The Successful Agent PRACTICAL HINTS FOR THE SELLER OF LIFE INSURANCE THE PRINCIPLES OF INSURANCE EXPLAINED SO SIMPLY THAT ANY LAYMAN CAN READILY UNDERSTAND BY WILLIAM ALEXANDER PRICE: CLOTH, $2.oo; FLEXIBLE LEATHER, $2.50 1907 HE SPECTATOR COMPANY 135 WILLIAM STREET NEW YORK GENERAL Copyright 1907 By THE SPECTATOR COMPANY NEW YORK PREFACE The object of this book is practical ; to tell the agent what he must know to be successful in selling life insur- ance. The author believes that he is competent to give advice because he has had thirty years of experience, during which time he has given a great deal of atten- tion to the instruction of agents, and has seen the practical results of his work. His identification with a particular company, more- over, has given him a knowledge of which the outsider is ignorant. Indeed, experience shows that the mere theorist, or the man acquainted with field work only, lacks much necessary information. Hence the author believes that he enjoys a distinct advantage as a teacher. His aim is to give information which shall be as useful to the agent of one company as to the agent of another. In this volume he advocates no company or companies, and champions only the great cause Of LIFE INSURANCE. It is his hope that any agent who reads will find the book a means of increasing his income; and that any layman who reads will recognize its teachings as disinterested and unbiased. While these explanations are primarily for begin- ners, it is believed that much will be found of use by 164068 4 PREFACE veteran agents, or by the employers of canvassers, as well as by laymen who seek enlightenment regard- ing the so-called mysteries of life insurance. In the early chapters some elementary truths are necessarily discussed. If the reader should skip these as unimportant or dry, it is doubtful whether the body of the book will prove either entertaining or profit- able ; for unless the A, B, C of the subject is learned the language used thereafter will be obscure, and the lessons taught will have little practical value. TABLE OF CONTENTS BOOK I CHAPTER I. PAGE. WHAT THE AGENT MUST KNOW 13 The average citizen is ignorant and must be enlightened. Life insurance depends on the law of mortality as applied to a large body of people. Its relations to the individual can only be understood after some knowledge has been obtained of the manner in which it applies on the average to this large body. CHAPTER II. A FEW FUNDAMENTAL TRUTHS 18 The average duration of life of a multitude of people may be accurate- ly determined. CHAPTER III. COST OF INSURANCE ON THE NATURAL BASIS 23 How to discover cost by utilizing mortality table. TABLE OP NET NATURAL PREMIUM RATES. CHAPTER IV. THE SINGLE PREMIUM 38 How the net single premium is computed. TABLE OP NET SINGLE PREMIUM RATES. CHAPTER V. THE LEVEL PREMIUM 31 How computed. TABLE OF NET LEVEL PREMIUM RATES. CHAPTER VI. THE GROSS PREMIUM 35 The "gross" premium includes a "loading" for expenses, which, when added to the net premium, gives the correct rate to charge. CHAPTER VII. SECURITY 39 A life insurance company organized on a scientific basis cannot fail if prudently and skillfully managed. Surplus. Relations between assets, liabilities and surplus. The Reserve explained. CHAPTER VIII. STANDARDS OF VALUATION 44 Why the reserve need not be as large as the policy obligations. Why it is that the lower the rate of interest employed the higher the standard of valuation. INSURANCE REPORTS. PUBLICATIONS THAT THE AGENT WlLL FlND USEFUL. 6 TABLE OF CONTENTS CHAPTER IX. PAGE. ADEQUATE PREMIUMS MUST BE CHARGED 49 Assessment companies have failed because their charges have been inadequate. Insurance on the natural basis. The agent must be able to show the strong points of his own company. CHAPTER X. DIVIDENDS 54 What dividends are and how they are paid. Three Ways of Conducting the Business: 1. Mutual companies. 2. Proprietary (or stock) companies. 3. Mixed companies. BOOK II CHAPTER I. THE POLICY CONTRACT 63 The agent's relations to the contract. The application, medical examination, and policy. General advice to the agent. CHAPTER II. POLICY CONTRACT (Continued) 71 The best policy for a particular man is the one that fits his circum- stances best. Different policies described. CHAPTER III. POLICY CONTRACT (Continued) 79 The salient features of various kinds of insurance. Different ways of settling policies at maturity. CHAPTER IV. THE NEW INSURANCE LAW IN NEW YORK 84 THE STANDARD POLICY. BOOK III CHAPTER I. THE AGENT A SPORTSMAN 93 Analogies between fishing and canvassing. The successful agent a mighty hunter. The agent exists because he is indispensable to the public. CHAPTER II. DIGNITY OF THE AGENT'S CALLING 99 It is on a par with the learned professions. It gives scope for the highest attainments and ambitions. Its many advantages illus- trated. TABLE OF CONTENTS 7 CHAPTER III. PAGE. GENERAL ADVICE 103 What the agent must do first. What his qualifications must be. Why any man of integrity, industry and intelligence can succeed. Scope of modern life insurance. CHAPTER IV. HOW THE AGENT MUST BEGIN 109 He must insure himself. He must look prosperous if he wishes to prosper. Why dishonesty is not the best policy. CHAPTER V. HOW TO FIND CLIENTS * 114 Cultivate friends and make acquaintances. How to get at people. The importance of tact. Prejudices must be overcome. The agent must have energy, originality, ingenuity. CHAPTER VI. THINGS TO DO AND TO AVOID 122 The agent must adapt himself to circumstances. The injury result- ing to the agent through ' ' twisting " and rebating. The agent must do a lot of thinking first, and a lot of work afterwards. CHAPTER VII. TIME IS MONEY TO THE AGENT 126 How time may be economized and used so as to do the most good. CHAPTER VIII. ORGANIZATION AND CONCENTRATION 132 The importance of system. The business of the agent must be carefully organized. What experts have said on this subject. CHAPTER IX. CONFIDENCE 135 All business is based on confidence. No agent who fails to secure the confidence of his customers can hope for permanent success. CHAPTER X. USE YOUR WITS 138 The importance of devising new and striking methods. Argument in favor of endowment insurance. The annuity as an entering wedge, and as a weapon of defense. Other illustrations. CHAPTER XI. THE RIGHT POINT OF VIEW 144 A policy is an asset, not an expense. The sense in which all life insurance is an investment. When is a man adequately insured? Other illustrations. 8 TABLE OF CONTENTS CHAPTER XII. PAGE. INCIDENTAL ARGUMENTS 152 The incidental benefits of insurance are more attractive to many people than its direct advantages. CHAPTER XIII. POPULAR FALLACIES 155 Examples of the obstacles that beset the agent's path, and how to sweep them away. CHAPTER XIV. THE GENERAL AGENT 161 CHAPTER XV. A PARTING SHOT 165 APPENDIX A. HOW TO COMPUTE THE SINGLE PREMIUM 167 APPENDIX B. HOW TO COMPUTE THE LEVEL PREMIUM ........ 171 APPENDIX C. THE PURE ENDOWMENT, THE TERM POLICY, THE ENDOWMENT POLICY 175 APPENDIX D. ANNUITIES 179 APPENDIX E. EXPECTATION TABLE 185 APPENDIX F. POPULAR FALLACIES 187 APPENDIX G. DEFERRED DIVIDENDS 196 APPENDIX H. TWISTING EXPLAINED 201 BOOK I THE TRUSTWORTHINESS OF THE WARES THE AGENT HAS TO SELL. THE SCIENTIFIC PRINCIPLES ON WHICH LIFE IN- SURANCE IS BASED, AND HAS FLOURISHED FOR A CENTURY AND A HALF. INTRODUCTION TO BOOK I. Life Insurance is not an expensive luxury. It is a necessity of modern civilization. That this is recognized is proved by the fact that the life insurance companies of the United States (excluding assessment and fraternal organizations) now have about $13,000,000,000 at risk; that the companies of other countries have upwards of $11,000,000,000 at risk, and that, consequently, the life insurance companies of the world are responsible at the present time for insurances aggregating TWENTY FOUR BILUONS OF DOLLARS. That this recognition is not all pervading and complete, however, is indicated by the circumstance that there are multitudes of men throughout the civilized world who need insurance but who have thus far failed to avail themselves of its protection. This failure is due to a variety of causes: ignorance, doubt, heedlessness, improvidence, selfishness and pro- crastination. It is the province of the agent to convert such people. And it is a significant fact that even those who clearly recognize the value of insurance seldom act until per- suaded by the agent to do so. Hence the agent occupies a broad and influential field. But to succeed in his im- portant mission he must master the principles of life insurance. Otherwise he will not be able to enlighten the ignorant, convince those who are sceptical, satisfy the doubting, or spur the dilatory to action. 12 INTRODUCTION TO BOOK I. To the average man life insurance is an inexplicable mystery, and with many its stability and utility are seriously questioned. Consequently it is essential that the agent should know of his own knowledge that it is established on fixed scien- tific principles. He must understand the theories on which it is based and be able to demonstrate its stability and value. He must be competent to show clearly what it offers to do and how it accomplishes its aims. In short, he must be prepared to show that it is safe beyond all per- ad venture and well worth the money it costs to obtain it. Then, and then only, will he be able to induce men and women to insure. THE SUCCESSFUL AGENT CHAPTER I. WHAT THE AGENT MUST KNOW. It is conceivable that a man who cannot read could sell books, and that a man who knows little about life insurance could sell policies. But the really successful agent must utilize in his business: (1) A comprehensive knowledge of life insurance in general ; (2) the strong points of the company he represents; (3) the selling qualities of the goods the policies he has to offer, and, (4) the best rules for organizing and carrying on his work. Each agent must gather for himself the information covered by the second of the foregoing divisions. The other three will be dealt with in this book. THE AGENT MUST BE ABLE TO IMPART HIS KNOWLEDGE. The agent who attempts to explain life insurance to his customers must understand life insurance him- self. And the best way for him to discover what information he must acquire for this purpose, will be to find out how little, or how much, his customers already know, and then see how well prepared he is to supply the facts that are lacking. 14 THE SUCCESSFUL AGENT In most cases it will only be necessary to announce one or two truths, or correct one or two errors; but the agent himself must be fully informed, so as to deal with the varying needs of different people. And a few elementary truths clearly stated will throw a flood of light into the mind of many a man who re- gards life insurance as an insoluble mystery. But at the very outset the agent must remember that his object is not to make an insurance expert of his customer. His province is simply to give a clear view of what life insurance tries to do, and how it succeeds in accomplishing its aims. His practical object being to show first that life insurance is based on scientific principles, and then that his customer can't do without it. WHAT LIFE INSURANCE IS, AND HOW IT WORKS. When a man sees a reaping machine and does not know what it is, he will wish to know first what it is for, and then how it works. A man who knows nothing about life insurance will wish to know first what it is for what it accom- plishes and then how it achieves its ends with what accuracy and reliability it works. In other words, whether it is safe, and, in addition to being safe, will prove adequately remunerative if he invests his money in it. IGNORANCE OF THE AVERAGE CITIZEN. If the agent will accompany me to some point of vantage, and will watch with me an imaginary citizen WHAT THE AGENT MUST KNOW 15 whose interest has been awakened in life insurance, we shall be able to gather some valuable information. Let us assume that this citizen (whom we may for convenience call Mr. Smith) is a shrewd, hard-headed fellow, who makes it a rule when he determines to investigate any subject, to go at it in an energetic, straightforward, practical way. And let us assume that, having no agent to help him, he starts out alone to gather such information as he can for himself. If so, he will probably go directly to some reputable company. Presumably any officer of the company will cheer- fully place himself at the visitor's disposal, but, to be definite, let us suppose that Mr. Smith is introduced to the Secretary. Smith will tell the Secretary that he knows some- thing about fire insurance if his building burns, the fire company will replace it how, he does not quite understand. He infers that life insurance is much like fire in- surance if a man dies prematurely (although his life cannot be restored, and although his widow cannot be given a new husband) the company can pay the widow a round sum of money. And that, of course, is worth while. How the company can afford to pay a large sum when it has received only a small sum is a mystery ; but that is not his concern. What concerns him is the fact that the man who does not die prematurely runs the risk of paying so much money into the company that he (Smith) can't for the life of him see how any benefit could result to 16 THE SUCCESSFUL AGENT him from the transaction. Nevertheless, remember- ing that "you can't fool all the people all the time/ 1 he assumes that there must be a satisfactory explana- tion, or there wouldn't be life insurance companies all over the world some of them with hundreds of thousands of policyholders and hundreds of millions at risk. In answer to all this, the Secretary will advance two propositions. 1. Life insurance depends on the LAW OF MORTALITY as applied to a LARGE BODY OF PEOPLE. 