MacDonald, 'The Qaddafi of Insurance,' Pushes Idea of Partnerships with Banks; but Impish ITT Life President Finds Most of the Industry Remains Hostile
Sudo, Philip T., American Banker
NEW YORK -- It was California, 1968, and Pierre Salinger had just emerged victorious in a primary fight for the U.S. Senate. Reporters crowded around him with questions.
A voice called out, "Mr. Salinger, have you met with Bob MacDonald yet, and what did his support mean to your victory?" The candidate, flustered by the unfamiliar name, said Mr. MacDonald's support was crucial, adding that he hoped to meet with him shortly.
Robert W. MacDonald, the 41-year-old president and chief executive officer of the ITT Life Insurance Corp., remembers the moment fondly. After all, he was the one who posed the question. A law student and insurance salesman at the time, Mr. MacDonald had snuck into the press conference posing as a journalist with a tape recorder.
"My friends saw the whole thing on TV," he recalls, laughing. "We were always into a little chicanery."
To the dismay of most insurance executives, the mischievous twinkle in Bob MacDonald's blue-grey eyes is still there. Despite attaining the top spot at a firm with $5 billion of life insurance in force, he is the same gleeful boatrocker he was as a student, one who knows how to make waves and ride them to shore.
The Rochester, N.Y., native's first big ripples in insurance came two years ago, when he called whole life "a lousy product" and made Minneapolis-based ITT Life the first major insurer to quit underwriting the policies. He chastised other insurers for "making the sale of life insurance a test of your patriotism, where you're un-American if you don't have a policy." And he began advocating banking deregulation, just as other insurers were describing its perils before Congress.
Today, Mr. MacDonald likens his reception at industry gatherings to that of "Jesse Jackson on a goodwill tour of Israel." He has earned several new nicknames in his role as the industry iconoclast, some of which are printable: maverick, traitor, "the Qaddafi of Insurance," and most recently, "Minnesota MacDonald and the Temple of Doom." In turn, Mr. MacDonald refers to his counterparts as "merchants of guilt" who are "down there on the credibility list with used-car dealers and sellers of mail-order aphrodisiacs."
Such colorful quotes make good copy, as reporters say, which helps bring attention to ITT Life and Mr. MacDonald's central theme: that the future of banking and insurance is a shared one. He has pressed the point for more than two years now, using the same arguments and punch lines, but it has taken that long for the message to gain some acceptance, he says.
The speech goes something like this: "The real problem in the insurance industry is distribution. The agent system is inefficient, and we don't have the margins for an inefficient system. We have to be able to get the agent in front of people and offer a more market-sensitive price. The answer is to offer it where it's most convenient and logical, and banks have everything it takes. They have two assets that we in the insurance business lack -- credibility and frequent face-to-face contact with an expansive customer base."
Bankers, meanwhile, "are looking for ways to make the brick-and-mortar branch system more profitable. To do that, they need to improve their marketing expertise, and the insurance industry excels in marketing techniques."
Many bankers and insurers agree with Mr. MacDonald and have formed alliances: American International Life Assurance Co. of New York and Citibank; Nationwide Life Insurance Co. and Bank One, Columbus, Ohio; Travelers Corp. and Hawkeye Bancorp., Des Moines; Aetna Life & Casualty Co. and First Tennessee Bank, Memphis; Equitable Assurance Society of the U.S. and Alaska Mutual Bank, Anchorage; Capital Holding Co., Louisville, Ky., and Bank of America.
ITT Life has agreements with several banks and thrifts, the largest of which is the Norwest Corp., also of Minneapolis.
The beauty of these partnerships, Mr. …