Customer Service Champs February 18, 2010, 5:00PM EST

USAA's Battle Plan

The provider of financial services for military families uses remote technology and a keen focus on clients to stay atop our annual customer service rating

By Jena McGregor

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Jesse Leftowitz

When Staff Sergeant Corey Mason wants to deposit a check, he doesn't use an ATM, a teller at a branch, or even a stamped envelope and deposit slip. Rather, the 37-year-old GPS systems specialist takes a picture of the check with his iPhone, uses an app to send it to his bank, and within minutes the money shows up in his account. Although he's now stationed at Fort Knox, Ky., it's the kind of service Mason knows his fellow troops in Iraq, where he served in 2004, surely appreciate. "The mail over there is extremely slow," he says. "They know what it's like."

By "they," Mason means his bank and insurance company, USAA, which counts military members and their families as the bulk of its clients. But he also means the 23% of USAA's top management and new hires that have served in the military. Says Mason: "It's not every day I get addressed 'sergeant' by a customer service agent."

In almost everything it does, the financial-services outfit puts itself in the spit-shined shoes of its often highly mobile customers, many of whom face unique financial challenges. USAA was the first bank to allow iPhone deposits, it routinely texts balances to soldiers in the field, and it heavily discounts customers' car insurance while they are deployed overseas. "They do all this really creative stuff that applies to guys and gals who are in Afghanistan," says Karen Pauli, a research director at consulting firm TowerGroup. "There is nobody on this earth who understands their customer better than USAA."

Although few large companies have such a specialized focus, managers everywhere could learn plenty from USAA about coddling customers. A private company with $68.3 billion in assets, USAA has unrivaled staying power atop Bloomberg BusinessWeek's annual Customer Service Champs ranking. Since we first produced the list in 2007 with our research partner, J.D. Power & Associates (MHP), no other company has come close to achieving USAA's feat: a No. 1 or No. 2 spot for four years running. No fewer than 87% of respondents to J.D. Power's syndicated surveys say they will definitely buy from the company again, far higher than the average, which is just 36%. Its client retention rate? A near-perfect 97.8%.

For USAA, though, maintaining that track record could become a bigger challenge. In November its insurance business scrapped some of its eligibility requirements, more than doubling its potential customer base, from 26 million to 61 million. USAA's property and casualty insurance is now open to anyone who has ever served honorably in the military; in the past, customers had to have served or signed up for USAA between certain dates. And while most of its banking and brokerage units have sold to anyone for years, it began advertising those services widely only last year.

While the company has no plans to offer insurance to the general public, expanding beyond its traditional customer could make it harder to provide the same lauded service. For one thing, a broader membership could lead to more consumers who present a greater insurance risk, which may mean service reps will need to be more skeptical about claims, says Brian Sullivan, editor of Auto Insurance Report. "If you rarely question the claim, you don't create any conflict," he says.

And while new members may be armed forces veterans and their families, their needs may be different, says Bruce Temkin, who heads up Forrester Research's (FORR) customer experience practice and has studied USAA. "The real trick for USAA will be how they continue to serve their core military customer while serving this broader set," he says. "It can get really messy if they grow too fast." A USAA spokesperson contends the insurer's pricing will correct for any greater risks that come from expansion.

For now, USAA is focusing on what it knows best: its armed forces customers and the unique financial issues they face.