2. Insurance as it relates to the individual can only be understood after some knowledge has been obtained of the manner in which it applies on the average to this large body of people. INSURANCE DEPENDS ON LARGE AVERAGES. Smith may object that he is indifferent to the fate of others, and wishes to concentrate his attention on his own case. But the Secretary must explain that in seeking to understand life insurance by looking at a single trans- action, Smith confronts a stumbling block over which ninety-nine men out of every hundred tumble when they begin their investigation of this subject; and that such men usually, after picking themselves up and rubbing their shins, give up altogether the pur- suit of knowledge about insurance, and hobble off in some other direction. "Consider your own case for a moment," says the Secretary, "you tell me that you are 35 years of age, WHAT THE AGENT MUST KNOW 17 and that you can afford to lay by from your income $300 a year. If so, I am able to tell you that a policy for $10,000 will cost you $281.10* down, and the same sum annually thereafter, as long as you live. I can tell you further that if you make your first payment (called the premium) today, and die tomorrow, the company will at once pay your widow $10,000. Whereas, if you do not die, you must continue to pay the same premium from year to year, as long as you live ; and the return to your widow at your death will be the same sum, namely, $10,000." "But/' continues the Secretary, "I cannot tell you whether you will die tomorrow, or ten years hence, or thirty years hence. Consequently, I cannot tell you when your widow will get her $10,000, or whether you will pay a small sum or a large sum for your in- surance. Nor can I tell you (if we confine our scrutiny to your individual case) how it is that we can pay $10,000 if you die tomorrow as readily as we can pay the same sum if you live for thirty or forty years. Nor, if we thus confine our attention to one trans- action, can I prove to you that life insurance is a good thing in general, and a good thing for you in par- ticular. " After listening to all this, Smith, if a reasonable man, will permit the Secretary to continue his explana- tions in his own way, whether he sees any sense in such a course or not. *This is the rate charged by a number of representative companies for an "ordinary life, participating policy." Certain companies charge a trifle less. CHAPTER II. A FEW FUNDAMENTAL TRUTHS. The Secretary will then explain that life insurance is utilized in a great variety of ways, and accomplishes many useful purposes, but that as Smith has caught on to the fact that through insurance a man can pro- tect his wife and children, and as that is the object he has in view, and as that is its first, simplest, and most obvious purpose, it will be well, for the time being, to center attention on that kind of insurance. The Secretary will then explain the necessity of glancing for a moment at the law of mortality, and a few other technical matters that must be understood in advance by any man who expects to understand life insurance in general, or its exact application to his own needs. THE LAW OF MORTALITY. If you toss a coin twice, it may come up heads both times or tails both times; but if you toss it twenty thousand times, heads will come up ten thousand times, and tails ten thousand times; thus illustrating the well-known fact that although the law of average works with exactness when applied to a large number of happenings, it works very imperfectly when applied A FEW FUNDAMENTAL TRUTHS 19 to a few happenings, and cannot apply at all in the case of an isolated event. THE LIFE OF THE INDIVIDUAL IS UNCERTAIN, BUT THE AVERAGE DURATION OF LIFE OF A MULTITUDE OF PERSONS MAY BE ACCURATELY DETERMINED. Nothing is more uncertain than the life of one man. Nor can any accurate prediction be made of the prob- able duration of life of fifty men, or one hundred men, or even one thousand men. But experience proves that the average duration of life of a large number, such as one hundred thousand, may be determined with substantial accuracy. The law of average thus applied to the duration of human life is called the law of mortality; and the statistics illustrating this law, when gathered to- gether and tabulated are called mortality tables.* USE OF THE MORTALITY TABLE. "The first thing I have to show you," says the Secretary, pushing towards Smith a printed page covered with figures, "is The American Experience Table of Mortality." "Hold on," says Smith, "let's keep away from figures. To me statistics are as dry as ashes, and all *The first mortality tables were based on the death rates of certain cities, but the more accurate tables now J n use are based on the statistics gathered by the insurance companies themselves. The table which has been used more than any other in the United States is the American Experience Table, giving the experience, for a term of years, of one of the oldest and largest of the American companies. There are later tables that are more comprehensive and exact, but this table has proved a safe and reliable guide, and is convenient for purposes of illustration. 20 THE SUCCESSFUL AGENT the mathematics I ever knew I forgot as soon as I got out of school. I haven't come to you for scientific training, but simply to find out whether life insurance is a good thing for me to invest my money in. " To this the Secretary will answer, ' * I have no inten- tion of boring you with the intricate technicalities of the business, or with complicated mathematical problems. There are certain facts, however, that you must know, and to comprehend them you must glance at one or two tables, and a few simple arith- metical computations which any man who keeps a bank account can readily follow. These can all be disposed of in a very short time ; and, if mastered and remembered, they will make all subsequent explana- tions clear as crystal; whereas if you dodge them, all subsequent explanations will be obscure. Moreover, I think you will admit when I have finished, that these preliminary explanations are not without inter- est. For example: I venture to say that you will not lay this table of mortality aside until you have extracted some interesting I might almost say en- tertaining information from it." EXPLANATION OF MORTALITY TABLE. The American Experience Table of Mortality begins with 100,000 persons, all 10 years of age. Of these, 749 will die during the first year, and only 99,251 will attain the age of 11. Of the survivors, 746 will die during the second year, and only 98,505 will reach the age of 12. And so on, from year to year. A FEW FUNDAMENTAL TRUTHS 21 AMERICAN EXPERIENCE TABLE OF MORTALITY Age Survivors Deaths Age Survivors Deaths Age Survivors Deaths 10 aoo,ooo 749 ' 40 78,106 765 70 38,569 2,391 11 99,251 746 41 77,341 774 71 36,178 2,448 12 98,505 743 42 76,567 785 72 33,730 2,487 13 97,762 740 43 75,782 797 73 31,243 2,505 14 97,022 737 44 74,985 812 74 28,738 2,501 15 96,285 735 45 74,173 828 75 26,237 2,476 16 95,550 732 46 73,345 848 76 23,761 2,431 17 94,818 729 47 72,497 870 77 21,330 2,369 18 94,089 727 48 71,627 896 78 18,961 2,291 19 93,362 725 49 70,731 927 79 16,670 2,196 20 92,637 723 50 69,804 962 80 14,474 2,091 21 91,914 722 51 68,842 1,001 81 12,383 1,964 22 91,192 721 52 67,841 1,044 82 10,419 1,816 23 90,471 720 53 66,797 1,091 83 8,603 1,648 24 89,751 719 54 65,706 1,143 84 6,955 1,470 25 89,032 718 55 64,563 1,199 85 5,485 1,292 26 88,314 718 56 63,364 1,260 86 4,193 1,114 27 87,596 718 57 62,104 1,325 87 3,079 933 28 86,878 718 58 60,779 1,394 88 2,146 744 29 86,160 719 59 59,385 1,468 89 1,402 555 30 85,441 720 60 57,917 1,546 90 847 385 31 84,721 721 61 56,371 1,628 91 462 246 32 84,000 723 62 54,743 1,713 92 216 137 33 83,277 726 63 53,030 1,800 93 79 58 34 82,551 729 64 51,230 1,889 94 21 18 35 81,822 732 -65 49,341 1,980 95 3 3 36 81,090 737 66 47,361 2,070 37 80,353 742 67 45,291 2,158 38 79,611 749 68 43,133 2,243 39 78,862 756 69 40,890 2,321 J. 22 THE SUCCESSFUL AGENT Less than one-half the original number will reach the age of 65, and the number of survivors will stead- ily diminish until at age 95 only 3 will remain.* By means of this table, any company can gather facts and figures which will enable it to find out how much each one of its customers must pay for his in- surance. Without such a table all would be guess- work; the charges would necessarily be arbitrary; some policyholders would pay too much and others too little. In computing premiums it is necessary, not only to utilize the mortality table, but also to take interest and expenses into account; but to show, in the sim- plest way, the utility of the mortality table, interest and expenses may be disregarded for the time being. *It is presumed that these 3 will die before reaching the age of 96. CHAPTER III. COST OF INSURANCE ON THE NATURAL BASIS. The cost of insurance when computed on what is called the "natural" basis is determined for each year separately. We may readily discover, for example, that the correct charge (if we disregard interest and expenses) for a man 40 years old, for $1,000 of insurance for one year, is $9.79. Here is the proof: Reference to the table (see page 21) will show that of the 100,000 persons with which the table be- gins, those still living at age 40 will number 78,106, and that 765 will die within the following year. Hence, if these people associate themselves together to insure one another for $1000 each, the sum of $765,000 must be contributed; for $1,000 must be paid to the estate of each one of the 765 members falling out during the year. To find the exact sum which each person would have to pay at the outset to establish this fund, it is only necessary to divide the total amount by the number of contributors. This will show that the contribution in each case must be $9.79; for $765,000 -=-78, 106 = $9.79. If the association is continued for a second year 24 THE SUCCESSFUL AGENT each member will necessarily pay for that year a slightly increased charge (or premium) namely, $10.55. There are two reasons for this increase, first, because the expense must be borne by a smaller number of survivors, and, second, because there will be more deaths during the second year than during the first. The amount which each must pay will be deter- mined as before. Of the 77,341 survivors 774 will die. Hence $774,000 must be paid. Each member, therefore, must pay $10.55; for $774,000 77,341 = $10.55. For the third year a still larger sum must be paid, namely, $785,000; and by a still smaller number of persons, namely, 76,567. Thus the cost of insurance on the "natural" basis (i. e. if computed from year to year) necessarily shows an annual increase; for, if we study the average duration of life of a large body of men we shall find that the mortality steadily increases as they grow older. INTEREST. Thus far we have disregarded interest, but interest happens to be one of the most important factors in a life insurance computation. Therefore, in determin- ing the premiums which must be charged, the insur- ance company must give its customers the benefit of the interest earned. Just here it is necessary to note that in life insurance computations, it is the rule to assume that all prem- COST OF INSURANCE ON THE NATURAL BASIS 25 iums are paid at the beginning of the year, and that all death losses are paid at the end of the year.* Now, in computing premiums on the natural basis, it happens that interest cuts a very small figure, be- cause none of the money received by the company can be held for a longer period than one year. Neverthe- less, interest does modify the result. For example: The computation already made shows that at age 40 the premium for $1,000 of insurance if interest is not taken into account is $9.79, whereas if interest at the rate of, say, 3%, is allowed the premium will amount to' $9.50. When interest is thus taken into account (if we continue to ignore expenses) we obtain what is called the net (or pure) premium. Here is the table. "If then," says Smith, "I wish a policy which will yield my wife $1,000 at my death, I can obtain it at my present age, which is 35, by paying the company $8.68 this year; $8.81 next year; $8.97 for the follow- ing year, and so on?" "Not at all," says the Secretary, "no company can afford to sell insurance for the net premium. It would be possible if the business could be trans- acted without expense, but no business can thus be transacted. Hence, the net premium must be increased by an allowance for expenses. When this has been done, we have the actual premium which the company must charge, called the gross premium. *The companies now pay their losses as they occur without waiting until the end of the year. How they are able to do this I shall not stop to explain. Here it is sufficient to note the fact. See next page. 26 THE SUCCESSFUL AGENT TABLE OF NET NATURAL PREMIUM RATES. For $1,000 of Insurance Payable in Event of Death. BASED ON AMERICAN EXPERIENCE TABLE AND 3% INTEREST. AGE RATE AGE RATE AGE RATE 10 11 7.26 7.29 41 ^.50 9.71 70 71 60.18 65.69 12 7.33 42 9.95 72 71.58 13 > 7.35 43 10.21 73 77.83 14 7.37 44 10.51 74 84.49 15 7.42 45 10.83 75 91.62 16 7.44 46 11.22 76 99.32 17 7.46 47 11.65 77 107.83 18 7.51 48 12.14 78 117.30 19 7.53 49 12.72 79 127.88 20 7.57 50 13.38 80 140.25 21 7.62 51 14.11 81 153.99 22 7.67 52 14.94 82 169.21 23 7.73 53 15.85 83 185.98 24 7.77 54 16.89 84 205.20 25 7.82 55 18.03 85 228.69 26 7.88 56 19.30 86 257.93 27 7.95 57 20.70 87 294.20 28 8.02 58 22.26 88 356.59 29 8.11 59 24.00 89 384.33 30 8.17 60 25.92 90 441.31 31 8.26 61 28.03 91 516.96 32 8.35 62 30.38 92 615.79 33 8.46 63 32.94 93 712.79 34 8.57 64 35.79 94 832.18 35 8.68 65 38.95 95 970.87 36 8.81 66 42.44 37 8.97 67 46.26 38 9.12 68 50.48 39 9.30 69 55.10 COST OF INSURANCE ON THE NATURAL BASIS 27 "The gross premium is determined by taking the net premium and adding to it a certain percentage of itself. This percentage is called the loading, and is an extra charge sufficient to provide for all expenses and contingencies. "But in explaining the difference between the net and gross premium/' says the Secretary, "I have wandered from the path. We must finish with net premiums before considering gross premiums. ' ' In scrutinizing the table of net natural premiums, you have observed that the charge at young ages is very small; that the rate increases from year to year, and that at the older ages it becomes very large. Now, as few men like to shoulder an increasing burden, little business is actually done by the insurance com- panies on this basis; but I have explained it because, as its name implies, it is the natural method if we view insurance theoretically. " CHAPTER IV. THE SINGLE PREMIUM. As the natural plan of paying for insurance lacks popularity, other methods have