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Robert Herres

You won’t find many CEOs who first learned about technology in the cockpit of a Sabrejet. One such is Robert …

You won’t find many CEOs who first learned about technology in the cockpit of a Sabrejet. One such is Robert Herres, retired Air Force general and, as of last September, chairman and CEO of USAA, a financial services company that sells everything from life insurance to no-load mutual funds to military officers and their families.

Herres, 61, sits at the controls of a company that has built its reputation on customer service. USAA fund investors who want hand-holding can call representatives at their personal 800 numbers. High-pressure sales tactics are taboo. “Our best marketing device is word of mouth,” says Herres.

San Antonio, TX-based USAA was formed in 1922 as an auto insurance company by 25 officers who had been turned down by local insurers, because they moved too often. (USAA stands for United Services Auto Association). But recently, its financial segment has been growing fastest. Today, for example, its bank has $4.2 billion in assets, and an array of thriving businesses ranging from mortgage lending to car loans. USAA was ranked 21st of the Fortune top 50 diversified financial companies for 1992, and had $33.2 billion in assets owned and under management at the end of last year. Net income on a preliminary basis hit $671 million in 1993, compared with $140 million the year before.

Despite the success, USAA faces a transition as its customer base shifts. With cutbacks in the post-Cold War armed forces, its 1.6 million core membership, active, former, and retired officers, is shrinking. To maintain growth, the company has taken on 900,000 “associate members”-the children and grandchildren of original members-and the search is on for more. “I think we’re less vulnerable to wholesale attacks from our competitors if we stick to our niche,” the general explains. But he acknowledges these third-tier members have a fading affinity to the military culture. “We’ll have to make our products so attractive that they’ll want to be a part of this association,” he says.

That means building cradle-to-grave relationships with customers, Herres says, and offering an array of financial products, many of them enhanced by technology. Under Herres, who was previously USAA’s operations chief, the company will sink $280 million a year into systems, including software that cuts by 75 percent the time for customizing health and life insurance policies. A new auto insurance service allows policyholders to go to a USAA-approved body shop and electronically send images to its appraisers so repairs can start the same day.

It also has fallen to Herres to deal with what may be an even tougher challenge. Like all property-casualty insurers, USAA has been hard hit by millions of dollars in losses from the rash of hurricanes and earthquakes that have devastated Florida and California, where the largest proportion of its military families live. But under its by-laws, USAA must offer insurance for the primary homes of its members, no matter where they live.

Thus, the company honors current policies. “We’re not going to leave our customers high and dry,” Herres says. But, he adds, “we have to figure out how to write a policy with fixed limits.”

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