How USAA is staying relevant

(intro)

Beyond the Challenge is a podcast where executives in the insurance and financial services industry share their insights and experiences. Hosts Kevin and Sandy Dougherty talk with today’s top business leaders about what keeps them up at night and the biggest opportunity organizations can capitalize on today. We encourage you to listen, share, and subscribe to our program.

Kevin and Sandy Dougherty each have over 20 years of experience in insurance and financial services, corporate leadership, and executive search. They’re the owners of Global Corporate Solutions and Global Corporate Leaders. Global Corporate Solutions partners with organizations to gain efficiencies and contain costs. Global Corporate Leaders partners with organizations to enhance and evaluate talent.

Beyond the Challenge podcast is sponsored by Exactuals, perfecting payments and the data driving them; Techficient, transforming the protection journey with intelligent data and machine learning to drive better outcomes; and JourneyGuide, improving your clients’ retirement outcomes through interactive planning software.

Welcome to Beyond the Challenge. Here are your hosts, Kevin and Sandy.

Kevin: Today, we’re talking with Brandon Carter, president at USAA Life, about the trends, challenges, and opportunities he sees for the insurance industry. Brandon is leading the strategy to digital transformation for their health, life, and retirement companies and is focused on preserving USAA’s legendary service and commitment to its 13 million members while enhancing financial strength and employee engagement. Brandon, can you tell us a little bit about yourself and how you got into the insurance industry?

Brandon: Well, happy to and happy to be here and be on this podcast. So I actually will celebrate my 25th anniversary at USAA on July 7th coming up next year. It’s also the 100th birthday for USAA so it’s a big celebration month in June and into July. I joined USAA right out of college and I grew up in San Antonio, Texas, and wanted to work for the really big company off Fredericksburg Road and got that opportunity about 18 months after I graduated from college. So I started as a life insurance representative, on the phones, talking to members between 20 and 30 times a day about their needs for life insurance and I have been honored to serve our members for the last quarter of a century.

Sandy: Wonderful. Thanks, Brandon. All sectors face challenges, but for the insurance industry, the list seems to be especially long. Many carriers seem to be struggling to stay relevant while others are embracing new technology, reimagining distribution channels, and developing strategic partnerships. What do you see as the future of distribution for the industry?

Brandon: Well, we definitely, USAA and I personally believe in the direct model. I think it is a very efficient model and I think that as customers and members think about their financial security, there is no arguing that their personal mobile device is with them throughout the day and there is no doubt that they are engaging more through their mobile platforms as it relates to advice so I believe that is no doubt the future of where distribution will continue to occur. We at USAA, you know, have an incredible mobile platform. We have over 100 million times a month, our members are engaging with us across our digital platforms and we believe that that’s a winning combination. There is no doubt to me that life insurance continues to be distributed via an agent model and I think that too will continue to be relevant, but I do believe the growth is in mobile and digital and I believe it’s gonna force us to simplify our products to accommodate the new platforms and the distribution across those platforms.

Sandy: Do you see embedded products for USAA going forward so it’s easier to reach some of the members in simpler underwriting, that type of thing, or do you not see embedded insurance as part of USAA?

Brandon: No, we do see embedded insurance is a way forward. In fact, we launched our first essential term product late last year which is a simplified underwritten product and our plan is to embed it into the digital flow for renters’ and homeowners’ insurance and so the plan is to reach beyond, you know, members that are looking for life insurance immediately to quite frankly have a more frictionless experience as they purchase property or auto coverage over time. So we think that’s, again, a winning combination and it’s how our members think about USAA. They don’t think about us as a life insurance company or an auto company or a bank, they think of us as USAA and they want to have a seamless experience when they engage with us.

Kevin: Do you see the entrance of Google and Amazon to the insurance marketplace changing the way carriers see distribution?

