USAA closed 51% of home insurance claims without making a payment in 2025
expressnews.com
expressnews.com
For things you can cover, external insurance will be more expensive than self-insurance because you aren't paying for random CEOs. (Unless you've captured some and are tending to them)
Currently our home insurance deductible is $10k. The logic is that anything less than that we can pay ourselves. Home insurance is only there to cover either catastrophic damage or really, a total loss.
That means you would need to hold enough money in short term accessible money (HYSA, etc) to self insure in that scenario, which is unachievable for most people.
Insurance should set a maximum cap to your pain no matter the circumstances… and I think the pain being >50k is quite unreasonable unless we’re talking about property that is worth in the millions.
This isn’t like putting all your money in meme stocks or something, this is more akin to selling risky stock options. The downside potential is massive and essentially uncapped, whereas the upside potential is meager.
At about 1M policy holders that’s about $14 per policy. Not bad for a couple months work.
Most of the issues here stem from problem the sales as opposed to the claims process. Customers are, structurally, under-educated on what their policies actually cover and this produces unrealistic expectations about what they should file claims for.
Emphatically, this is not their fault but an industry-wide issue that has complex causes like brokers/salespeople getting increasingly squeezed to produce as well as the intense time pressure under which many folks purchase their homeowners insurance policy (folks are often sprinting to check this box to secure a mortgage). Sadly, there is also a strong correlation between consumers experiencing worse socioeconomic conditions and failed claims. This, to me, generally suggests that some behavioral insights should be brought into the sale and management of the financial product to better protect these buyers' interests.
It is important to highlight and understand this point of failure because: 1) claims (even failed ones) are one of the easiest ways to get your rates jacked up as this is a category that insurers are allowed to price on. 2) The common response to articles like this is that "of course insurance should cover more things" but this counterintuitively risks creating more dead-weight loss for consumers broadly in the form of coverage for things that we simply shouldn't be insuring (and instead should be maintaining and replacing).
All that is to say: ask your broker / agent what's in your contract. Do it BEFORE you have a claim to file as in some cases speaking to them (especially captive agents) may in and of itself trigger a claim.
AI-native brokerages (like what we've built) are part of the solution to this problem since well-constrained LLMs can help buyers and users get a much better sense of what their contracts actually cover, and whether or not they should submit a claim.
USAA had a great run of building trust and is speedrunning torching it.
I’ve heard good things about Farmers and USAA. Never anything positive about another.
For mortgages, I can recommend Digital Federal Credit Union (DCU), now merged with First Tech. They held the note and the servicing.
From a policy standpoint, this works out really well for them as the bottom feeders aren't their customers, so they have fewer claims.
And it doesn’t even make sense financially. The “brand” of your mortgage provider adds absolutely nothing to the utility. When shopping for a mortgage, just pick the lowest possible rate, it does not matter from whom. Loans get sold all the time and that is a good thing as it helps minimize rates through raw competition.
USAA at one time had aims of being a comprehensive financial company and they gave those up years ago. Brokerages got sold to Schwab, IRAs to Victory, etc. Again, this is a good thing as there was no way they were going to be able to compete in all those categories. Specialization is good.
In one case dealing with our house, I discovered a calculation error in my favor and submitted the corrected documentation to them. After examining that data they agreed and modified the claim to correct that error.
With the exception of the adjuster visits, all contacts with USAA were managed over the telephone or thru texts and emails. They are efficient and easy to reach.
I can see where USAA's statements that the numbers are off. From the article:
>In a statement, USAA said the association’s data is misleading because it lacks context about why a claim may be closed without payment. Those factors could include claims that were later reopened, claims covered under separate policies or multiple claims from a single event that are consolidated into one case.
I had a leak and they covered an entire new hardwood floor for the deductible cost with basically no questions and a handful of pictures
my rates are reasonable for everything
Our roofing contractor said pretty much the same thing. He said they are comprehensive in their damage assessments so the coverage quoted after their rep visits tends to be very close to actual damages that should be repaired. They will adjust if you can document something they missed. Very easy to work with, he said.
First claim was for a leak caused by a broken pipe due to the building settling. The adjuster went missing for months, took 6+ months to get payment and resolution after emailing and calling almost every day. I think the final total was ~15k which was covered between the HOA's insurance and my insurance. I was also out of pocket for several thousand just trying to diagnose the issue since it wasn't initially clear what was causing the issue, ended up having to cut into the walls just to find the issue which they of course did not entirely cover.
Second claim was for sewer backup that flooded the unit causing 50k+ worth of damage. They initially outright denied the claim, which I had to push back on by escalating up to a senior adjuster. Again, took them MONTHS to payout, causing huge delays in the repairs, which caused the tenant to sue me for breach of the lease contract. Tried to help the tenant use their renter's insurance to get alternate lodging while the repairs were going on but they refused for some reason. I had to threaten to sue USAA and to pull my policies for them to get any movement on my claim. They ended up covering up to approximately the policy maximum (25k) and made up about 15k of the rest from loss-of-use but I had to absolutely bully the manager I finally was able to get into contact with. Out of pocket like 10-15k after settling with the tenant.
