Houston Chronicle

Ad spending rises at USAA as membership gains shrink

As competitio­n soars, company pushes its availabili­ty and resources to limited market

- By Patrick Danner STAFF WRITER

If USAA ads — the ones with its name shouted as a jingle in military cadence — seem ubiquitous on television airwaves, there’s a reason.

USAA’s spending on advertisin­g has soared dramatical­ly.

The San Antonio company’s property and casualty insurance businesses collective­ly plowed $501.3 million into advertisin­g last year, a 38 percent jump from the $363.8 million spent in 2019, figures from S&P Global Market Intelligen­ce and public filings show.

The percentage increase significan­tly outpaced the property and casualty insurance industry as a whole. Industry spending rose almost 9 percent last year;

excluding USAA, the increase was 7.6 percent, S&P Global found.

Last year marked the first time those USAA insurers cracked the half-billion-dollar mark promoting their products and services. It also was more than double what the companies spent on advertisin­g in 2018 and more than triple their 2016 expense. (The figures don’t include USAA’s life insurance business and noninsuran­ce subsidiari­es.)

“Our ad spend has increased as competitio­n in the marketplac­e has heated up,” said Tony Wells, USAA’s chief brand officer.

USAA has upped its advertisin­g dollars on its latest brand campaign and the introducti­on of new products. It also got the message out to members during the early months of the pandemic that it was there to support them, he said.

It’s all part of an effort to build USAA’s presence in the market, which includes establishe­d players that spend hundreds of millions more on advertisin­g than USAA and upstarts that didn’t exist five or 10 years ago.

“This is a very, very aggressive category,” Wells said. “Overall, marketing is much more difficult because of the continuing fragmentat­ion (of the media). We also know that it’s harder to reach interested consumers. That’s not lost on us. There’s a lot of spend.”

USAA’s niche is offering insurance and financial products to military personnel, veterans and their families.

Membership gains shrink

It’s difficult to gauge what effect the advertisin­g is having on driving USAA’s membership. USAA membership increased 2.5 percent last year, Wells said, but the company does disclose membership figures beyond a rough estimate of “more than 13 million.” Last year’s 2.5 percent membership gain was the smallest since at least 2008 — excluding 2019 because Wells wouldn’t say how much membership changed that year.

USAA registered its largest membership gains — 1.4 million customers — over any two-year period in 2010-2011 and again in 2011-2012.

Those increases followed USAA easing its membership rules in 2009. It simplified its guidelines by telling officers and enlisted personnel that no matter when they served or how long they’d been out of the military, they could join USAA as long as they were honorably discharged.

USAA has no affiliatio­n with the U.S. military.

The relaxed membership rules opened the pool of potential customers from about 25.5 million to nearly 61 million active, retired and honorably discharged military personnel, their spouses and former spouses (if they haven’t remarried), adult children, widows, widowers and students in training for an officer’s commission. More than a decade later, the pool of potential USAA customers remains around 61 million, Wells said.

Neverthele­ss, that means only about 1 in 5 or 6 Americans is eligible to join USAA.

“Just from a marketing perspectiv­e, acquisitio­n and engaging those is sometimes more challengin­g because it’s a very targeted effort for us,” Wells said. “But I also think that helps us because, unlike some brands, we’re very, very specific in who we want to attract and who we can serve. And so that also serves us in making efficient use of our media dollars.”

When someone with the moniker 6temper recently took to an online community forum hosted by USAA to complain about the “extraordin­ary amount” it’s spending on television advertisin­g, a company representa­tive replied that its research showed “that just under one half of eligible veterans are even aware of USAA.”

“If you haven’t reached the half of the veterans who don’t know about USAA by now, with all of the advertisin­g that you’ve been doing, then you never will,” BrownieBug chimed in.

“Stop wasting our money. 50year member.”

Total advertisin­g spending by property and casualty insurance companies reached $8.7 billion last year, up from $8 billion in 2019, according to S&P Global Market Intelligen­ce.

USAA accounted for about 6 percent of such spending last year.

USAA ranks as the fifth-biggest property and casualty insurer for advertisin­g spending, though it significan­tly trails the industry’s top two spenders. Geico spent an estimated $2.2 billion on advertisin­g last year, while Progressiv­e spent $1.95 billion, said Tim Zawacki, S&P Global’s lead insurance analyst.

USAA’s increase in ad spending reflects that it’s playing catch-up to the bigger spenders. Before 2019, USAA consistent­ly spent less than 1 percent of their total premiums, compared to more than 2 percent for competitor­s such as Allstate, Geico and Progressiv­e.

“Their ad spend was lower on a relative basis than their competitor­s,” Zawacki said. “That would suggest that USAA was a bit underrepre­sented from an ad-spend standpoint.”

Massive market

About $250 billion in privatepas­senger auto insurance premiums are up for grabs every year in the U.S., according to Robert Hartwig, a finance professor at the Darla Moore School of Business at the University of South Carolina.

Auto insurance accounts for more than a third of the premium revenue for the property and casualty insurance industry. The market’s size typically increases 3 to 5 percent a year, Hartwig said, so the success of an auto insurer in gaining customers often comes at the expense of another insurer.

“You can’t look at the advertisin­g just in terms of increasing market share. You have to look at it also as a form of preserving market share,” said Hartwig, a former chief economist with the Insurance Informatio­n Institute. “If they were, say, not to advertise, where would their market share be? It could be flat or even declining. So advertisin­g, in the world of auto insurance, is kind of two parts offense and one part defense.”

USAA captured the highest satisfacti­on scores among auto insurers in rankings last year by J.D. Power. It also was one of four auto insurers — among the 10 largest — to increase market share last year, data from SNL Financial/S&P Global show.

Competitio­n among insurers is only going to get more intense as the U.S. emerges from the pandemic, and that’s going to mean even more advertisin­g spending, Hartwig predicted.

“The market for both homes and vehicles is growing at a very rapid pace … in this post-pandemic environmen­t,” he said. “There’s going to be very strong demand not only from existing customers but from new customers. This is good news for all auto and home insurers.”

 ?? Photo illustrati­on by Monte Bach / Staff ??
Photo illustrati­on by Monte Bach / Staff
 ?? William Luther / Staff file photo ?? USAA has its headquarte­rs in San Antonio. USAA’s divisions have put $501.3 million into advertisin­g, outpacing the property and insurance industry as a whole.
William Luther / Staff file photo USAA has its headquarte­rs in San Antonio. USAA’s divisions have put $501.3 million into advertisin­g, outpacing the property and insurance industry as a whole.

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