Agent-Owned Insurance Firm Is Inaugurated

Maverick insurance executive Robert W. MacDonald, who shocked the industry a few years ago by advocating low-cost term insurance over so-called whole-life policies, broke new ground Thursday by launching a unique enterprise that is to be owned in part by the agents who sell its products.

MacDonald, who resigned earlier this year as president and chief executive of ITT Life Insurance, said he and nine former ITT Life associates have acquired the corporate shell of Financial Assurance, a 30-year-old insurance company based in Golden, Colo., as a vehicle for the new firm. Terms were not disclosed.

In an interview, MacDonald said the venture, to be called Universal Security Assurance, will be a subsidiary of newly formed LifeUSA. Both will be based in Minneapolis, also the home of ITT Life.

“We were looking for a platform to build from,” MacDonald explained. He said additional stock in LifeUSA will be initially offered to “key agents and independent insurance field-marketing organizations” next month to provide working capital and the required surplus funds needed to underwrite insurance. The aim is to launch the firm on July 4, he said.

MacDonald said agent commissions will be split between cash and stock in the company. In addition, 5% of each employee’s salary will be in the form of common stock. Within five years, he said, it is expected that 80% of the stock will be held by agents and employees. The balance of the stock will likely be publicly traded, he added.

“LifeUSA is designed for agents who want to be capitalists rather than captives, owners rather than the owned,” MacDonald said.

MacDonald named Daniel J. Rourke as president of Universal. Rourke was senior vice president of marketing for ITT Life under MacDonald.

MacDonald, 44, became president of ITT Life in 1980. Two years later he shocked the industry by ceasing to sell its basic product, whole-life insurance, which he described as “obsolete.” In its place, the firm began offering packages of term insurance linked to various investment plans, a concept now known as universal-life insurance.