LifeUSA's Number One Policy - Speed

Bob MacDonald's fast-growing company is writing billions of dollars of insurance by rewriting the rules of its industry.

Robert MacDonald, chairman and CEO of LifeUSA, has never been afraid to make waves. In the early 1980s, as president of ITT Life Insurance, he launched a public campaign against his industry's most popular family of policies -- whole life -- and was vilified by his peers. In the late 1980s, having led a dramatic expansion of his business unit, he tried to buy it from ITT -- and wound up getting fired instead. But none of the turbulence from MacDonald's past compares with the waves he's making today. He's building a nimble growth company in an industry justifiably famous -- infamous, really -- for bureaucratic inertia, painful cost-cutting, and massive layoffs.

"We're trying to revolutionize this industry," MacDonald declares. "We're taking a completely different approach in terms of both products and culture."

It's hard to argue the point. MacDonald, 53, launched Minneapolis-based LifeUSA soon after he left ITT. Revenues last year were nearly $273 million, up from less than $114 million in 1991, and the company collected more than $1 billion in premiums. Assets stand at nearly $4 billion, four times their 1991 level. Despite this growth, LifeUSA has stayed remarkably lean. Its youthful workforce (median age 34) barely exceeds 400 people. But the number of independent agents under contract -- the front line to customers -- is nearly 50,000, almost double the 1991 figure.

MacDonald is clear that he's not just building another life insurance business; he's working to create a new way of business life. He wants LifeUSA to be to his industry what Federal Express has been to shipping, Wal-Mart to retailing, MCI to telecommunications -- a young company with a business model that changes the rules of the game. Three principles define the model: shared ownership, organizational transparency, and speed.

"Our basic philosophy is simple," MacDonald says. "If you come with us and help grow the company, you'll share in the value we create." Early on, to recruit skeptical agents, LifeUSA offered 20% of agent commissions in stock options. LifeUSA employees have an even bigger stake. Rank and filers control options on more than 1.8 million shares, roughly 4,500 shares per person. This kind of equity stake may be business as usual in Silicon Valley, but it's unheard of in the insurance business.

"It takes people 18 months to 'get' how we work here," says LifeUSA president, Maggie Hughes. "We have to teach the concept of ownership. We tell people, 'This is your company.' That's a new idea to most people. School teaches you to obey authority. We teach people to think for themselves."

Of course, even misfits can't take responsibility for a company they don't understand, which is why life at LifeUSA can feel more like a freewheeling graduate seminar than a tough-minded business. "Share the Wealth" meetings provide quarterly briefings on the company's prospects and performance. "Working the Business" classes are taught by senior people and cover topics such as investment strategies, marketing, and customer service.

"We've got people with high-school degrees who can understand complex financial structures," Hughes, 45, boasts. "In order to be held accountable, people need to be conversational with the company's financials."

LifeUSA's second core principle -- transparency -- means the free flow of information up, down, and across the organization. It's hardly a new idea; lots of companies use e-mail and groupware to share information. LifeUSA prefers an older technology: the telephone. This company is addicted to voice mail.

Why voice mail? "It creates more personal relationships," Hughes argues. "You can listen to the voices. E-mail can be isolating. Voice mail helps people share information without becoming isolated." In a typical month, LifeUSA's 400 people send more than 200,000 voice-mail messages. Hughes gets 300 to 400 messages every day. Most of the messages, she's quick to add, aren't one-to-one information bursts. Many are postings to voice-mail forums organized for specific groups debating particular issues -- an especially important way to use the technology, Hughes argues.

"Voice mail is a great way to teach people how to make decisions," she says. "It exposes them to the depth of a situation. They can hear decisions being made."

Of course, ownership and information don't count for much without great execution. And execution, MacDonald believes, boils down to speed. LifeUSA wants to be a fast company -- literally. It guarantees to make commission payments to agents within 24 hours, issue policies to customers within 48 hours, and respond to questions from agents within 48 minutes. This last commitment is the core responsibility of the FASTeam (Fast Answer Support Team), the company's lifeline to its independent agents.

"The speed at which things process there is just phenomenal," says Donald Sunderland, a LifeUSA agent in Fargo, North Dakota. "The day they hear I've made a sale, my commission check is transferred electronically to my bank account. This outfit is really humming."

Robert MacDonald hopes to keep it that way. "We've made a good start," he says. "The key is to maintain the openness and the candor as we get larger."

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