Inflation in the insurance sector is starting to normalize—but Wayne Peacock says rates won’t come down to pre-pandemic levels.
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00:00 I thought you were going to ask me which book I was reading, but I escaped that one tonight.
00:04 Did you read one last night just so you'd have an answer?
00:08 No, I didn't. But I do have my answer for you, but I'll save that for the next one.
00:13 What is it?
00:13 I will tell you my all-time favorite business book is really "Boys in the Boat" because it's
00:19 a great history lesson of what happened in the '36 Olympics. There was nothing like putting an
00:27 eight team together and see if you can make that work in one boat together.
00:31 Welcome to Leadership Next, the podcast about the changing rules of business leadership.
00:37 I'm Alan Murray.
00:38 And I'm Michal Evron.
00:39 There is this perception, and a lot of it is real, that it's become harder and harder
00:46 to own a home. Auto insurance is going up. What, from your perspective, what are you seeing with
00:54 some of those macro trends, and how are they impacting your particular membership?
00:58 Inflation related to repairing cars and replacing cars outpaced headline inflation
01:06 by whatever definition you want to use through the early stages of this. And it has put
01:11 tremendous pressure on auto insurance providers across the country. And the unfortunate side of
01:18 that is that we have raised rates in a pretty significant way across the industry. In 2022,
01:25 the auto insurance industry lost eight cents for every dollar of premium that it wrote.
01:30 And you've seen the impact of that through increased rates.
01:35 About inflation and as it relates to the auto insurance environment, it is coming down. And it
01:42 is coming down, maybe not back to historical norms, but we do see those trend lines in a positive
01:49 way. And our sense is over the next couple of years that we'll get back into a more normalized
01:55 environment. But the reality is auto insurance will be more expensive, dollar for dollar,
02:01 than it was pre-pandemic or pre all of this inflationary challenge.
02:07 The issues around homeowners is really much broader, right? The cost of a mortgage is
02:13 significantly up from two or 3% to six or 7%. It is putting a big barrier into home ownership.
02:20 That doesn't get solved until interest rates come back into a more reasonable way.
02:27 Wages catch up a bit, but the bigger challenge around homeowners insurance will be weather
02:34 related risk. And you're seeing many carriers today who are pulling back from markets.
02:40 So it isn't just about the cost. It's about the availability as well. And this is a big
02:46 challenge for us as a member owned association. We're not in the business of saying no to our
02:52 members, but we are in the business of maintaining financial strength. So we're being very
02:56 thoughtful and careful on kind of trimming around the edges of our risk profile to limit exposure
03:04 where we can, but still try to say yes to as many members as possible. But I do believe we have to
03:10 have more of a national conversation on what's happening with homeowners insurance here over the
03:16 next couple of years. You and I have spoken in the past about the importance of purpose-driven
03:22 leadership in enabling leaders to get through multiple crises happening at the same time.
03:30 Explain why that's important to you and what it means and how it works at USAA.
03:34 Look, it comes back to why are we here and what do we stand for and where do we focus
03:41 every single day? And I think if you walk the halls of USAA and talk to our teammates and you
03:46 can pick whatever random sample you want, you'll find that people want to be here because there is
03:52 exciting and rewarding work. They love the teammates who they work with, but there's always
03:59 some connection, in most cases, a personal connection to the why behind the work and
04:05 knowing that our work matters past just being really good at the work. Because on the other
04:10 side of that are folks who have put a uniform on, who put themselves in harm's way, who have
04:15 sacrificed greatly so that we get a chance to live in this wonderful free country. And those people
04:21 who sacrifice don't get paid a whole lot from the government. They don't have a lot, but they do it
04:25 every single day. So our employees have this sense that the work matters past the work of the work.
04:32 And I think that helps drive discretionary effort, a pursuit of excellence, and a desire to be even
04:39 better tomorrow than we were yesterday. USAA has a strong commitment to diversity,
04:46 equity, and inclusion. You can see that in your employee numbers, the mix of your employee base.
04:53 And it matches, of course, the commitment of the military to diversity, equity, and inclusion. But
04:59 we're operating in this strange political environment where you're in Texas. The governor
05:04 of Texas has actually directed state offices to ignore diversity and equity goals. How does that
05:13 affect you? How do you deal with that or react to that? Well, I'm going to answer in a way that
05:18 probably isn't surprising to you. It comes back to the mission and the mission of serving a very
05:24 diverse military community. And I think today the world's moving fast, as we know. The world is
05:30 complex. The world requires broader thinking about how to make the best decisions. And I think our
05:38 employee base needs to reflect that diversity, all manner of diversity, in order to best prepare
05:45 ourselves to serve today and tomorrow's military. And when you think about my earlier comment of
05:52 letting the Navy in in 1923, in 1996, we opened up to enlisted. In 2009, we opened up to enlisted
06:00 no matter when they served. So the diversity of our membership base has expanded greatly,
06:07 and it continues to change. And this, for us, comes back to connecting to being able to serve
06:14 with relevance. If you don't understand who you're serving and what they need, it's really
06:19 hard to continue to innovate and build great capabilities for them. So for us, it's a mission
06:23 imperative, but it's also something we've been doing long before DEI became a thing.
06:30 [Music]