does not seem out of place.
USAA’s organizational chart (Appendix A) can be considered symmetric. The work of
the organization is broken down by specialty (Cogmap, n.d.). Each division is able to work
independently of each other. The insurance division can sustain operations without relying on
the banking division. Likewise, each portion of the insurance division such as property, auto,
and life are also able to work independently of each other.
USAA operates in a constantly changing environment based on market actions.
Individual accounts are subject to market and employment fluctuations as are USAA managed
investment accounts. Competition, inflation risks, and market trends affect USAA accounts and
members directly. USAA has remained stable in economic upturn and downturn cycles.
Competitors will continue to be a threat to USAA, but the established niche market and
historically better insurance rates allows USAA a benefit others cannot match. They are both
efficient and effective in getting the best rates for customers in all aspects of banking, insurance,
investment, retirement, and money management accounts.
USAA would like to continue to award their members Subscriber Savings Account
dividends annually and maintain or increase their rank of 57 among Fortune 500 companies and
net worth ranked at 141 (Financial.., 2015). The SWOT Analysis shown below identifies four
opportunities for USAA to better serve existing customers or increase its standing in the current
market in which it operates. The identified items are: restricted membership availability could
be increased to allow more members; increase brick and mortar banks throughout the US to
better serve customers; increase ATMs, partner with bank with large ATM network, or remove
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ATM fee for customers not near a USAA financial center; open Innovation Lab exists to allow
engineers to try any wild ideas they may have. USAA should focus on innovation to become the
leader in the insurance and banking industry.
Strengths
Weaknesses
What do you do well? What unique resources can
you draw on? What do others see as your
strengths?
What could you improve? Where do you have fewer
resources than others? What are others likely to see
as weaknesses?
- Low cost insurance premiums
- Restricted membership
- Complete online services allow for
members to handle
banking/insurance/investment needs
regardless of their location and time zone
- Lifetime membership availability
regardless of change in life situation (i.e. a
spouse of a military person and a USAA
member is now a former spouse, they
retain their eligibility for all USAA
services)
- Reliance on technology for members to
complete transactions is not always
effective and at times a person-to-person
conversation is needed. With members
spanning across the globe, the changes in
time zones can sometimes make this
difficult.
- Technological innovations have not
progressed since mobile check deposit
system.
Opportunities
Threats
What opportunities are open to you? What trends
could you take advantage of? How can you turn your
strengths into opportunities?
What threats could harm you? What is your
competition doing? What threats do your
weaknesses expose you to?
- Restricted membership availability could
be increased to allow more members.
- Increase brick and mortar banks
throughout the US to better serve
customers
- Increase ATMs, partner with bank with
large ATM network, or remove ATM fee
for customers not near a USAA financial
center
- Open Innovation Lab exists to allow
engineers to try any wild ideas they may
have
- Poor market trends could hurt banking
business overall, which includes USAA
- Hackers and identity theft are inherent
threats to companies conducting business
over the Internet
- Technological advances of other
companies over USAA could leave them
behind
USAA is continuing to work towards innovative ways to make their services more
accessible to their customers. They pioneered the mobile check deposit system that has since
been adopted by many banks. However, they have not come up with new ideas to revolutionize
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the banking or insurance industries since then. This is one area where their Open Innovation Lab
could be better utilized. They have partnered with Progressive Insurance to license their “usage
based pricing technology” which is used to collect driving data to calculate coverage (Aldridge,
2013).
Using technologies developed by other companies is allowing USAA to remain
competitive in the environment in which they operate, but they need to lead the technology
innovations for customers. They will continue to lag the industry and have to rely on leasing the
technologies of other companies, which can come at a hefty cost. The first company to the
market with a new innovation has the advantage of being able to be the sole user until other
companies develop the same technologies, or lease it to their competitors at a profit. Although
USAA has an Open Innovation Lab for any type of innovation to be fostered, they should look
into expanding their structure to include employees who are not engineers. This may allow a
broader range of ideas that are brainstormed without any biases as to whether or not they can
feasibly be expanded upon and implemented.
