With a deal to use IBM software to move its core processing online, USAA is positioning itself as a technology leader in the paper-intensive insurance industry.
A longtime customer of International Business Machines Corp., USAA has shifted its Internet operations to IBM's WebSphere software. Under a deal to be announced soon it would take the next step: to shift its core processing to the same platform, making all those transactions visible online to its employees and its customers.
"The day will come when we run our entire business online," said Steve Yates, the president of USAA's in-house information technology company. "We're a big mainframe shop, and we have large, old systems. We need someone who can bolt on an Internet front end."
USAA exclusively serves military personnel and their families; its customers are among the most loyal anywhere. The San Antonio company often tops opinion surveys on customer satisfaction, with respondents lauding its service.
It is significant that USAA wants to serve customers in cyberspace, which a few years ago was where financial companies cut costs by eliminating the personal touch.
USAA started strictly as an insurance company, with customers as "members" who owned shares. Since setting up its banking subsidiary in 1983, it has been successful in cross-selling, particularly in mortgages, brokerage accounts, credit cards, and auto loans.
Mr. Yates said the noninsurance businesses of USAA are mostly online - 80% of brokerage trades, for example.
More than half of USAA insurance interactions, including rate inquiries, are done through the Web site. The long-term goal is to manage the entire insurance business online. That's a tall order - in the insurance industry, claims are often filed with medical samples and photos, and most processing entails passing a paper file along a chain of people.
"These things don't tend to be easily tracked electronically," Mr. Yates said. "I think it's very uncommon" for an insurance company to adopt electronic processing.
Bill Pieroni, IBM's general manager for insurance, said the insurance industry tends to lag other financial services sectors in electronic enhancements.
"USAA has invested heavily in technology" and is outpacing its industry peers, Mr. Pieroni said.
He said the company's plans reflect a shift in attitude. "The technology will work; that's not the challenge," he said. "This is more about an insurance company that is willing to completely transform its model."
Mr. Yates said he takes his marching orders from USAA's chief executive officer, Bob Davis. "Our boss told us he wants everything to be available over the Internet," he said.
Ron Shelvin, principal analyst for the market research firm Forrester Research in Cambridge, Mass., agreed that USAA is breaking new ground. "Within the insurance industry it's not common" to offer all its services online.
The reason, he said, is that consumers tend to contact their insurers far less frequently than they do their banks or brokerages, and when they do need to file a claim, customers may be distraught after a car accident or other misfortune, Mr. Shelvin said. "There's not much demand from the customers for this type of service."
But customers and the company will probably benefit from that visibility, he said. "There are a lot of potential cost savings if they can pull this off."