Brandon: You know, here’s how I think of disruptors and, you know, I’d put Amazon and Google in that, is you can’t argue with their reach and their scale and you can’t argue with the disruption that would be forced across our industry, but the basic needs are the basic needs for our products and services and even though they can impact the distribution, and I think they will impact the distribution over time, it still requires the products, it still requires the services, it still requires the lifelong liability to put on balance sheets. So, there is no doubt distribution is changing. And, as I mentioned, to me, digital distribution is the accelerator here. I think Amazon and Google are great examples of that. The last thing maybe I would mention is digital distribution was on many people’s roadmaps and then COVID shut the world down and, all of a sudden, it became the main thing on many people’s roadmaps to replace lost distribution. So a lot of these companies have invested significantly to accelerate their pace in digital. I believe that’s gonna pay off in a big way for the industry here over the next few years. 

Kevin: That’s great. Brandon, what will carriers need to do to stay competitive in this new environment?

Brandon: Well, it sounds really basic but I would start with listening to their customers. You know, if you think of this industry, this industry has served a very noble purpose for many, many years. And it’s about serving our customers and covering needs that they can’t cover themselves. I don’t believe as an industry we do a great job of listening to our customers. I believe that we do a great job of rolling out bells and whistles and a whole bunch of new, shiny objects, but when it comes down to it, what problem are we trying to solve for our customers? I think about that as it relates to maybe great examples in 2008, 2009, USAA rolled out Deposit@Mobile, right? And so you think about the transformation that occurred of depositing a check via your mobile phone, it really was very simple. We listened to our customers, our customers deploy all over the world, and they can’t drop by a bank branch. So it was a real simple example of listening to our customer and, quite frankly, serving them in a service that’s different than a product but does lead to product acquisition.

Sandy: What do you see as the main barriers to growth and innovation just for the industry in general?

Brandon: Well, this industry is a risk averse industry and it’s somewhat insulated because, you know, our liabilities are long, our barriers to entry look like we’re regulated across 50 states with 50 state insurance commissioners and I think these factors make this industry somewhat conservative in nature. It’s not something that can’t be overcome but there is also antiquated admin systems and other elements that, quite frankly, have a lot of technical debt that make it difficult to come in and, all of a sudden, be a player at scale that would be required to compete for the future. I think, you know, if you look at some of the interesting startups and, you know, most of them have joined and some have recently started or purchased their own life insurance company and they’re starting to not just distribute but manufacture, I think that’s gonna be an interesting model to continue to watch. So my summary would be it is a difficult to enter market, it is not insurmountable, and I think that, you know, through innovation and, quite frankly, just sheer grit and perseverance, we can continue to have new entrants into this market.

Sandy: Okay, so for carriers to embrace innovation and transformation, do you think it’s truly important to do those tech partnerships, especially with insurance carriers generally having so much tech debt?

Brandon: Well, I think it’s important to know what you’re good at and what you’re not good at and I think it’s important to know that, you know, many of the insurtechs can help you get to market sooner. And I think, in those situations, you know, you can use it as an accelerator. For me, innovation is, you know, I think of it in terms of kind of constant innovation. What are we doing in the product space? What are we doing in the electronic medical record space to say yes to more of our members? And then what are we doing in the big strategic bets that are vastly different than where we’ve been that we think can, quite frankly, put us on a different trajectory? So, I do think the risk of believing that all of your innovation lives in-house can be dangerous and I think it can slow your pace. So, there’s some really great partners out there that can help accelerate your innovation and transformation but there’s also a lot of them so my advice would be to pick your partners smartly because they’re gonna stay with you for a long time and it’s gonna make a difference in your value proposition.

Kevin: What is USAA Life doing to stay relevant?

