Understanding the Legalities of USAA Membership and the Concept of Discrimination in the Insurance Industry

Discrimination is often a contentious topic, with many people assuming that any form of discrimination is illegal. However, the truth is that discrimination is entirely legal in many contexts, with specific restrictions based on protected classes. USAA, for instance, is legally allowed to restrict its membership to military members and their descendants. This article explores why this practice is legal and acceptable under certain circumstances.

Discrimination in the Insurance Industry

One common misconception is that discrimination can only be based on race, sex, national origin, and military service. However, in reality, people and organizations discriminate all the time, often for reasons that might seem logical or even noble. For instance:

NFL teams select the best players based on performance. Law firms hire the best lawyers to represent their clients. Modeling agencies choose the best-looking models to represent their brands. Individuals choose the best food, cars, and internet service providers.

These actions are perfectly legal because they are based on performance, quality, or personal preferences. However, discrimination becomes illegal when it targets specific protected classes, such as race, religion, sex, or age, in certain circumstances. Military service is not one of these protected classes and is thus not subject to such restrictions.

Chartered Organizations and USAA

USAA, a mutual insurance company, operates based on a specific charter that limits its membership to military members and their descendants. This is a legal practice rooted in the organization's charter. A mutual insurance company, or credit union, is established to serve a specific group, such as employees of a particular company. These organizations are designed to provide financial support and services to members who have a direct connection to the group they serve.

A mutual company like USAA was founded to cater to military officers who faced challenges in obtaining insurance from traditional companies due to their frequent relocations and temporary duty orders (TDY) or permanent changing station (PCS) moves. To address this discrimination, these officers formed a mutual insurance company to ensure they could receive better rates and services.

Over time, the membership criteria for USAA expanded to include all military commissioned officers, academy cadets, and ROTC cadets in the final year of their training. Additionally, non-commissioned officers and warrant officers were added as USAA's charter continued to evolve. Spouses and children were eventually included as well, ensuring that families could benefit from the organization's services.

Examples of Chartered Organizations with Restricted Membership

The concept of chartered organizations with restricted membership is not unique to USAA. Other examples include:

SSFCU Security Services Federal Credit Union

SSFCU, a credit union, was established with a charter that limited membership to members of the United States Air Force Security Services and the US Air Force Communications Service (AFCS) stationed overseas. This restriction was necessary due to the sensitive nature of these roles and the importance of maintaining security clearances.

GEICO's Origins

GEICO, the well-known insurance company, started as a Government Employees Insurance Company, serving only government employees. The company's name reflects its original focus, which shifted as the company expanded its reach.

When considering membership for a credit union or other similar organization, it is essential to pay attention to their name. The name often indicates the original charter that limits its operations to a specific group.

Conclusion

In summary, USAA's practice of restricting membership to military members and their descendants is legal and rooted in its charter. This practice is not discriminatory if it is based on a legitimate business rationale. However, any form of discrimination that targets protected classes (race, religion, sex, or age) is illegal and unacceptable.

Understanding the legalities of chartered organizations and their restricted membership can help individuals and organizations operate within the bounds of the law. It is crucial to recognize the distinctions between legal discrimination and illegal discrimination to ensure fair and ethical business practices in the insurance industry.