Wow this ended up being a wall of text... been wanting to get this off my chest for awhile now.
Firstly, I work in what's basically R&D for an auto insurance at a major USAA competitor. That said, I was and have been a USAA customer in one way or another for about 10 years now.
solely for military-related peeps
Not strictly these days. Between 2009 and 2013 they were mostly open to the general public. There's no reason their dependents won't be able to be members due to their legacy program. I think these were limited member accounts though and weren't able to get the insurance dividends or just weren't able to get the auto insurance policies or something.
Yeah but USAA kicks much ass
Again, not as much as they used too. Their banking services, and money market accounts are on point. Their homeowner's insurance is competitive, but isn't the best. The area that they've been becoming a little less competitive is in auto insurance.
A little more insight:
They claim 99% of their customers will stay there their entire life. This is mostly true... our numbers show they have something absurd like a 97% retention rate after 184 days (industry average is closer to 70%). The reason they have this is two-fold.
Firstly, once you have all your accounts in one spot, its actually surprisingly difficult to move them out. You just won't know where to go. My company knows this all to well... we write homeowner's insurance policies for other companies just for the boost in retention (we don't write it on our own paper for business reasons). I could imagine having banking information is an even bigger factor.
Secondly, they're seen as an exclusive club doing something good for the military. For goodness sake they give their auto policyholders dividends every year when USAA makes to much profit. This club mentality makes it really hard to convince USAA members to shop, because they're proud to be customers at USAA.
The cold hard truth:
By all means USAA is great. When I was 15 I paid $30/mo for liability insurance on a Ford Taurus I owned, on my own policy. I want to say my parents had State Farm, and to be added on their policy it was going to be something like $80/mo. That's a ridiculous savings. I kept them for years.
I switch to my current employer (which there's essentially no employee discount due to how auto insurance is regulated). Got full coverage, including roadside assistance for $80/mo. That's right... for what I was paying for liability only in rural Kansas I was able to purchase full coverage in a large metropolitan area. The problem here lies in the fact that USAA can ultimately rely on their customers not shopping. I mean they only lose 3% of their customers over 6 months, which is basically 20 points better than average for the industry. They can keep upping your rate and you're just happy to be in the club. Now for the truth: Data for us shows that customers will start shopping for a new auto insurance policy if we change their rate at any given time by 5% or more (that's >=5% and <=-5%). Based on rate filings with other insurance companies... this is probably an industry wide standard. The exception is USAA. It literally took a 300% raise for me to go shopping. It's that bad.
Moral of the story: Always shop around.