Brandon: Yeah, well, it’s an important point, because, to me, when you ask a question of staying relevant, and I think of it in two dimensions. The first is relevant to our members. What are we doing to listen and solve their problems? And relevant to creating scale in these businesses. You can come at them together but sometimes differently. If I think about relevance to our members, I’ll go back to examples I’ve given already on remote deposit capture. If you think of the first, you know, we don’t know exactly for sure that we were the first but we believe we were the first to be able to digitally sign a life insurance application, you know, back in 2012 timeframe, 2010 timeframe, somewhere in there. And then we do know that we were the first to be able to apply via your mobile device. So, for us, it’s a lot of being able to purchase these products in a very different way. Our future is around electronic medical records. You know, a lot of our members, of course, are, you know, veterans and they have medical records strung across the United States and getting those records are really difficult so buying life insurance is very difficult. So, electronic medical records allow us to move, you know, a month’s process into minutes and we are building infrastructure with a few of our partners that allow us to auto decision those electronic medical records and be able to instant issue. So, we think that is a major element of relevance in the future. If I think about our annuity line, you know, we recently launched distributing our annuities through third parties and, today, we distribute through a very strong partnership with Fidelity and Charles Schwab. We’re very proud of those relationships. And so, for us, that’s very different. We’ve been a direct model. This was the first time we’ve put our product on the shelf of someone else and, honestly, two brands that are just iconic in nature and that’s what we’re very proud of and it’s gone extraordinarily well. And maybe the last piece is, you know, our relationship that we’re continuing to develop in the health space with Humana, and later this year, we’ll actually white label a product with Humana, a Medicare advantage product. They’ll sell it on their shelf, their agents will sell it, it’ll have a USAA co-brand with Humana. So, these are all examples of ways that we’re thinking about distribution, both products we manufacture, we sell other carrier’s products, they sell our products, and we white label and they sell a white label product through a USAA relationship. So, those are all examples of I think remaining relevant through product and distribution development.

Kevin: What is your opinion about the future of insurance regulations and compliance as we know it today?

Brandon: Yeah. You know, I might have a bit of a different opinion than most in the industry and it’s primarily from where I sit. I sit in a company that is highly regulated. We have a $120 billion bank and we have, you know, OCC and Federal Reserve regulation. We think of regulation and compliance as a way to scale into the future. And if you think about it, we can actually build our processes, we can digitize our processes, we can automate our processes, and we get more efficiency over time and we also get a very consistent member experience. So, we take a lens that I think is maybe a little bit different than the industry of we want to automate our business, we want to do so in a compliant and a regulated fashion and we build our processes that way. There’s no doubt we watch federal regulation. You look at 7702 and kind of the best interest elements. We do approach our advice that way for our members to ensure that, you know, we’re leading with best interest first. So, again, to me, we have a very strong risk and compliance posture at USAA and I think it really comes from the fact that we are a top 5 P&C company, a top 30 Federal Savings Bank in the US, and a top 25 life insurance company, all regulated very differently.

Kevin: What type of strategic partnerships do you see working best for carriers?

Brandon: You know, I mentioned earlier our relationship with Fidelity, our relationship with Charles Schwab, you know, I talked about — we have a relationship with Humana, we have a relationship with Victory Capital and those are all examples of areas where we either could not scale through our investment management company and chose to have a strategic relationship with Charles Schwab and Victory Capital who could scale and could give a vast assortment of products that we were unable to develop. So, for me, what those look like are products that either we can get to market to sooner or best in breed across the industry, where, quite frankly, we just can’t compete from an efficiency or an effectiveness perspective. So, similar in the med advantage space with Humana, similar on distribution with, of course, Fidelity, which is just an incredible distributor of annuities for their customers and we stand alongside that. So, I think what’s gonna be really important for any, you know, executive in the insurance industry or retirement industry is to know what you’re good at, where you have an advantage, where you don’t. And, quite frankly, even if you were to build it, it would take too long and I think you start moving to the right answer, which is strategic partnerships that allow you to scale and move at a quicker pace.

Sandy: What do you see as the biggest opportunity for the insurance industry over the next three to five years?