been devised. One of these methods is for the company to charge a single premium. To discover a single premium, payable in advance, which shall be equivalent to the series of annual pay- ments called for on the natural basis, we may proceed as follows: Selecting any age, and starting with the number of persons who (according to the mortality table) are living at that age, we must proceed to find out first what amount of money will be needed each year to pay the death losses of that year. Then, if we should take no account of interest, the sum of these items would be the total amount needed. But we must take account of interest; and although we have seen that interest cuts a very small figure in computing the premiums on the natural basis, the reverse is true when we come to the single premium. The com- pany receives all its money in advance, while pay- ments to policyholders are made gradually, as deaths occur. Hence, by investing these receipts, a large interest income is obtained. And as the interest thus gathered is as good for paying death claims as the money directly contributed by policyholders, the single premium actually charged is considerably less than would otherwise be necessary. To discover the part of the work which will thus be done by the interest earned (thus determining THE SINGLE PREMIUM 29 the correct net single premium) it is only necessary to discount (at a given rate of interest) the sum of money needed at the end of each year, to pay the death claims for that year, and then to add together all the items thus obtained. These items thus dis- counted, when added together, will make the aggre- gate premium; and this aggregate divided by the number of persons will give the net single premium for each individual. "In the leaflet I now hand you, " says the Secretary to Mr. Smith, "you will find this computation worked out and verified. It is not necessary for you to study it at once, but you can do so at your leisure. " "That's an excellent suggestion, " says Smith, "for when I get into the street I can quietly throw the leaflet into the nearest ash barrel and go on my way rejoicing." "So you can, " answers the Secretary, "but I advise you not to do so. I hope you will scrutinize these figures; for it is important that you should follow at least one demonstration in order that you may know of your own knowledge that there is no guesswork about these calculations. After that you can afford to take my word for the fact that sim- ilar computations are accurate and adequate.* *The contents of the leaflet referred to above will be found in Appendix A, at the end of this volume. Every agent should master the few simple arithmetical computations given in this book. There is nothing he can do which will be of more practical value to him; for he cannot convince his customers that life insurance is an exact science until he has himself been convinced. While it may not be necessary for the general reader to master these demonstrations, it is eminently desirable that he should do so. For if he does, what is obscure to most laymen will become clear and convincing to him. 30 THE SUCCESSFUL AGENT "For the present it is only necessary for you to glance at this table of net single premiums. " TABLE OF NET SINGLE PREMIUM RATES. For $1,000 of Insurance Payable at Death. BASED ON AMERICAN EXPERIENCE TABLE AND ASSUMING 3% INTEREST. AGE PREMIUM AGE PREMIUM AGE PREMIUM 21 $335.68 46 $514.30 71 $786.82 22 340.57 47 524.23 72 796.67 23 345.61 48 534.37 73 806.28 24 350.82 49 544.70 74 815.69 25 356.18 50 555.22 75 824.93 26 361.72 51 565.89 76 834.01 27 367.43 52 576.71 77 842.97 28 373.32 53 587.67 78 851.80 29 379.39 54 598.74 79 860.49 30 385.64 55 609.92 80 869.06 31 392.09 56 621.18 81 877.42 32 398.73 57 632.51 82 885.60 33 405.58 58 643.89 83 893.63 34 412.63 59 655.30 84 901.59 35 419.88 60 666.72 85 909.51 36 427.36 61 678.13 86 917.32 37 435.04 62 689.50 87 924.88 38 442.95 63 700.83 88 932.02 39 451.07 64 712.08 89 938.75 40 459.42 65 723.24 90 945.23 41 468.00 66 734.27 42 476.80 67 745.16 43 485.83 68 755.88 44 495.10 69 766.41 45 504.58 70 776.73 CHAPTER V. THE LEVEL PREMIUM. "I have now," says the Secretary, " explained two ways of paying for life insurance. Which do you prefer?" "I don't like either," says Smith, "I have always understood that I could get a policy by paying an annual premium of so much a year the amount every year to be the same. And that's what I want." "You express a general preference," replies the Secretary. "Few people like to pay a premium that grows bigger every year; and few are able or willing to deposit a large sum in advance. Consequently the actuaries have devised a third plan, called the level premium plan. "The level premium plan is the popular plan the one on which substantially all the business of most of the companies is transacted. "If you insure on that plan you will pay a uniform rate a moderate sum for the first year, and the same sum for every subsequent year. "To discover the correct amount to charge on/ this basis the actuaries take a single premium anot find its equivalent in annual premiums (or annuities)! to be distributed over the period during which the! policy will remain in force. "Here is another leaflet, which will show you how 32 THE SUCCESSFUL AGENT this equivalent rate may be computed.* But at present it will only be necessary for you to glance at a table of the net level premiums." (See next page.) PREMIUM CHARGES DEPEND ON AVERAGE RESULTS, NOT ON THE EXPERIENCE IN INDIVIDUAL CASES. From these tables it will be seen that the net natural premium for $1,000 of insurance at age 21, is $7.62; the single premium, $335.68; and the level premium, $14.72. Now,, let us assume that the lives of three persons have been insured for $1,000 (one on each plan) and that death occurs in all three cases before the end of the first year. What will be the result? On the first policy the company will receive only $7.62; on the second a much larger sum; namely, $335.68, and on the third, an intermediate sum; namely, $14.72. And yet the company must pay the same amount ($1,000) in each case. Now, let us assume that these three men, instead of dying prematurely, live for many years and then die. The situation in that event will be reversed. The sum of the premiums paid on the first policy will make its cost greater than that of either of the others; and the second policy, instead of being the dearest, will turn out to be the cheapest of the three ; for the single premium of $335.68, paid in advance, will represent the entire outlay. This illustrates the axiom that the result in the case of any individual policy is necessarily eccentric. *The contents of this leaflet will be found in Appendix B (page 161) THE LEVEL PREMIUM 33 TABLE OF NET LEVEL ANNUAL PREMIUM RATES. For $1,000 of Insurance Payable at Death. BASED ON THE AMERICAN EXPERIENCE TABLE AND ON THE ASSUMPTION THAT 3% INTEREST WILL BE EARNED. AGE RATE AGE RATE AGE RATE 10 $11.95 40 $24.75 70 $101.33 11 12.15 41 25.62 71 107.50 12 12.36 42 26.54 72 114.12 13 12.58 43 27.52 73 121.23 14 12.81 44 28.56 74 128.91 15 13.05 45 29.66 75 137.24 16 13.29 46 30.84 76 146.35 17 13.55 47 32.09 77 156.35 18 13.83 48 33.43 78 167.40 19 14.11 49 34.85 79 179.65 20 14.41 50 36.36 80 193.31 21 14.72 51 37.97 81 208.49 22 15.04 52 39.68 82 225.48 23 15.38 53 41.91 83 244.69 24 15.74 54 43.46 84 266.83 25 16.11 55 45.54 85 292.73 26 16.51 56 47.76 86 323.13 27 16.92 57 50.13 87 358.58 28 17.35 58 52.66 88 399.35 29 17.80 59 55.37 89 446.40 30 18.28 60 58.27 90 502.68 31 18.79 61 61.36 91 572.39 32 19.31 62 64.68 92 656.07 33 19.87 63 68.23 93 743.75 34 20.46 64 72.03 94 849.07 35 21.08 65 76.11 95 970.87 36 21.74 66 80.48 37 22 A3 67 85.17 38 23.16 68 90.19 39 23.93 69 95.57 34 THE SUCCESSFUL AGENT Whereas if we consider a multitude of cases, and view them in the mass, we shall find that it makes no difference to the company (theoretically at least) whether all are insured on the natural basis, or all on the single-premium basis, or all on the level- premium basis; or whether some are insured on one plan and some on another. The result on the average will be the same. Thus is exemplified the fundamental truth that to understand insurance we must never lose sight of the fact that the company must base its charges upon the average result (which is certain) and not upon the expected fate of the individual policyholder (which is uncertain.) CHAPTER VI. THE GROSS PREMIUM. The Secretary, having explained to Smith these three ways of computing the net premium, and having shown that life insurance is founded on sound principles, has only one thing further to ex- plain; namely, how the company determines the gross premium the premium which shall prove adequate when expenses and contingencies are taken into account. LOADING FOR EXPENSES. At this point, the Secretary will be forced to admit that no company can tell in advance precisely what its future expenses will be or what contingencies may arise. Therefore the management must proceed with care and discrimination. Nevertheless, a com- pany can, from observation and experience, make a fair estimate of its future expenses; and will con- sequently be able to add a percentage to the net rate, which, on the one hand, shall not be excessive, and, on the other hand, shall be sufficient to remunerate it for the obligations it assumes. As every agent has in his rate book the premiums charged by the company he represents, tables of gross premiums may be omitted here. I give, by way of illustration, however, the following examples of gross 36 THE SUCCESSFUL AGENT premiums, for $1,000 of insurance, on the Ordinary Life Plan:* AGE PREMIUM AGE PREMIUM AGE PREMIUM 21 $19.62 35 $28.11 55 $60.72 25 21.49 40 33.01 60 77.69 30 24.38 45 39.55 65 101.48 These rates are found by adding a loading of to the net premium derived from the American Experi- ence Table of Mortality, assuming that the money employed will yield 3% interest. Most policies, other than those on the ordinary life plan, excepting term policies, are loaded one-sixth of the net premium plus one-sixth of the ordinary life net rates. This makes the percentage vary some- what at every age, it being higher at older ages than at younger ages. Term premiums are computed by adding the ordin- ary life loading to the net term rates. It is important to note, just here, that while it is absolutely essential that the premiums charged shall be adequate, no serious injury need result if a little *These are representative rates. Some foreign companies charge a trifle more, and some American companies a trifle less. In cases where com- panies use the same mortality table and assume the same rate of interest, the net premium is the same. Notwithstanding this the gross premium may differ, for the percentage added as a loading may be larger in one case another. THE GROSS PREMIUM 37 more than is necessary is charged ; provided the com- pany transacts its business on what is called the mutual plan, under which it is agreed that each policy- holder shall receive back his share of the unused portion of the premiums paid. MUTUAL PLAN. When the business is conducted on the mutual plan,* the policyholders form the company. They associate themselves together for the purpose of insur- ing one another's lives. They are, in a certain sense, partners. Each one pays something more than is necessary, with the understanding that the excess shall be returned to him in dividends. These divi- dends include profits, but the bulk of the money thus returned consists of the unused portion of the prem- iums paid. Policies issued on this basis are called participating policies, because they participate in the company's profits and savings. THE SECRETARY TURNS SMITH OVER TO AN AGENT. The Secretary having made these explanations, will have given Smith all the general information necessary. Consequently he will turn him over to an agent, who will show him that at his age (35) the level premium for $1,000 of insurance is $28.11; and for $10,000 is $281.10. And we may assume that Smith will thereupon draw his check for $281.10 and *The different plans are explained on page 56. The mutual basis is here employed simply by way of illustration. 38 THE SUCCESSFUL AGENT go on his way rejoicing, knowing that he has acquired title to a fund of $10,000 for the protection of his wife and children.