I have been with USAA since 1984. Never used another insurance company for anything. Never had an issue, but haven't made a lot of claims, either. So I went shopping around and found that other companies can save me money. The icing on the cake is I will get a $9,700 check from USAA from my Subscriber Savings Account if I leave them. So why am I so hesitant to make the switch? Seems like a financial no brainer.
The only way to assess your actual insurance coverage is to file a claim and see how the process works out. (Especially the part involving lawyer litigation.) A claim is essentially trial by fire, especially for those who shop the loss-leader pricing. USAA screws up member claims at a far lower rate than the rest of the industry, and ironically that's why they're more expensive.
About the only way to compare insurance coverage/service is to use the customer-satisfaction rankings of the third-party ratings services, and possibly to consult a local insurance broker who'll give you actual quotes for your local area.
Internet comparisons (especially on Internet forums) are worthless because the rates are regulated by the states and priced by the ZIP code. The differences among state regulations are especially evident with insuring your teen driver.
Here's a few considerations from my milblogger experience. I'm also a USAA geezer (1981) and I've attended seven years of their financial blogger conferences. Part of that includes interviewing Wayne Peacock in 2017 (the guy who now runs USAA) and my ongoing conversations with John Bird (the retired submarine admiral running Military Affairs, who I knew when he was just another XO):
- USAA has a "no subsidies" practice with their insurance. They don't have to worry about their stock's share price, they don't under-price loss leaders for market share, and they're highly risk averse. Your price reflects their risk pool in your ZIP code... and maybe your claims history from the insurance industry's database.
- If you get slapped with a higher premium from USAA, it's due to either your claims history (if you've filed them) or due to factors in your local market like concentration risk. For example USAA frequently stops writing new policies in Hawaii and Florida during rising trends in storm damage. (The last one in Hawaii persisted for a decade.) They raise their auto premiums in large military concentration areas. If you're "getting a discount" from another insurer, you're giving up something that you'd want to have from the claims process-- or you're hoping that someone else is subsidizing it.
- USAA has one of the nation's fastest & cheapest claims-processing systems. Much of this tech was invented at USAA and is licensed by the other insurance companies. USAA also owns the patent on mobile check deposits, and today those license fees drop straight into the R&D budget to cut the business expenses even further.
- USAA is discouraging their customer service, unless you do it via the app & chat. They're trying to find a way to shut down their phone system (because only 3% of their members use it) and it takes persistence to get tailored support. If you're not happy with their treatment of a large claim (>$25K) then it's worth hiring a contract claims adjustor. The good news is that USAA frequently pays out the smaller claims (<$2500) without investigating them because it's costs them less.
- If you want cheaper insurance, start by raising your deductibles. Put the savings in your repair/replace fund.
- USAA's Subscriber Account is the most misunderstood benefit in the insurance business. It's financial engineering for setting aside loss reserves in case of mass casualties (hurricanes & earthquakes). It's not your savings account but rather the cost accounting for a mutual (private) insurance company. However when comparing premiums & policies, you might wish to consider last year's distribution as a discount on next year's premiums.
- Yes, USAA spends money on marketing. It gets tiresome. However this is where USAA finds the new members (especially NFL games) to broaden the risk pool and keep our premiums lower. You can't depend on the aging demographic of people like me, REWahoo, or Friar1610. You want the Millennial and Gen Z members who buy more insurance, file cheaper claims, and even have lower rates of default & fraud.
- If you think USAA is wasting your member money on marketing then you should compare it to the cost per member of the marketing spending of insurers like Nationwide, Liberty Mutual, and State Farm.
- For you older military vets: yes, USAA used to only insure officers. This rule changed in 1996 (a generation ago) because the officer population got much smaller after WWII, Vietnam, and DESERT STORM. USAA understands that they need to grow the membership to hold the line on the fixed expenses.
Insurance pro tips for financial independence:
- Your shelter & transportation are two of the big three factors in your progress to FI.
- Self-insure the transportation cost as much as you can with higher collision/comprehensive deductibles. You might even completely drop that coverage. Here's the important part: put the premium savings in your vehicle-replacement fund.
- If you want your car to be perpetually guaranteed to be restored to "good as new", then you have to be willing to work the extra months of trading your life energy for money to afford it.
- Consider raising your home insurance deductibles when you can afford $25K-$50K of damage from a casualty or a natural disaster.
Personal advice:
If you're unhappy with USAA, get a quote from Armed Forces Insurance. They're much smaller and their reserves are not as robust, but we've had over 40 years of good service from them. They might even offer auto insurance in your state.
Today USAA only has our auto policy while AFI has everything else: our home, our rental property, our liability, and our umbrella liability.
We have only bought used cars for the last 40 years. The most we've spent on a used car was $21,500, and 13 years later I still have a mild case of buyer's remorse along with the great memories. Today we're driving electric vehicles (with nearly zero maintenance) and recharging them for free from our photovoltaic array.
As part of our self-insurance practice (without collision or comprehensive insurance) we carry USAA's and AFI's maximum limits on Uninsured Motorists/UnderInsured Motorists, personal liability (property damage & bodily injury), and umbrella liability. My spouse and I are too wealthy to afford cheap liability insurance.
We've lived in the same location (on Oahu) for over 30 years. Our vehicle premiums for two cars have been a total of less than $80/month that entire time. We can't find a cheaper insurer.
I thought it was the bank, not the insurance company, that got slapped with those fines.
It was, but still unacceptable to me under the umbrella of USAA.
USAA's bank finances (and fines) are handled separately from their insurance finances. (Their business practices and their ethics might still be shared.) The bank also uses a lot of third-party contractors (mortgages) which have been a persistent (and expensive) pain in their asse(t)s. They're still trying to figure it out, and I'm skeptical about their progress.
Now that USAA has sold their investment & wealth-management sidelines, I'm hoping that they sell the bank and just stick to insurance.