Brandon: Well, I think the biggest opportunity today is the same than it was 10 years ago, which is, quite frankly, we’re distributing less life insurance products today than we ever have before. And that’s more of a percentage of Americans that own our products. And so our process is antiquated and I think we’ve made a lot of great movement as we simplified our underwriting process but I think more innovation needs to happen there so that we can, quite frankly, reach the consumers that aren’t a big part of our business, which look like millennials, you know, persons of color, women, women head of households, right? These are all elements that I think we need to develop products, distribution channels, and, quite frankly, content and advice that are very specific to I think these growing segments that are gonna become a part of where we’re headed. I think the other element too is our industry has not done a great job of nurturing and servicing these relationships so we’re so focused on the next product you’re gonna buy or buying again that we don’t do an exceptional job of servicing the contracts that you have via digital, via moving of money and other elements so I think that is an area of opportunity where we need to build a digital experience so that our consumers and our members can see their contracts, their products, understand who their beneficiaries are, and be reminded of why they bought that product to begin with. And I just think that’s a miss today where other industries do a better job than we do of staying meaningful in that relationship beyond the purchase of the product.

Sandy: What’s the best decision you made that had a positive impact on your career?

Brandon: The best decision I’ve made is probably less about me and more of people that I worked for, given me opportunities I was not yet ready for. And if you think of all of us, someone took a chance on us, gave us an opportunity when maybe we were 50 percent, 60 percent, maybe 30 percent ready, and gave enough support to give you confidence but enough space to allow you to find your way and fail a bit and grow. So, for me, you know, it does take two to tango so you’ve got to believe, you’ve got to step into that space, you’ve got to be a constant learner and you got to surround yourself with people that are competent, confident, and, quite frankly, are high in integrity that will care enough about you to give you feedback and coach you and help you continue your own development.

Sandy: What advice would you give to somebody who’s looking to get into the financial industry other than maybe what you just said?

Brandon: Here’s what I would say, pick a great company, right? And the truth is, I’m very blessed and I picked a great company, you know, back in 1996 and 1997 and it’s been an incredible opportunity. These are long-term commitments that these companies are making in you as a sales representative are, in essence, talking to people about it and so ensuring that the company isn’t not around or not around, it’s more of the question of servicing and developing that relationship and so I would say be very selective with the company that you choose. The second is, I think, take what you can learn, and that’s good and bad, from those that you work with. Everyone has something to give, sometimes you want to learn them and sometimes you don’t, but you can pick and choose what works and what you want to emulate and what you don’t want to emulate and I think if you look at every interaction with folks that work around you as an opportunity to grow, you know, I think that’s a great way of looking at it. It’s an incredible industry. We should be very proud of it. And I think it’s a great industry to attract new talent as well.

Kevin: From a professional standpoint, what keeps you up at night?

Brandon: I think the long-term growth projections, right? Which is, you know, we have had a lot of innovation, we’ve had a lot of product development, and the truth is we’re serving less of the population today than we did 10 years ago. And so the question is, are these products past their prime or not? And how can we think differently about these products into the future? So, you know, I give a lot of thought as to how we remain relevant into the future. I think, also, the needs are changing and buying a product to invest in every month or to have a 20-year product that covers you for 20 years, you know, life changes a lot in 20 years. So, really how we can change with our consumer and our member to remain an important part of their financial future. So I think that’s the key. And maybe the last thing I would say, I give a lot of thought to the talent needed to build the company of the future. And if you think about when I joined 25 years ago in the life insurance company, there are a lot of underwriters and claims representatives and sales representatives and if you think about today, there are still those important roles as well but digital designers, IT coders, it’s a very different talent market today than it was 25 years ago. So the question is, what are we gonna do to attract those type of skills to come into our industry versus going to work for Meta or Amazon or Google? And so it needs to be a mission-driven, values-based, I think, doing good because our consumers need these products so I do give a lot of thought on how do we get new skill sets and, quite frankly, advanced skill sets into our industry for the future.

Kevin: Brandon, thank you for your time today. It’s been great to hear your insights on how carriers can stay relevant and the opportunities you see for the industry in the next few years.

Brandon: Thank you, Kevin. Thank you, Sandy. It’s been great and I look forward to connecting soon. 

(outro)

Thank you for listening. Please make sure to subscribe and share so we can stay in touch. If you would like to learn more about how Global Corporate Solutions and Global Corporate Leaders can help your organization recruit the best talent, increase your diversity, and save money, please visit our website at www.thegclgroup.com.