* *In concluding these technical explanations, let me remind the agent that few applicants will wish to go into all these details. But the agent must know them so as to be able to answer such questions as may be put to him. CHAPTER VII. SECURITY. Many a man is willing to gamble in stocks, or to risk his money in mining schemes or other speculative ventures. But when he selects a permanent invest- ment, especially if his object is to provide for the future of his family, his aim will be to satisfy himself that the investment is safe beyond all peradventure. Hence, the importance of the foregoing explanations. For if the agent knows of his own knowledge that the cost of insurance can be accurately determined, he will be able to sweep away the doubts and fears which he will find lurking in the minds of many of the men whom he will seek to insure. SAFETY GF THE INSURANCE PRINCIPLE. Many life insurance companies have failed, but any agent who will take the trouble to investigate, will find that in every such case the failure has been due either (a) to the fact that the company has been organized on an unscientific basis, or (b) because it has been grossly mismanaged. For it is an incon- trovertible fact that no company organized on a sound basis has ever failed IF IT HAS BEEN PRUDENTLY AND SKILLFULLY MANAGED. There are companies in the strong vigor of youth, today, that have been in business for a century and 40 THE SUCCESSFUL AGENT a half; and most of the large and flourishing com- panies now existing in the United States have been in business for fifty years or longer. One reason for this stability is that all sound life insurance, as I have already stated, is based on the law of mortality; a law which illustrates the fact that the average duration of life may be determined with substantial accuracy in advance. One hundred years ago a famous English actuary, Charles Babbage, said: " Nothing is more proverbially uncertain than the duration of human life when the maxim is applied to an individual. But there are few things less sub- ject to fluctuation than the average duration of life of a multitude of individuals. " And another expert, Dr. Southwood Smith, who also studied this subject when life insurance was in its infancy, said, "Mor- tality is subject to a law, the operation of which is as regular as that of gravitation." THERE CAN BE) NO RUN ON A WffE COMPANY. Another reason for the stability of life insurance is the fact that it is not exposed to dangers which often threaten the stability of banks, trust companies, and other corporations. Such as financial panics, com- mercial disturbances, crop failures, etc. There can be no run upon a life insurance company, and its obligations will continue to mature with the same regularity and deliberation during periods of financial excitement as at other times. For the obligations of a life insurance company are not influenced by SECURITY 41 market fluctuations, but depend altogether upon the uniform workings of the law of mortality. ADEQUATE PREMIUMS INSURE SAFETY. Another reason for this stability, in the case of all properly organized companies, is that the charges made are clearly adequate. After a company has been in business for a few years, it necessarily accumulates a fund so largely in excess of the obligations which must be paid immedi- ately, that (provided its assets are carefully invested and its business prudently conducted) it can guaran- tee with absolute certainty the fulfilment of all its obligations. It is true that instances may be cited of companies organized on a sound basis which have died in infancy. This at first blush might seem to controvert the posi- tion I have taken; but investigation will show that in such a case failure has usually been due to the fact that a number of death claims have matured prema- turely, and before sufficient funds had been accumu- lated to meet them. This, instead of indicating a flaw in the life insurance principle, simply proves that the correct principle has been disregarded. No life insurance company is safe until it has a sufficient body of policyholders to permit the law of mortality to work smoothly. If a company starts with an in- sufficient number of members the deaths are likely to occur at first in an eccentric manner, and the com- pany may experience an excessive early mortality. Disaster due to such a state of affairs would obvious- 42 THE SUCCESSFUL AGENT ly be due to mismanagement; for the only basis on which an insurance company can be firmly established is either to begin with a large membership, or else to have in hand (temporarily at least) a special guarantee fund which may be used to supply possible deficiencies while the membership of the company is small, but which may be withdrawn after the company has been successfully launched and has secured a sufficient number of paying members to permit the law of mortality to work accurately. ASSETS, LIABILITIES AND SURPLUS. The business of life insurance is conducted by corpo- rations. Nevertheless every life insurance company is neither more nor less than a co-operative association. The business is carried on with the money contributed by the policyholders. The premiums paid by them, when brought together form the ASSETS of the com- pany a fund which would be called its CAPITAL if it were not that in life insurance parlance the word capital has another meaning. The ASSETS, roughly speaking, consist of two parts ; the reserve and the surplus. The RESERVE is the money which the company must have to meet its policy obligations. A competent actuary can calculate the amount of this reserve, and if its amount is adequate, it will, with future interest and future premiums, prove suffi- cient to pay every policy as it matures. DIVERSITY OF SECURITY 43 The SURPLUS is the money left over after all obliga- tions have been provided for. It is a safety fund which may be used to repair injuries resulting from depreciation in the value of investments or from other causes. It is also the fund from which DIVIDENDS are paid to policyholders. Having given these definitions it is necessary to qualify them in one respect. The obligations of an insurance company are, with few exceptions, insur- ance obligations; and I have spoken of the reserve, which measures the insurance liabilities, as if it rep- resented the total liabilities of the company. But every company has, in addition to its insurance liabil- ities, a few miscellaneous obligations which must be added to the reserve to determine the total liabilities of the company. To be exact, therefore, I must modify the foregoing definitions, as follows: The ASSETS represent the total property of the com- pany. The LIABILITIES, wljich consist chiefly of the reserve (the company's insurance obligations) also include all other outstanding liabilities (which are usually small and unimportant.) The SURPLUS is the difference between the assets and the total liabilities. CHAPTER VIII. STANDARDS OF VALUATION. MEANING OF A THREE PERCENT RESERVE. The reserve, as we have seen, is the amount of money which the company needs, together with future interest and future premiums, to pay its policy obliga- tions. The total reserve is the sum of the reserves held against each individual policy. If a layman scrutinizes the reserves on individual policies he will be puzzled. In one case he will see that death occurs before much reserve has been accu- mulated; and yet the company must pay the full amount of the insurance. In another case he will see that the policy has been in force for a long series of years, and that the reserve has reached an amount possibly in excess of the insurance. What is the meaning of this? Simply that the reserve on each policy, considered by itself, means nothing, notwithstanding the fact that the total reserve is found by adding the individual reserves together. The important thing for the company to determine is that the total reserve shall be adequate. Then the result will be satisfactory, although in certain individ- ual cases the reserve will seem to be inadequate. Any actuary will tell you how reserves are com- puted. Space is lacking for an explanation here. STANDARDS OF VALUATION 45 WHY THE RESERVE IS LESS THAN THE POLICY OBLIGATIONS. Every life insurance company issues a financial statement at the beginning of each year. This statement reveals (a) the present condition of the company, and gives (b) a brief record of its transactions for the previous year. The annual statement of a well managed company is therefore one of the best canvassing documents that an agent can have. There is only one thing in such a statement that is obscure to the layman (if he has any familiarity with financial balance sheets) and that is the fact that the total liabilities, including the total reserve, are less than the policy obligations. The reason for this is that most of these obligations are future liabilities some of them will not mature for many years. The reserve simply represents the insurance liability of the company at the present time, and does not include the premiums and interest which will be received here- after, and which will aid in paying the company's obligations.* Now, as we have seen, the reserve is adequate be- cause the obligations of the company mature grad- ually; giving time for interest and future premiums to make up the apparent deficiency. But the amount of interest which will be credited to the reserve will depend upon the amount of interest *The reserve is sometimes called the Re-insurance Fund, because if the company should wish to transfer its obligations to another company the other company could afford to assume all its risks, in consideration of receiving its total reserve fund. 46 THE SUCCESSFUL AGENT earned, and no company can tell in advance precisely what its earnings will be. Hence it is necessary that the rate assumed shall not be higher than the company may reasonably expect to realize. At present most of the companies assume that 3% will thus be earned.* THREE PERCENT STANDARD HIGHER THAN FOUR PER- CENT STANDARD. When the actuary of a company computes the reserves on the outstanding policies, and thus dis- covers the total reserve necessary for the company to hold, he is said to "value the policies" or "make a valuation." We often hear it said that the policies of a certain company have been issued on the four percent stan- dard of valuation, and that some other company em- ploys the higher three per cent, standard. This is simple enough, but laymen are often confused by the statement that the 3% standard is higher than the 4% standard. They are confused because they know that 4% is a higher rate of interest than 3%, and wonder why the standard is higher when the lower rate is employed. The explanation is simply that if a certain sum of money must be paid in the future, and if that sum is to be paid in part from interest earned, a larger sum must be provided in the beginning if only 3% will be earned, than if 4% will be earned. The 3% standard is consequently higher than the 4% standard because more principal must be pro- * Formerly 4% was assumed, and many policies now outstanding were issued on a 4% basis. In the early days still higher rates were assumed. STANDARDS OF VALUATION 47 vided to make up for the expected deficiency in in- terest. INSURANCE REPORTS. In addition to the financial statement, or balance sheet, which the company issues at the beginning of each year for the information of its agents and policy- holders, it must make a detailed report to the Insur- ance Department of every State, and to the govern- ment of every foreign country within whose borders it transacts business. The agent will do well to have always at hand the last printed report of the Insurance Department of his own State, or of the State within which his com- pany is domiciled; for this report not only embodies the verified financial statement of his own company, but those of the companies with which he must com- pete. In soliciting business, or in persuading a customer not to surrender a policy, the agent can often use the official report to great advantage by pointing to the figures illustrating the financial strength of his com- pany or the economy of its management. Or, if he is dealing with a financial man, he can call attention to the excellent quality of the investments of the company. INSURANCE FACTS AND FIGURES. There are many publications which the agent can turn to advantage, such as the tabulated abstracts of the financial statements of all the companies; 48 THE SUCCESSFUL AGENT general compilations of insurance statistics; books containing the policy forms of the different companies ; blue books, etc. etc.* *The following publications of The Spectator Company are good illus- trations: The Pocket Index (an annual abstract of financial statistics) The Handy Guide (giving premiums, policy contracts, etc.,) and The Insurance Year Book. For those who wish to dip a little more into the mathematics of life insur- ance and the chief actuarial problems see Notes on Life Insurance by the late Gustavus W. Smith; revised and extended by E. B. Fackler, also published by The Spectator Company. CHAPTER IX. ADEQUATE PREMIUMS MUST BE CHARGED. In a previous chapter I have said that every life insurance company is a co-operative association, but the statement was made with some hesitation be- cause the phrase is ambiguous and likely to be mis- understood. This is because there are certain insur- ance organizations which are called "co-operative societies" to distinguish them from the old-fashioned companies*. Since all life insurance companies are co-operative associations it is unfortunate that this good title has been given to a kind of insurance, and a group of com- panies, that have failed to furnish complete, or perma- nent protection. It is asserted by the advocates of regular life insur- ance that these organizations have lacked stability because they have neglected to take due account of the law of mortality. Seeing that insurance could be offered, in the beginning, on young lives at very low premium rates, they have ignored the fact that when low rates are thus charged very much higher rates must be charged later on. They have attempted the hopeless task of charging a low rate with the expectation of meeting their obliga- *These societies are also called "assessment" companies a less mis- leading title. 50 THE SUCCESSFUL AGENT tions without any material subsequent increase in their charges. As a rule, the result has been that after flourishing for a time they have deteriorated or failed. And when such a company fails it usually has in its membership a large number of impaired risks (men who could not obtain insurance elsewhere) besides many unpaid death claims in favor of widows and orphans. These co-operative (or assessment) companies were very popular at one time. Their charges were so moderate that the regular companies found their Competition annoying, but nowadays it is easy to convince the public that if there is any branch of business which needs to be founded on accurate scientific principles it is the business of life insurance. 3ome one has said that no one wants a tolerably good egg; and all thoughtful men will agree that no man of common sense should content himself with tolerably good life insurance, since its province is to protect widows, orphans, and those who are unable to protect themselves. If these companies had been organized on the natural basis, so as to charge a premium increasing from year to year, or at short intervals, they would have escaped the chief difficulties which have beset them. This they failed to do, however, either because they overlooked the fact that mortality increases as the risks on the books of a company grow older, or because they saw that they could not compete success- fully with the regular companies unless they offered their insurance at cut rates. ADEQUATE PREMIUMS MUST BE CHARGED 51 Every risk assumed by a company costs money. The company must be remunerated for that cost or it will suffer a loss. The effort to grant insurance (except temporarily) at less than cost will always be futile. The best way to point out the weakness of assess- ment insurance is to show that adequate insurance can be issued on the natural basis. The form of policy which best illustrates the natural basis is called the Yearly Renewable Term Policy. Under this policy the exact cost of the insurance from year to year (as shown by the mortality table) less interest and plus a loading for expenses, is charged. But the premium necessarily increases from year to year ; and although it is very small in the beginning it becomes very heavy later on.