Obviously I'm biased but even a cursory reading of the policy made it obvious to me both issues were very squarely covered and it was absolutely like pulling teeth to get them to do anything. Unfortunately I don't know if any other company would've been better.
“When all factors are included, less than 6% of USAA homeowner claims were denied without payment,” USAA said. “Most claims closed without payment involve losses below a member’s deductible or claims the homeowner chooses not to pursue.”
The biggest scam I've seen in real estate is mandatory windstorm insurance (TWIA & friends). I've been through multiple hurricanes where claims were involved and it would have been significantly better if the premiums were simply left in a savings account to compound over time.
Any kind of disaster that would require complete reconstruction of your home would likely violate whatever "act of god" clause happens to exist in literally every policy. Not having insurance is not equivalent to being at risk for the total property value (in any practical sense). $10k goes a long way when you are repairing wood and plastic that is mostly still standing. If you are fortunate enough to have a few years between catastrophes (as typically you do), then it's generally never a problem.
A simple rule for today's economy: If you cannot afford the property on cash basis, you should probably try to find a cheaper property. The risk of mandatory insurance premiums creeping up into the danger zone is too high. Even if it starts out OK, you may find that your escrow account requirements start to outpace your principal and interest obligations over the years.
Paying off a 3% mortgage means you could not invest that money, which would return 7% on average or like 10+% recently. That is a lot of lost money.
Anyone whos not L5 at bigtech cannot afford any home on a cash basis. That’s not a realistic bar.
That being said, insurance is wildly different by state and location and it sounds like it royally sucks in Texas.
United Services Automobile Association - Officers and senior NCOs
USAA Casualty Insurance Company - Enlisted (E-1 to E-7) and children of the above
USAA General Indemnity Company - National Guard, Reserve
Garrison Property and Casualty - Extended family of the above
I can't get past the article's paywall to view the 51% rate, but I expect your claim process experience will vary based on which company is insuring you.
I have noticed that the quality of service has declined over the past 5 years or so (which lines up with Peacock's being CEO). It sometimes takes 2 or 3 calls to answer a question with my policies these days, as they now have high turnover in the call center.
More info: https://www.reddit.com/r/USAA/comments/12ww8fz/where_can_i_f...
My car insurance is above $4k/yr for two family cars, rising annually despite no accidents.
Meanwhile, "normal" countries are solving these problems in reasonable ways. Back home in Central Europe, you get state mandated car insurance at pre-negotiated rates that are based on the car, not the driver.
US insurance is a scam.
I like my low very rates. I don't want to pay higher rates for people who can't parallel park. They can suffer their skill issues.
In the Netherlands my standard car insurance came with a bodily injury liability limit of 6.5MM and property damage liability limit of 2.5MM at a cost of only around €25 per month.
You usually cannot even get limits that high from insurers in US, let alone at such a cheap rate.
That’s massive operational overhead and is definitely not as simple as looking at elevation, and that overhead is reasonably not worth it for those companies.
Car insurance premiums grew 3.8% to 5.4% annually over 30 years, compared to 2.4% average inflation rate. Why?
Complex technology and labor required to fix cars.
Costly claims for rising medical bills, increased litigation, severe climate weather damage, and distracted driving accidents from smartphones
The last 3 years, profit is way up from excess cash after post-pandemic rate increases. Before that, profit wasn't great.
I still have their awful jingle stuck in my head played over hours of holding on the phone, I'll probably turn into a Manchurian candidate if I ever hear it again.
To me, the hardest part is competing for the small number of intelligent people who are interested in such a dull, fundamentally scammy business.
Multiple resources on the internet put the startup costs at $500K or less. That's not much more than fast food or other high touch retail startups by comparison.
There are certainly a few steps on the learning curve but it's mostly high school and undergraduate math that is needed. That puts it out of reach for some but the field is pretty flat once you get there, is my perspective having considered and opted against getting into it.
In other words, there's no moat in insurance.
See for example the minimums here: https://www.insurance.ca.gov/0250-insurers/0300-insurers/010....
The 50 states regulate insurance in the US and issue rules about how to do this, some of which affect competition and pricing in heavy handed ways, sometimes it's overtly political.
In general though insurance is an extremely competitive field. Margins for the most part are similar or lower than other industries.
Not sure where the popular impression that it is not competitive comes from. If anything I think the sword cuts both ways, the friction in the process is probably more a symptom of competitiveness more than its absence.
The fact that it goes up 20-30% every year (no claims, obviously), that I cannot raise my deductibles to significantly lower my premiums, the whole skin-job of "agents" that provide an illusion of choices to confuse the market, and that they've bought a friendly regulatory regime that lets them price discriminate by capping coverage maximums when the whole point of insurance is to cover long-tail risks. Never mind that their chief "innovation" over the past few years has been pushing surveillance devices that track your driving, finding reasons to cancel policies, and whatnot.
I've also bumped into a few different people who shut down their small businesses over untenable commercial rates. The whole industry is a massive drag on our economy. I've no doubt that the accountants/actuaries find places for the money to go that isn't just executives' pockets, but that's of little consolation.
After realizing I've really stopped buying insurance except a core of home, car and liability with high deductables. If you're a responsible person who is careful insurance really isn't worth the cost.