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Case Study: USAA

If I were to ask you which company out of all of the companies that you buy products and services from is your favorite what would you say? Over the years I have asked this question to a lot of people and most of us can guess the answers I have received: Audi, Apple, Trader Joes, Costco, etc. What I rarely hear are the names of banks, or financial services firms, or insurance companies. But if you were to ask me the same question I would answer USAA Insurance. I know it is strange of me to answer this way, because most people dislike their insurance company, but if you ask anyone that has USAA about the company I guarantee that they will have at least one reason, and a related story, about why they really love it. So let me tell you my story.

In 2002 my wife and I got rid of our condo, threw everything in storage, and took an around the world trip with just one backpack and a bicycle each. Our plan was to start at the southernmost tip of South America and wind our way up to the north; then fly to Africa and do the same; then fly to Europe and travel north to south and then west to east before taking the Trans-Siberian Rail Road across to China where we planned to travel all the way down south through Southeast Asia and then finish up in Australia and New Zealand. We committed to only traveling by air between continents, which meant relying on trains, buses, cars, motor scooters, tuk tuks, camels, horses, donkeys and most importantly our bicycles to get from point to point. It was an extremely complex trip to both plan and execute.

When we arrived in Europe, Brussels to be exact, about 6 months into what would turn out to be an 18 month trip, we decided that it would be cheaper, and give us more freedom, if we bought an inexpensive used car. The plan was to buy it in Belgium and then sell it in Turkey before we headed north to hop on the Trans Siberian Rail Road to China via Siberia. Our thinking was that this would give us the freedom to do some really spectacular long distance bike trips beginning and ending in places that public transportation didn’t reach. On paper the plan sounded great, but the complexity of buying a car in Belgium almost derailed our entire plan.

Buying a used car in America is hard. Buying a used car in Brussels was almost impossible. The sales people at the used car dealerships did not know English, we did not know French, and trying to haggle over the price of cars using a French phrase book was laughable at best. Half the time I felt like I might actually be asking about “ham sandwiches” when trying to inquire about “power steering”. It was a mess. After a week the stress was taking its toll.

Adding to the stress was the fact that we were having trouble getting an insurance company to insure us. It might be easier now, but in 2002 it was next to impossible for an American to get car insurance for a car bought in Europe when said American did not have a European drivers license, a permanent European address nor a permanent address in the United States. To make matters worse, you had to have insurance in order to register a car and get a valid license plate. The only exception was if we wanted to participate in programs offered by companies like Mercedes or BMW where you were able to buy a new car, drive it in Europe for up to three months, and then commit to shipping it back to the States. Sadly, our budget did not include buying a brand new Mercedes. We were more in the market for 10 year old Citroen station wagons or Euro vans!

Every morning we would wake up full of hope and head out to the auto dealerships with a gleam in our eye and a bounce in our step. We wanted our confidence and cheer to inspire the normally dour Belgium sales people to crack a smile and cut us a deal. At the end of each day we would return home on the metro beaten down, tired and wet. It turns out that it rains a lot in Brussels in the spring. And we weren’t having any better luck arranging insurance for our yet to be purchased automobile. We were close to giving up on the whole thing when I finally called USAA.

After literally beating our heads against the wall trying to find insurance for our as of yet to be purchased car we were stunned when the USAA representative to whom I was speaking with on the phone said that of course they were able to insure our car. When we told her that we hadn’t actually bought the car yet she asked if we had been out looking and if we had a car in mind? We told her that yes we had spent quite a bit of time looking and in fact had just recently found a couple that might fit our needs but that we were still in the process of “negotiating” the terms. I didn’t want to tell her that when I said “negotiating” what I really meant was that we would ask for a lower price and the sales person would say no and we would then go to the next dealership down the road and repeat the process. In other words, it wasn’t a negotiation in the traditional sense.

“Do you speak French?” She inquired.

“No” I answered shaking my head and looking with disgust at my rain dampened French phrase book. She asked me to wait for a moment and the line went silent. I thought to myself, well, ok when she comes back on she is going to tell us that since we don’t have the car they cannot offer insurance and yada yada yada have a nice day and talk to you soon.

However, when she came back on the line she surprised me by asking if we would like to have a local USAA representative meet us the next day to help us negotiate the purchase of one of the cars? Since I didn’t know French, even though she was speaking in impeccable English, which of course I do know, I asked her to please repeat her question. She did. I readily agreed to her offer and didn’t even ask about the cost because we needed a car and after five days we weren’t any closer to having one and every day spent looking for a car in Brussels was one less day exploring the world. The opportunity cost of not accepting her offer was huge.

The next day a Belgian USAA representative met us at a car dealership and for 3 hours helped us negotiate the purchase of a brand spanking “new” 10 year old Citroen station wagon. He then helped us fill out all of the necessary paperwork (in French). He then walked us step by step through the car registration process which was important because not only does it rain a lot in Brussels but the bureaucracy is pretty overwhelming. His negotiating skills actually helped us save more on the car purchase than the premium we were paying for the insurance. When it was all said and done, and after he had spent another hour giving us friendly travel tips, and as we were saying our goodbyes I asked him how much we owed for the service. “Nothing”, he said “you are a USAA member”.

Let me say this again: USAA sent a representative to help us negotiate the purchase of a car for free. We were hopefully going to buy a car either way and they were the only insurance game in town for Americans so they were going to get our business regardless. So why did they do it? They did it because at a very core level, baked into their organizational DNA, their mission is to help their members deal with complexity.

USAA was founded in the early 1920’s when 25 Army officers got together to insure each other because no other insurance company was willing to insure their “risky” and complex lives. Today the company serves 10 million members (customers) who include current and retired armed service members as well as their direct descendents. Luckily, my father was in the Air Force so I am able to be a member. It is a company born out of the complexity that results from the disruption of war.

Its commitment to its members, its willingness to go the extra mile, and the quality of its services and employees continually places it alongside other companies like Apple and Google on various “Most Admired Company” rankings.

I have never spoken to the CEO of USAA, but I am certain that if I did and asked him what USAA “does” as a company he would not answer “sell insurance” or “manage mutual funds”. He would probably answer with something along the lines that they are committed to helping their members navigate the complexity of life and thrive. And they do this by not only giving them peace of mind by insuring their possessions and loved ones, and by helping them plan for a prosperous retirement, but by going the extra mile. Like, for instance, helping a member in a foreign land get a good deal on a used car while on a complex once in a lifetime adventure.

And doing this is probably why 94% of their customers plan to stay customers for life.

This is The Way of the Navigator at work.


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