* There are other varieties of renewable term insur- ance which have a thoroughly scientific basis. A level premium is charged for a short term, such as three or five years, and is then increased for another term. But the principle is the same; if the premium is low at first it must be increased as the policy grows older. Some companies organized on the assessment plan have reorganized their business so as to conduct it on the regular basis. But the agents of the regular companies need not fear the competition of such organizations, because even after they have reformed their methods, they are usually handicapped by out- *For a description of this policy and the rates charged see pages 76, 77, 78. 52 THE SUCCESSFUL AGENT standing obligations previously assumed on an insecure basis. Before turning from this subject it may not be amiss to add that in buying life insurance the purchaser must not only consider quality but quantity. If a dealer offers a ton of coal at less than the current price, see that you get full measure. When a regular company issues a policy for $1,000, it guarantees the payment of $1,000 at maturity. With many assessment companies, however, it has been the usage to insert a clause stipulating that the amount of insurance provided for in the policy (or certificate) shall be paid in full only in case it turns out that the company has received adequate remuneration for the risk assumed. ECONOMY AND PROFIT. If the agent is to succeed , his customer must have confidence in life insurance in general. He must be shown, of course, that the particular company rep- resented by the agent is the one of all others which he ought to patronize. But this is not to be accom- plished by assailing competing companies. The agent who seeks to recommend his company by shaking the faith of his customer in other com- panies organized on a sound basis, will shake his con- fidence in all companies. Such an agent follows, not simply a shortsighted, but a suicidal method. Nevertheless, the agent must study his own com- pany, and be prepared to advance its strong points with convincing force. ADEQUATE PREMIUMS MUST BE CHARGED 53 If his company has been well managed in the past, and is skillfully managed today, he will be able to point to its financial strength. He will be able to point to good investments, and appreciation in the value of assets. He will be able to point to judicious economy; and, if expenditures have been large, he will be able to show that they have been justified by adequate returns. He will be able to show that the business transacted has not cost the company an excessive price, and that the expense ratios indicate profit and not loss. He will be able to show that the company's risks have been selected with such care and discrimination that the average death rate is more favorable than that provided for in the mor- tality table. If, in addition to this, the income realized on investments is above the rate assumed in the computation of the company's premiums; and if the actual expenses are on the average less than the loadings on premiums, he will be able to show that policyholders will not only be amply protected but that they may expect to receive liberal dividends from future earnings. C~H A P T E R X . DIVIDENDS. Dividends are paid from surplus, and when the life insurance business is conducted on the mutual plan, the theory is that the policy-holders get their insurance approximately at cost; that having paid premiums which are more than sufficient the com- pany (after it has paid all expenses and after reserv- ing an adequate safety-fund) can return the balance to the policyholders. From this it will be seen that the dividend on an insurance policy has in it a larger element of saving than of profit. Hence, the phrase ' 'return premium," which is sometimes used, is more accurately descrip- tive than the somewhat misleading term "dividend." HOW DIVIDENDS ARE PAID. The business of life insurance was first organized on a scientific basis in England, a century and a half ago. In the early days, dividends were paid at irregular intervals. A company after accumulating surplus for a series of years would declare a dividend, after which it would again accumulate surplus for a longer or shorter period before declaring another dividend. Subsequently the English companies began to de- clare dividends at fixed intervals, usually five years. DIVIDENDS 55 The American companies followed this English custom for a time and then introduced the practice of paying dividends annually. Subsequently deferred dividend policies became very popular. Under that plan the gross premiun^ must be paid for a stipulated period (usually either ten, fifteen or twenty years) after which the surplus accumulated during the period is divided among the surviving policyholders. Policies of this character, if kept in force after the completion of the period, usually receive dividends annually thereafter.* There are fashions in life insurance just as there are fashions in hats and coats; and although most of the policies now outstanding in the United States are on the deferred dividend plan, the fashion of paying dividends annually is regaining the popularity which it enjoyed thirty or forty years ago. But the manner in which dividends shall be paid is of secondary importance. The question of first importance is far broader; namely, whether the company is so managed as to enable it to pay adequate dividends on any basis, AS TO THE DIFFERENT WAYS OF USING DIVIDENDS. When dividends are paid annually, the first divi- dend usually falls due at the end of the first year, when the premium for the second year is payable. Some companies do not begin to pay annual divi- dends until the end of the second year. * Defer red -dividend insurance is explained in Appendix G, Page 196. 56 THE SUCCESSFUL AGENT A dividend may be used in any one of four ways: (1) As so much cash to be withdrawn ; or, (2) As cash to reduce the premium ; or, (3) As cash to buy paid up insurance;* or, (4) As cash to buy an annuity on the life of the insured. Every agent should be able to explain these different methods to his customer, who often wonders why the amount of a dividend addition is larger than the equivalent cash dividend; or why the addition is smaller in amount than if the cash divi- dend were used as an annual premium to buy new insurance. The explanation in the latter case is that the addition is, so to speak, a small single- premium policy. The same amount of cash used as an annual premium would, of course, buy a larger amount of insurance. But to keep the insurance in force, another payment, for the same amount, would have to be made a year later, and further pay- ments during subsequent years. THREE WAYS OF CONDUCTING THE BUSINESS. The regular life insurance companies may be broadly divided into three classes. 1. MUTUAL COMPANIES. Governed by the policyholders through a *When the dividend is utilized in this way it is usually called an addition, because it adds something to the amount of the original insurance. This is equivalent to the purchase of a small single premium policy. DIVIDENDS 57 board of directors who select officers to run the business. No capital, over and above the assets con- tributed by policyholders. Transact their business on the Participating Plan. Surplus belongs to policyholders, and goes to them in dividends. 2. PROPRIETARY (OR STOCK) COMPANIES. Governed by stockholders through a board of directors who select officers to run the business. Capital stock (usually for a large amount) in addition to the assets. Transact their business on the Non-Participat- ing Plan. Policyholders pay a fixed premium (less than the charge for participating policies). Policyholders have no interest in the surplus earned, aside from the protection which it gives to the company. Dividends from surplus to stockholders only. 3. MIXED COMPANIES. (A compromise between mu- tual and stock companies.) Governed by stockholders through a board of directors who select officers to run the business. Capital stock in addition to assets. Premiums computed on the participating basis. Dividends from surplus to policyholders, as 58 THE SUCCESSFUL AGENT in the case of mutual companies. But part of the surplus usually a moderate percentage paid in dividends to stockholders. Exception 1. It has been the custom with both mu- tual and mixed companies to issue non-participating policies to customers who fancy that kind of insur- ance.* Nor has it been unusual for stock companies to issue participating policies occasionally. Exception 2. Some companies, that are practically mutual companies, are, in a certain technical sense, mixed corporations. For example: there are com- panies whose business is conducted on the mutual plan whose surplus is distributed exclusively among policyholders that nevertheless, have a nominal capi- tal (usually amounting to $100,000.) Such a company is a mutual organization as far as its insurance business is concerned. As far as the government of the corporation is concerned, it may either be controlled by the stockholders exclusively ; or by stockholders and policyholders jointly, or by the policyholders exclusively."}* "Companies acting under the New York law have since January 1, 1907, been limited to one plan, either the participating or the non-participating method. fin the State of New York an amendment to the Insurance Law was passed in 1853 which has forced every mutual company subsequently organ- ized, to have a capital of at least $100,000 before opening its doors. The object of this law was not to prevent the establishment of mutual com- panies, but to prevent the organization of a company on any basis by irresponsible persons. Its aim was also to protect the policyholders of a young company during the infancy of the enterprise. BOOK II DESCRIPTION OF THE WARES THE AGENT HAS TO SELL. AS LIFE INSURANCE HAS A VARIETY OF USES AND AC- COMPLISHES MANY USEFUL PURPOSES, THERE MUST BE A VARIETY OF POLICY FORMS. INTRODUCTION TO BOOK II. The agent is a salesman, and must be thoroughly fa- miliar with the wares he has to offer. Life insurance serves many useful purposes. To this end there are many kinds of policies. And the agent must know the characteristics of each, and how each contract may be adapted to the needs of his customers. Hence the different kinds of insurance must be clearly understood, and each form of policy analyzed and ex- plained. The varyingneeds of different people must be recognized, and the manner in which their wants may be supplied must be understood by every agent who hopes to achieve conspicuous success. BOOK II. CHAPTER I. THE POLICY CONTRACT. THE AGENT'S RELATION TO THE CONTRACT. The agent, like a banker who sells a block of bonds to his customer, exercises very important functions, but he is not a party to the contract. He occupies a delicate position, for he is employed by the company to sell its policies, and also represents the purchaser, and must be true to both. He is like an ambassador, who represents his nation at the court of some friendly power. His legal status can be readily determined, but he need have little concern about that if he is careful about his moral status. There is no real difficulty in being loyal to your com- pany and, at the same time, the friend and adviser of your customer; for in a properly organized company the interests of the company, the agent, and the policy- holder are identical. It is to the interest both of the company and the agent to give the customers the kind of insurance which will suit them best. It is to the in- terest of the agent as well as of the company only to insure men who are good risks. And honest policy- 64 THE SUCCESSFUL AGENT holders will be benefitted if the business of the com- pany is carefully selected; for if mortality is light policyholders will receive larger dividends, or if the policies are issued on the non-participating plan the prosperity of the company will enhance the security of their investments in it. Formerly, every life insurance contract consisted of three parts (1) the application, executed by the in- sured ; (2) the report of the medical examiner, embody- ing answers made by the insured to questions put by the doctor ; and (3) the policy, executed by two execu- tive officers of the company. The modern usage is to make the application and medical report collateral documents, furnishing the basis, but not forming any part of the contract. In such a case the policy itself becomes the complete con- tract ; the company agreeing to insure the applicant in consideration of the first premium, and his promise to pay subsequent premiums as they fall due. THE APPLICATION. Let us glance for a moment at the history of such a contract. The man who decides to apply for insur- ance is the Applicant as soon as he has signed his name to the proposal blank. When he has paid the first premium he becomes the Insured. CONDITIONAL RECEIPT. The medical examination may be made either before or after the signing of the application. And if the agent believes that the result of the examination has THE POLICY CONTRACT 65 been, or will be, satisfactory, he will do well to clinch the transaction by collecting at once from the appli- cant the first premium, giving him in return what is called a conditional receipt. This receipt provides that the insurance shall take effect immediately (sub- ject to the acceptance of the risk by the company.) STRIKE WHILE THE IRON IS HOT. It is important for the applicant to protect himself against accident or delay by securing the protection of the insurance at once. It is important for the agent also that the contract should be consummated at once ; and that for several reasons. The applicant will not be able thereafter to change his mind. Time will be saved. A second visit to the applicant will be avoided, for the policy when issued may be sent by a messenger or by mail. The agent who neglects to collect the premium at once may have to do all his work over again. A bird in the hand is worth two in the bush ; and the agent's commission is in the air until the premium has been paid. THE MEDICAL EXAMINATION. Many men hesitate to insure because they dread the examination, which they erroneously magnify into an inquisition, or at least a somewhat painful ordeal. But the object of the doctor is not to discover ideally perfect specimens of manhood, or to torture applicants in any way. The aim is simply to protect the mass of 66 THE SUCCESSFUL AGENT the policyholders of the company against fraud, and to keep out those who are obviously impaired risks. The layman often asks why a medical examination is necessary. Why, if deaths occur on the average in accordance with known laws, a company cannot afford to insure everybody. So it could, if the law compelled every man to insure. A company could well afford to grant insurance at current rates to the community at large, but the med- ical examination is necessary under existing conditions because the company can insure only those who are willing to be insured, and there is always a tendency towards what is known as "adverse selection.' 