Name: USAA CEO: Car insurance rates are up but insurance companies are still losing money
Uploaded: 2024-06-04
Duration: 6 min 37 s
Description: Inflation in the insurance sector is starting to normalize—but Wayne Peacock says rates won’t come down to pre-pandemic levels.

Inflation in the insurance sector is starting to normalize—but Wayne Peacock says rates won’t come down to pre-pandemic levels.

USAA CEO: Car insurance rates are up but insurance companies are still losing money

Photo illustration by Fortune. Photograph provided by USAA.

Leadership

I thought you were gonna ask me which book I was reading. But um I that one today. So did you read one last night? Just so you'd have an answer? No, I didn't, but I do have my answer for you, but I'll save that for. What is it? I would tell you my, my all time favorite business book um is Really Boys In the Boat because it's a great history lesson of um you know what happened in the 36 Olympics, you know, there is nothing like putting an eight team together um and see if you can make that work uh in one boat together. Welcome to leadership. Next, the podcast about the changing rules of business leadership. I'm Alan Murray and I'm mia there is this perception and a lot of it is real that it's become harder and harder to own a home. Uh Auto insurance is going up. What from your perspective, um What are you seeing with some of those macro trends and how are they impacting your particular membership? Inflation related to repairing cars and replacing cars, outpaced headline inflation by whatever definition you want to use kind of through the early stages of this and it has put tremendous pressure on auto insurance providers, you know, across the country. And the unfortunate side of that is that we have raised rates um in a pretty significant way across the industry. In, in 2022 the auto insurance industry lost eight cents for every dollar of premium that it wrote. Um And you've seen the impact of that um through increased rates about inflation and as it relates to the auto insurance environment, it is coming down. Um And it is, you know, coming down, um maybe not back to historical norms, but we do see those trend lines in a positive way. And our sense is, you know, over the next couple of years that we'll get back into a more kind of normalized environment, but the reality is auto insurance will be more expensive, you know, dollar for dollar um, than it was pre panem or pre you know, all of this inflationary challenge, the issues around homeowners is really, you know, much broader, right? The cost of a mortgage um is, you know, significantly up from two or 3% to 6 or 7%. It is putting a big barrier into home ownership. Um that doesn't get solved until interest rates come back into a more reasonable way. Um, wages catch up a bit, but the bigger challenge around homeowners insurance will be um weather related risk. Um And you're seeing many carriers today who are pulling back from markets. So it isn't just about the cost. Um It's about the availability as well and this is a big challenge for us as a member owned association. We're not in the business of saying no to our members. Um But we are in the business of maintaining financial strength. So we're being very thoughtful and careful on kind of trimming around the edges of our um you know, risk profile to limit exposure where we can. Um But still try to say yes to as many members as possible, but I do believe we have to have more of a national conversation on what's happening with homeowners insurance here over the next couple of years. You and I have spoken in the past about uh the importance of purpose driven leadership in enabling leaders to get through uh multiple crises happening at the same time. Ee explain why that's important to you and what it means and how it works at USA. A look, it comes back to why are we here and what do we stand for and where do we focus um every single day? And I think if you walk the halls of usa a and talk to our teammates and you can pick, you know, whatever random sample you want, you'll find that people want to be here because there is exciting and rewarding work. Um They love the teammates who they work with. Um But there's always some connection in most cases, a personal connection to the why behind the work and knowing that our work matters past just being really good at the work. Because on the other side of that are folks who have put a uniform on, who put themselves in harm's way, who have sacrificed greatly so that we get a chance to live in this wonderful free country. And those people who sacrifice don't get paid a whole lot from the government. They don't have a lot but they do it every single day. So our employees have the sense that the work matters past the work of the work. Um, and I think that helps drive discretionary effort, um, a pursuit of excellence and a desire to be, you know, even better tomorrow than we were yesterday. USA A has a strong commitment to diversity, equity and inclusion. You can see that in your employee numbers, the mix of your employee base and it matches, of course, the, uh, the commitment of the military to diversity equity and inclusion. But, but we're operating in this strange political environment where you, you're, you're in Texas. The Governor of Texas has actually directed state offices to ignore, uh, diversity and equity goals. How does that affect you? How do you deal with that or react to that? Well, I'm gonna answer in a way that probably isn't surprising to you. It comes back to the mission and the mission of serving a very diverse, uh, military community. And I think today, um the world's moving fast as we know, the world is complex. Um The world requires, you know, broader thinking about how to make the best decisions. Um And I think our employee base needs to reflect that diversity, all manner of diversity in order to best prepare ourselves um to serve today and tomorrow's military. And when you think about my earlier comment of letting the Navy in, in 1923 in 1996 we opened up to enlisted, um, in 2009, we opened up to enlisted, um, no matter when they served. So the diversity of our membership base has expanded greatly and it continues to change. And this for us comes back to, you know, connecting to being able to serve with relevance. If you don't understand who you're serving and what they need, it's really hard to continue to innovate and build great capabilities for them. So, for us, it's a mission imperative, but it's also something we've been doing long before, you know, de and I became a thing.