USAA membership is limited to a select group of customers. One way they may be
better poised to increase their net worth is to lessen the restricted membership availability
beyond what is currently is today. The restriction on the year of discharge could be lifted, as
well as the conduct of the discharge from service to be more than just members with an
Honorable discharge. The requirement to have military affiliation altogether could be lifted as
well.
USAA is the only company among its competitors that has a restricted customer
requirement. GEICO, which used to be known as Government Employees Insurance Company,
expanded their membership to allow more than federal government employees and enlisted
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military members. They still offer rate discounts to these groups, but were able to increase their
customer base and overall company success by opening their doors to other customers (A.M.
Best, 2011). Taking the lead from GEICO, USAA could expand its membership by removing
the limitation of who can become a member, but continuing to offer the same great rates
members now have as a discount. They could move out of their current institutional
environment into a broader operating arena. This would actually increase rates overall, but then
discounts would be applied to previously qualified members.
Continuing to operate in the same niche market they currently are in is also a viable
option to increase their standing among other Fortune 500 companies. The membership
requirements will remain the same and USAA should look into creating an agreement with
military installations to put a small financial center branch on the installation. To keep costs
down from building new structures and increasing employees, installing ATMs on the
installations and Naval Vessels may be a viable alternative. A company that caters to the
military should have a greater physical presence for military members to take advantage of their
services.
As a manager making the decision of which of the above mentioned suggestions to
implement, I feel the most viable solution to increase standing in the list of Fortune 500
companies would be to open membership to a larger customer base while maintaining discounts
for currently qualified members. This would allow additional revenue to come into the company
in terms of assets managed, insurance policies written, and bank account balances. USAA has
already created a switched structure with the Open Innovation Lab. This lab can be utilized as a
place to develop new ideas to make the company more successful overall, beyond technological
advances.
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References
A.M. Best Market Report. (2011). GEICO’s story from the beginning. Retrieved from
https://www.geico.com/about/corporate/history-the-full-story/
Adams, J. (2012). Bank Technology News. How USAA innovates online banking. Retrieved
from http://www.americanbanker.com/btn/25_9/usaa-innovates-online-banking-withvoice-recognition-and-customer-analytics-1052161-1.html
Aldridge, J. (2013). San Antonio Business Journal. USAA licenses pricing technology from
Progressive Insurance. http://www.bizjournals.com/sanantonio/news/2013/07/08/usaalicenses-pricing-technology-from.html
Business Wire. (2015). USAA adding as many as 3,500 new positions through 2015. Retrieved
from http://www.businesswire.com/news/home/20130305006540/en/USAA-Adding3500-Positions-2015#.VQOQ0-G2KT8
Cogmap USAA. (n.d.) Retrieved from http://www.cogmap.com/chart/usaa?ver=9&vt=0
Financial Strength. (2015). Retrieved from
https://www.usaa.com/inet/pages/about_usaa_corporate_overview_financial_strength?akr
edirect=true
History. 2015). Retrieved from
https://www.usaa.com/inet/pages/about_usaa_corporate_overview_history
Indeed. (2015). Retrieved from
http://www.indeed.com/cmp/Usaa/reviews?fcountry=US&start=40
Locations. (2015). Retrieved from
https://www.usaa.com/inet/pages/about_usaa_corporate_overview_locations
Our Products. (2015). Retrieved from https://www.usaa.com/inet/pages/our-products-main
United Services Automobile Association competition. (2015). Retrieved from
http://www.hoovers.com/companyinformation/cs/competition.UNITED_SERVICES_AUTOMOBILE_ASSOCIATION.b5
45524fb6f4a0e5.html
University Recruiting. (2015). Retrieved from https://www.usaajobs.com/campus/index.html
Who Can Join. (2015). Retrieved from
https://www.usaa.com/inet/pages/why_choose_usaa_main?showtab=legacyPassDown&a
kredirect=true
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Appendix A USAA Organizational Chart