1 Any company if it offered to insure every man who applied would soon fail, for invalids would apply and healthy people would hold back. Its death rate, instead of being normal, and in accordance with general aver- ages, would become excessive. DELIVERY OF THE POLICY. If the company approves the risk, the policy is "written" and sent to the agent for delivery. If the policy is issued on the level premium basis, and is an "ordinary life" contract, it will provide that, in consideration of the payment of a uniform rate an- nually for life, the company will pay to any designated beneficiary the amount of the face of the policy upon the death of the insured, on receipt of due evidence of his death. THE POLICY CONTRACT 67 PROOFS OF DEATH. This evidence is given to the company in a series of certificates which taken together, are popularly known as proofs of death. The agent must always be ready to aid, without charge, in facilitating the payment of a death claim; for the check of the company, in satisfaction of a pol- icy, delivered by the agent to the beneficiary, is one of the most powerful levers he can get hold of to in- crease his business. THE BENEFICIARY. The beneficiary is the person to whom, according to the contract, the insurance is to be paid. In modern contracts the insured usually reserves the right to change the beneficiary at any time. But the benefici- ary may be made the absolute owner of the policy, or the insured may have the policy drawn in his own favor, and may then assign it at any time, or dispose of it by will. PRIVILEGES AND CONDITIONS. A life insurance contract might be a very short in- strument, simply providing for the payment of prem- iums by the insured, and for the payment of the insur- ance by the company. But certain reasonable con- ditions are added for the protection of the policy- holders of the company in general, and certain pro- visions are prescribed by law. These conditions in a modern policy, however, are few. The greater part of the contract consists of privileges, benefits, and op- 68 THE SUCCESSFUL AGENT tions. These are advantages which help the agent to sell the policy, and which the insured would not as a rule be willing to relinquish. If these were all omitted the contract would be much shorter and simpler. Without going into detail, some of these benefits are as follows: 1. Incontestability' As soon as the policy has been in force for a stipulated period, the company volun- tarily estops itself from contesting the payment of the insurance. 2. Grace. Thirty days grace is allowed in the pay- ment of premiums. (Interest is usually charged for the time the payment is deferred.) 3. Loans. After the policy has reached a certain age the company will make a loan against it for a specified amount. 4. Surrender Values. The contract may be termin- ated and a surrender value granted, after the con- tract has been in force for a certain length of time. PREMIUM NOTICES. The company is compelled by law to send due notice of every premium falling due, to the insured or as- signee. But the agent must keep a record of all poli- cies in which he is interested, and see to it that no prem- ium is overlooked. RESTORATION. The company is always ready to make it as easy as possible for the man who has permitted his policy to lapse to revive it, if he is still a good risk. THE POLICY CONTRACT 69 The agent will always find it to his advantage to aid in effecting the restoration of a policy, but he will save himself much trouble, and protect his client against every danger, by preventing a lapse in the first instance. There are critical periods in the history of every policy. When the second premium falls due the agent should be at hand to give his customer a few reassuring arguments, if his steadfastness has become shaken. He should watch out also to prevent the agent of an- other company from making some plausible counter- proposition which might unsettle his customer. He must be on the alert at the end of the third year. Most companies refuse to allow any surrender value until the end of the third year. At that time the very fact that a surrender value can be obtained for the first time tempts a man to abandon his policy, espe- cially if the agent of some other company explains to him that the value can be used to pay the premium on a new policy. When a man expresses a determination to surrender his policy for its cash value at the end of the third year , call his attention to the fact that the longer the policy remains in force the larger will the surrender value be. Any sensible man who can afford to pay his premium can be induced to continue, if he is shown that the longer he waits the larger will be the return which he can demand. UTILIZE MATURING POLICIES. Keep your records so that you will know well in ad- vance when every limited payment life policy will be- 70 THE SUCCESSFUL AGENT come "paid up, " and when every endowment will ma- ture. If a man has a fifteen payment life policy you can go to him at some convenient time after he has paid the last premium, and remind him that as his old policy will cost him nothing in the future he can well afford to pay the premium on an additional policy. When an endowment policy matures it is not only a good time to reinsure the owner , but the very fact that you are paying a large sum of money to a living policy- holder will enable you to persuade others in the com- munity to make similar investments. The moment death comes to one of your policy- holders ask your company to examine its records so as to be in readiness to pay the claim as soon as the proofs of death are filed. If the case is one where there are no complications you can easily gain access to the executor of the estate, or the relative who represents the deceased policy- holder, and explain that it will give you pleasure to facilitate the settlement of the claim as soon as possible because you know from experience that a little ready money at such a time removes anxiety and prevents discomfort. Then, when the company's check arrives, you can show it to the people you chance to meet while it is still in your possession* CHAPTER II. DIFFERENT POLICIES ARE OF EQUAL VALUE. POLICY CONTRACTS DESCRIBED. Theoretically, one policy is as good as another, if due allowance is made for differences in premium rates. There are different kinds of policies because there are different kinds of people. One policy is better than another in a given case, because it happens to meet exactly the needs of a particular man. If a man should ask you to advise him whether to buy an automobile or a motor boat, your natural in- quiry would be, ' ' Do you wish to travel by land or by water ? " Thus it is with insurance ; the best policy is the one that effects the purpose for which it is desired. POLICIES MAY BE SEPARATED INTO FOUR CLASSES. Life insurance may be broadly classified as follows : 1. Ordinary life policies. 2. Limited payment life policies. 3. Endowment policies. 4. Miscellaneous, or eccentric, contracts. There are few policies issued which do not fall within one of the first three of these categories. 72 THE SUCCESSFUL AGENT THE ORDINARY LIFE POLICY. Thus far we have confined our attention to ordinary life policies, and the explanations already made suffi- ciently describe that form.* THE LIMITED PAYMENT LIFE POLICY. The essential difference between the ordinary life policy and the limited payment life policy is this: Under the former contract premiums must be paid from year to year as long as life continues. Under the latter contract it is agreed (in consideration of the fact that the insured must pay a larger premium) that after a given number of premiums have been paid the policy will become "paid up." The most popular form of limited payment policy is one under which the premiums are limited to a period of twenty years. This is called a Twenty An- nual Payment Policy. Policies are sometimes issued with the premium term limited to fifteen years, or even ten years. But, except for old men, the higher charge for short term policies renders such contracts less popular. In the case of a limited payment policy the shorter the prem- ium term the higher the rate. The premiums charged on a limited payment policy are equivalent to the premiums charged on an ordinary life policy. That is to say, the eompensa- *The word "ordinary" is used to distinguish policies of this kind from what are called "limited payment" life policies. The word "life" is used to indicate that the contract is not an "endow- ment" that the policy is expected to continue during the lifetime of the insured, and cannot be paid until after his death. DIFFERENT POLICIES ARE OF EQUAL VALUE 73 tion which the company will receive will correspond on the average. The correct premium to charge on a limited pay- ment policy is derived from the single premium, but instead of computing a rate for life, a series of annui- ties, limited to the desired period, are calculated. For example : If a policy is to be paid for in ten premiums, an annuity for ten years must be computed. The method of finding level annual premiums from the single premium having been explained, it is not necessary to illustrate the method further. THE ENDOWMENT POLICY. We have seen that the rate charged for a limited payment life policy is higher than for an ordinary life policy. . Now the rate charged for an endowment pol- icy is still higher ; for in the case of an endowment the insurance must be paid (1) in the event of the death of the insured during the endowment period, or (2) at the end of the period if death does not intervene pre- viously. Endowment policies may be issued for any desired term of years, but the term is seldom less than for ten, or more than for thirty years ; the favorite period being for twenty years. An endowment policy is an excellent contract for a young man who wishes to save something from year to year, in addition to securing the protection furnished by the insurance. It is a good policy for a father who has an infant son or daughter, and who wishes to start the son in busi- 74 THE SUCCESSFUL AGENT ness when he comes of age, or to give the daughter a marriage portion. He may accomplish this easily and conveniently by means of an endowment policy, if he lives. Meanwhile, in the event of his death, the insur- ance will give instant protection to the beneficiary. The endowment policy is a compound contract ; that is to say, it consists of two simple contracts in com- bination. One of these is known as a pure endowment, the other is a term policy* THE PURE ENDOWMENT. The pure endowment is a contract under which the company agrees (in consideration of a single payment, or of a series of level premiums) to pay an agreed sum at the end of a designated term of years if the person on whose life the contract depends is living at the end of the term. In the event of death during the term the company pays nothing. For example: In consideration of a gross annual premium of $37.20, the company will agree to pay a man 30 years of age, $1,000 at the end of twenty years, when he will reach the age of 50, on condition that the company shall make no return if he dies before reach- ing the age of 50.f *The method of discovering the current premium on these two policies and on the endowment policy also, will be found in Appendix C, page 178. tA child's endowment is a species of pure endowment. It is utilized by & parent who wishes to make future provision for a son or daughter. A father, for example, who has a daughter one year old can, for a gross annual premium of $36.79, provide a fund of $1,000, payable when the daughter comes of age. In view of the moderate price charged for such an endowment the father can afford to run the risk of losing all the money invested in the event of the death of the daughter; for if death intervenes the fund will not be required, and if death does not intervene the return will be liberal and useful. DIFFERENT POLICIES ARE OF EQUAL VALUE 75 THE TERM POUCY. The term policy is a temporary policy. It is the converse of a pure endowment. It grants protection for a term of years and then expires. The company can afford to insure a man 35 years old for $1,000 for a term of ten years at a gross annual premium of $16.45, for if death does not intervene before the end of the ten years the company's obliga- tion will then be cancelled. A term policy is like a fire policy. If death occurs after the policy has run out (unless the insurance has been renewed) the com- pany will have nothing to pay. THE NON-PARTICIPATING POLICY. Companies that transact their business on the par- ticipating plan charge premiums somewhat larger than are believed to be necessary, with the understanding that the excess shall be returned in dividends. But as no one can tell in advance what the amount of future savings or earnings will be, no policyholder can tell in advance exactly what a participating policy will cost. Hence, some people prefer to relinquish all claim to dividends and to pay a fixed rate, somewhat less than the premium charged on the participating plan.