Date: March 9, 2000
To: Robert F. McDermott, Chairman
From: 

Subject: Recommended Technology Projects
 

Without question, our imaging and workflow management technologies have become a “high water mark” in our company’s history.  Our partnership with IBM and the benefits from their MVS ImagePlus System have established insurance industry standards for excellence in collaborative business relationships and processing efficiency.  While these achievements have given us a competitive advantage, we must always guard against complacency – or face the consequences of loss of market share.

To move us ahead towards our vision of providing quality insurance products and services to our customers throughout the world, I recommend that we expand our direct marketing model from only U.S. Mail and phone sales to include the Internet.  I believe that this strategic initiative will be as significant to us and the way we do business as all of our other technology initiatives combined.

Our Internet applications can incorporate policy quotation and sales together with claims services including customer inquiry of reported losses.  Because the Internet is so wildly available around the world, we can also benefit from using its e-mail capabilities to communicate to our policyholders, regardless of the degree of their mobility or overseas assignment.  Moreover, by using the Internet to do direct sales and claims processing, I estimate that we will reduce our transaction costs by over 11% during our first year of operation on the Web.  My projections also show, that the one time costs necessary to implement this technology at USAA will be recouped over a over a two-year payback period.

I am very excited about this idea and how it can benefit us at USAA.  I will arrange a meeting with you next week to fully discuss the strategic and tactical implications of using the Internet in our business.