* Some companies make a specialty of this kind of in- surance, and when this is the case the company usually *The non-participating rate has the same basis as the participating rate, the only difference being that the loading is less. In other words, the net premium is the same. The gross premium is less because the percentage added for expenses is less. 76 THE SUCCESSFUL AGENT has, in addition to its assets, a large capital, held for the protection of policyholders. If the premiums charged prove inadequate then the deficiency must be made up out of this capital. If, on the other hand, the premiums charged are more than adequate, the surplus goes in dividends to the stockholders as a reward for risking their capital in thus guaranteeing the obligations of the company. Companies whose business is conducted on the par- ticipating plan (in which the policyholders occupy a position somewhat analogous to that of business part- ners) are usually willing to issue a non-participating policy when a customer prefers that plan. This it can afford to do because the surplus earned on participat- ing policies gives the company a stability which makes a few such transactions absolutely safe. It has not been regarded as prudent, however, for a company organized on the mutual plan, if without capital, to confine its business to the non-participating plan.* THE YEARLY RENEWABLE TERM POLICY. We have already seen that, although few people want to pay for their insurance on the natural plan, that plan is sound and legitimate. A policy can be issued on that basis with the understanding that although the premium paid each year covers the insurance for that year only, the company, nevertheless, binds itself to renew the insurance from year to year, provided a premium covering the risk assumed each year is paid. *But see note at foot of page 58. DIFFERENT POLICIES ARE OF EQUAL VALUE 77 And the premium to be adequate, as we have seen, must increase from year to year. This kind of insurance is called a Yearly Renewable Term Policy. The insurance is granted for the term of one year ; then on payment of the second premium it is renewed for the term of another year, and so on. It is not usual to pay dividends on this policy, and it has no surrender value in the event of lapse. When such a policy is taken, it is usually for tem- porary protection and is dropped after it has served its purpose. It may be continued for life, however, although it is usual if such a policy is continued beyond age 65, to convert it into a level premium contract, in accordance with such a clause as the following : "If continued beyond age 64 the full premium charged by the company for an ordinary life policy taken out at age 65 must be paid, after which there will be no further increase in the premium rate." It is usually stipulated also that the policy may be exchanged at any time for any other form of policy issued by the company, at the rate charged at the age attained by the insured at the time the change is effected. Hence, the agent can sometimes insure a customer on this plan who would otherwise refuse to take immediate action. But in every such case the agent should follow the man up and persuade him later to take permanent insurance on some other plan. Few companies issue many Yearly Renewable Term policies, and some companies do not issue them at all. 78 THE SUCCESSFUL AGENT Hence I have described this kind of insurance simply because it is the best exponent of the natural method of charging. A plan more frequently utilized is a modification of the yearly renewable term plan. It provides for the payment of a level premium for a short term of years, and then the insurance is renewed at a higher rate for a similar term ; then for another at a still higher rate, and so on. YEARLY RENEWABLE TERM POLICY GROSS PREMIUM RATES. FOR $1,000 OF INSURANCE. AGE PREMIUM AGE PREMIUM AGE PREMIUM 21 22 $12.53 12.69 36 37 $16.07 16.44 51 52 $26.77 28.17 23 12.85 38 16.85 53 29.69 24 13.03 39 17.29 54 31.39 25 13.20 40 17.76 55 33.21 26 13.40 41 18.26 56 35.23 27 13.60 42 18.80 57 37.42 28 13.81 43 19.39 58 39.82 29 14.04 44 20.03 59 42.46 30 14.28 45 20.73 60 45.34 31 14.52 46 21.51 61 48.49 32 14.79 47 22.35 62 51.94 33 15.09 48 23.29 63 55.70 34 15.39 49 24.34 64 59.81 35 15.71 50 25.50 CHAPTER III. POLICY-CONTRACTS. (Continued.) THE RETURN PREMIUM POLICY. The Return Premium policy provides that if the in- sured dies within a certain period the company will not only pay the face of the policy, but will return all the premiums that have been paid. To the uninitiated this may seem an impossible transaction. How can a company assume a risk for a number of years and then give back all the money it has received? The answer is that the company does not agree to return the premiums except in the cases where death intervenes. It charges every person who takes such a policy an increased premium ; and the in- creased rate paid by all, including those who survive, covers the extra insurance granted to those who die. Thus it will be seen that the return premium policy is simply a policy under which the insured pays an additional sum so as to insure the amount of money which he pays to the company in premiums. The result is that in the event of death within a designated period of years, the company will pay the face of the policy together with the premiums received. THE DOUBLE ENDOWMENT POLICY. This is a good policy for a young man who, wishing the protection of insurance, desires primarily to force himself to save something from year to year. 80 THE SUCCESSFUL AGENT It is also a policy which can be safely issued upon the life of a man who, for any reason, is not likely to outlive his " expectation. " The double endowment is simply an endowment on which in consideration of a higher premium (a) the face value of the policy is payable if death occurs dur- ing the endowment period, and (b) double its face value at the end of the period if death does not inter- vene. It is an expensive policy for the man who dies, but a cheap policy for the man who survives. THE JOINT LIFE POLICY. A policy may be issued on two or more lives, the in- surance to be paid when the first death occurs. But this form of policy is almost obsolete. When a man and wife, for example, decide to insure jointly, or when partners in business wish to protect one another, it is usual to issue a separate policy on each life. Thus the insurance can be dealt with more conveniently and readjusted more easily. DIFFERENT METHODS OF SETTLEMENT. When a policy has matured, and the time has come for the company to pay, it is the modern custom to give the beneficiary the choice of several methods of settlement. The entire amount of the insurance may be drawn in cash, thus ending the transaction. Or, the whole sum may be left with the company for a term of years, or during the lifetime of the benefi- POLICY-CONTRACTS 81 ciary ; the company agreeing meanwhile to pay the beneficiary a certain income. Or, the money may be drawn in equal annual instal- ments extending over any desired period, such as 10 years; 30 years, or 50 years. If this settlement is selected, the company can afford to allow interest on the deferred payments, thus increasing the amount so disbursed. Hence the longer the period selected the larger the return. For example : if the period selected is 50 years, sufficient time is given for interest (at 3%) to very nearly double the amount paid. For example : the sum of $50,000 of insurance payable in cash in advance, could be paid in 50 equal instalments of $1,886.50, extending over a period of 50 years; thus yielding a total of $94,325. There is another method of settlement which has been very popular, and which is a modification of the above, called the Continuous Instalment plan. It is an excellent method of adjustment in a case where there is only one beneficiary to provide for, or where a separate policy can be taken for each beneficiary. It provides that the insurance shall be paid in twenty instalments. All twenty instalments must be paid in any event, and if the beneficiary outlives the period during which the twenty instalments are payable, the instalments will be continued, in the form of an annu- ity, as long as the beneficiary lives. Thus, a father who is able to support a daughter as long as he lives, can guarantee her a fixed income for life, beginning at the moment his support will be with- drawn. 82 THE SUCCESSFUL AGENT This kind of insurance when issued on the endow- ment form is appropriate for a man and his wife, if they have no children or other dependents. Take an illustration: Such, insurance, issued on the twenty year endowment form, provides that if the husband dies prematurely the company shall immediately be- gin to pay the instalments agreed upon to the widow, with the stipulation that they shall continue as long as she lives. If both are living at the end of twenty years, the instalments begin then, and continue as long as the one who lives longest survives. Another plan, (which may be made compulsory upon the beneficiary) is to convert the insurance when the policy matures, into an annuity payable during the lifetime of the beneficiary. This adjustment is not unlike that under a Continuous Instalment Policy, but it differs in this respect: the annuity, instead of being payable for twenty years and thereafter during the lifetime of the beneficiary, will cease as soon as the beneficiary dies even if that should be within the first year. In consideration of this, the sum payable each year, other things being equal, will be more than in the case of a Continuous Instalment Policy. The exact amount of the annuity in this case cannot be known in advance because the insurance due on the maturity of the policy will procure a larger or smaller annuity according to the age of the beneficiary at that time. Many a man who would not think of investing in a policy payable in cash can be interested in a policy under which the insurance will mature in an invested POLICY-CONTRACTS 83 form. Every man knows that widows and minors often lose or waste money inherited. Insurance is doubly sure when the husband, or father, stipulates that the money due upon the maturity of the policy shall remain with the company, and that the benefi- ciary shall receive only the income on it, or shall re- ceive the money in annual instalments, or in the form of an annuity for life, CHAPTER IV. THE NEW YORK INSURANCE LAW. THE STANDARD POLICY. Every young agent is inclined to think that he has peculiar difficulties to face, and that it must have been far easier to solicit life insurance in "the good old days." But although his difficulties may differ in many respects from those encountered by the agents who have preceded him, it does not necessarily follow that they are greater or more perplexing. I can remember many periods when it was far more difficult to write insurance than it is today periods of financial depression, periods of doubt and uncertain- ty following financial panics ; periods when the public grew suspicious of all corporations. There was a time when all policies contained war- anty clauses which enabled the companies to contest death claims on a great variety of technical or trivial grounds. In those days adjusters were sent through the country to make compromises, and men were pub- licly warned against insuring lest they should leave to their wives and children lawsuits instead of legacies. During that period, abuses such as these made it al- most impossible for agents to do business. Everyone will agree that the years 1905 and 1906 have been difficult years. First, because many errors which had crept into the business were then exposed, THE NEW YORK INSURANCE LAW 85 and second, because the people hesitated to insure until the reforms suggested had been carried out. But with the year 1907 we have entered upon a new era, and the agents who are able to adapt themselves to new conditions will undoubtedly reap a rich harvest. The stability of life insurance has been demonstrated. The great financial strength of the reputable com- panies has been emphasized. The methods of con- ducting the business have been readjusted along more conservative, economical, and safer lines. And last, but not least, an intelligent public interest has been awakened in life insurance, and men will now listen to the agent. The insurance laws of several States are being re- vised, and in the State of New York, Standard Policy forms have been framed for the protection of policy- holders. A brief description of the new Standard Policy of the State of New York may not be out of place. A variety of standard forms are authorized by this law.* I shall touch, by way of illustration, only on the Ordinary Life Form. The policy is the entire contract. The company agrees to pay the face of the policy immediately upon the receipt of evidence that the insured is dead. The only consideration for this prom- ise to pay, is the agreement on the part of the insured to pay the premiums as they fall due. "Under this law the company can transact its business on the participat- ing plan or on the non-participating plan. It is free to choose, but cannot issue both kinds. 86 THE SUCCESSFUL AGENT The insured can make the beneficiary the absolute owner of the policy, or may reserve the right to change the beneficiary at pleasure. If any conditions as to residence, travel, occupation, suicide, etc., are inserted, they must restrict the con- tract for a single year only. If the policy is a participating contract, dividends must be declared annually. After the policy has reached a certain age (usually three years) it has a loan value, increasing from year to year ; and a surrender value, either in cash, paid-up insurance, or extended term insurance. The policy may, like any other similar contract, be assigned by the owner to any desired assignee. The contract provides that after three years, in the event of lapse, if no surrender value is asked for, the policy shall be continued automatically in the form of extended term insurance. If the policy is permitted to lapse, it may be res- tored subject to reasonable conditions. The insured may limit the beneficiary to a specific method of settlement upon the maturity of the policy, or the beneficiary may be allowed to choose any one of the following options: A settlement in cash. A settlement in equal annual instalments. A settlement in continuous instalments; or The money may be left with the company at interest during the lifetime of the beneficiary and paid when the beneficiary dies. It is not a necessary part of the contract, but the THE NEW YORK INSURANCE LAW 87 proceeds of the policy may be converted at maturity into an annuity on the life of the beneficiary, or on the life of any other designated person. The Standard forms are fewer in number than the old forms which they supersede, but, as a compensa- tion, great flexibility is given to the Standard policy by the various ways in which the insurance can be util- ized at maturity and the variety of ways in which it can be dealt with before maturity. The agent who offers the New York Standard Policy, or any similar policy, will do well to study in advance the circumstances of his customer, and then center his attention on the method of settlement which suits those circumstances best; calling attention incident- ally to the other attractions of the contract. The Standard Policy is a long contract chiefly be- cause of the variety of options offered. Some of its provisions may seem obscure to the un- initiated. This the agent may turn to good advan- tage by requesting an interview for the purpose of ex- plaining them. BOOK III HOW THE AGENT CAN BEST DISPOSE OF HIS WARES. PRACTICAL HINTS FOR THE CANVASSER. INTRODUCTION TO BOOK III. The agent who has mastered the principles of life insur- ance ; understands its practice,and has familiarized him- self with the policies offered by the company he repre- sents, has still much to learn. He must understand him- self, and must become a close student of character. He must learn how to offer his wares to the best advantage ; how to find customers, how to interest and convince them; how to systematize his work and concentrate his energies; how to economize his time and render his labors remunerative. He must discover both what he must do and what he must avoid; what he must say and what he must leave unsaid ; when to push forward and when to await devel- opments. To perfect himself he must be a close student, and ob- tain an education, just as a doctor or a lawyer fits him- self for his profession. And while the better part of this education must come from practice and experience, there is much valuable instruction that he may secure from others, which if turned to practical account will be of great assistance to him in his business. The aim has been to gather together, in this, the third section of this book, advice which every agent can utilize. And it is hoped that the counsel thus offered will not only prove valuable in itself, but will suggest lines of thought that will enable the reader to work out many use- ful principles and projects. BOOK III CHAPTER I. THE AGENT A SPORTSMAN. ANALOGIES BETWEEN FISHING AND CANVASSING. Christianity, whether it be regarded as of divine or of human origin, is universally recognized as a mighty force. And it is interesting to note that the men first selected to spread its doctrines were fishermen, who left their nets and became "fishers of men." The analogies between fishing and canvassing are many and striking, but there is one significant differ- ence : It is the aim of the fisherman to devour. It is the aim of the canvasser to protect. The province of the agent (like that of the apostle) is to rescue ; not to destroy. The fisherman must do four things: find his fish; lure him to his bait; hook him, and land him. The agent must do likewise: find his customer; interest him ; hook him (persuade him to sign an application) and land him (induce him to bind the contract by paying the first premium.) Fish are not anxious to be caught, and men, do not wish to be insured. You can't expect to catch fish by staying at home. 94 THE SUCCESSFUL AGENT And even if you go to the river 's brink and sit down by the water's edge, the chances are that no fish will jump into your lap. Thus it is with the agent who stays in his office to insure the men who drop in to buy policies Such men run the risk of starving to death. The fisherman must study the habits of fish; learn where they congregate; discover when and how they can be most readily attracted, and by what means they can most certainly be captured. He must know when to wait and when to strike. One kind of fish must be played until he is tired out; another must be yanked out like an aching tooth. If the fish refuses to bite the angler must exercise patience and perseverance, changing his bait, or his fly, until he discovers something that will take. Thus it is with the agent. The fisherman can often succeed in attracting a school of fish by throwing out " ground bait," but he can only catch them with the bait that is on his hook. The agent uses ground bait also. He advertises, and distributes books and pamphlets, but his subsequent work is the only thing that pays. The young agent will find his chief difficulty in hook- ing and landing his fish, but the experienced agent will say, "Show me the man who can afford to insure, and let me get at him, and I'll do the rest with ease and dispatch." The inexpert fisherman blames the place, or the weather, or his tackle, or the fish. The competent fisherman asks for but one thing fish to catch. The unsuccessful agent complains of his territory, or the THE AGENT A SPORTSMAN 95 people he is thrown with, or the failure of his manager or company to back him. The competent agent suc- ceeds anywhere and everywhere. In fishing and in canvassing, failure is usually due to lack of determination, lack of care, or sheer laziness. Every young agent should paste in his hat the follow- ing maxim, attributed to Abraham Lincoln, "If you intend to go to work, there is no better place than where you are. If you do not intend to go to work, you cannot get along anywhere. " And Lincoln knew. Not long ago a New York paper after making the assertion that, "Lincoln was a great man," continued : "Let the young man who thinks that he hasn't a chance in the world and ought to be pitied, read over what Lincoln said about his own education. Let him remember the conditions under which Lincoln lived, reading his few books by the light of a fire, writing on the back of a wooden shovel, then shaving off the wood, so as to get a new place to write. It is clear that the man who has it in him and who wants to can succeed." The following advice was given to a young man who had just taken up his abode in the city of Florence : "In order to earn a living in Florence, it is necessary for a man to be industrious that is to say, he must constantly use his mind and judgment, and be quick and sharp in all that he does, and know how to make money, since Florence, not having a naturally rich and fertile territory, cannot supply the means of living at a small cost." No better advice could be given to any young agent about to open an office, and yet this counsel was given 96 THE SUCCESSFUL AGENT some centuries ago by an experienced artist to a strug- gling young painter who afterwards won fame and fortune, and became one of the great masters of the Florentine School. Don't misinterpret this advice. If you have a choice select the best field, but having made your selection, let nothing stand in the way of your success. Henry James has referred to the fishermen of the Loire as notable examples of men who follow "art for art's sake;" the assumption being that although always fishing these anglers never catch any fish. But there is more wit than truth in the remark. The serious lesson actually taught by these anglers is that perseverance pays, for I have eaten many an excellent fish caught in that famous French river. From all this the intelligent reader will gather three points: 1. Where there are fish, fish can be caught. 2. If you can choose, go where fish are most plenti- ful. 3. But wherever you go, catch fish. The secret of success, whether you are an angler or an agent, is to be so in love with your work that you will shirk no toil; never become discouraged, and always be willing to take infinite pains. "As soon as a man begins to love his work, then will he also begin to make progress." THE SUCCESSFUL AGENT A MIGHTY HUNTER. I have likened the successful agent to the skillful fisherman. Perhaps it would be more appropriate to describe him as a mighty hunter; for the agent seeks his game chiefly on terra firma, although it is true that THE AGENT A SPORTSMAN 97 he can make acquaintances at sea and establish busi- ness relations with them after reaching shore. And I once heard of a man who frequented a famous water- ing place for the purpose of warning the bathers against the dangers of the deep but that man, I be- lieve, was in the accident business. If you keep the fact constantly in mind that you go forth, not to slaughter but to protect life, you can learn many lessons from the successful huntsman. Consider the patience with which he follows his game; and his persistence until he has captured it. Nothing discourages him. He continues his active pursuit until his efforts are rewarded. At one time he will find the utmost expedition essen- tial; at another he will prove the truth of that much abused proverb, "Everything comes to him who waits. " But remember that you can neither fill your game bag, nor write applications unless you are constantly on the alert and always ready to act. CANVASSING A NOBLE SPORT. Canvassing for life insurance is a noble sport, and one into which a man may well throw all his energies with one aim, and one only, namely, the determination to win an honest victory. To the agent who thoroughly appreciates the qual- ity of his work; his enthusiasm; his eagerness to tri- umph ; his gratification when success has been achieved, will be like that of the winning football player who 98 THE SUCCESSFUL AGENT throws all his intellectual and physical powers into an irresistible determination to win. Canvassing may also be likened to our national game. No-plays, as well as mis-plays, are errors the failure to do the right thing at the right time. THE AGENT IS A NECESSITY. The excuse which the agent has for being an agent is the fact that men will not insure voluntarily. It is true that the companies can get along without agents, but the people cannot. Until the agent converts them they do not insure.* *The Old Equitable of London is an eminently sound company and will reach its 150th birthday in 1912. It advertises that it has never employed agents. That explains the fact that its influence has been very limited. Its average output of policies during the last 10 years has been less tkan one policy a day. During the 365 days of 1905, for example, it wrote altogether only 290 policies. CHAPTER II. THE DIGNITY OF THE AGENT'S CALLING. The agent follows an honorable and dignified calling, which deserves to be classed with the learned profes- sions. It furnishes scope for the highest attainments and for the loftiest ambitions. It gives him rare opportunities. No man ahead of him can arrest his progress, if he is willing to push for- ward. There is no calling in which the maxim that "There's always room at the top*' applies with more force ; for the high altitudes are only to be reached by the agents who are vigorous, self-reliant, courageous and expert. Genius, talent, learning, position, influence, can all be utilized; while the man of moderate attainments can be certain of a measure of success if he have but integrity of purpose and is diligent in business. It is a stimulating pursuit, sharpening the wits and hardening the muscles. The life of the agent is whole- some, and unrestricted. He is not tied down to an office, or bound by red tape. He goes and comes at will, playing when he pleases and working when he chooses But he must choose to work if he expects to succeed. He is constantly making new acquaintances, and extending his sphere of influence. 100 THE SUCCESSFUL AGENT He learns to read character, and to sway mens' minds. He engages constantly in contests of the highest in- tellectual quality; and the joys of the victories he wins are sweet. There are some callings in which a man may legiti- mately engage wherein his gain may be another's loss. There are others, accounted reputable, which are actually pernicious in their general influence. But the agent, although his primary object is to earn money, is constantly teaching lessons of self-reliance, thrift, providence, and benevolence. Hence the agent, if he work wisely and well, not only makes money, but benefits his fellow men ,while making himself a better, a stronger, and a broader man. The following testimony has been gathered from the writings of men who have been successful agents and know what they are talking about. I commend their opinions to all youthful agents. There is no business in which it is possible for a man without capital to achieve such a financial success as in life insurance. In no other occupation can a man without any resources other than brains, energy and integrity, secure so great a pecuniary reward for his labor. The possibilities of this business to an agent are limited only by his capacity and willingness to work. There are now more opportunities to attain fin- ancial success in the life insurance business than in any of the so-called learned professions. The latter are overcrowded. Many attorneys are without clients, THE DIGNITY OF THE AGENTS CALLING 101 many physicians are without patients, and most clergymen are struggling along on starvation wages. The lawyer, or the doctor, has to put up his sign and then sit down and wait for something to turn up. In life insurance the agent can go out and turn some- thing up. While in life insurance work there are great oppor- tunities for young men, those more advanced in years are not debarred, as in many lines of business. The old man's experience in the business should become increasingly valuable so long as he has the physical and mental strength to continue his work. This is a consideration of no small importance in choosing a life work, when one remembers that in many lines of business and in many professions advanced years bring decreased earnings or entire lack of employment. This business makes a man a clear thinker and a good talker. The wise agent learns to sift things quickly, and to retain and use for his own purposes anything that can be made to work for his good. His occupation is a healthy one. He is not con- fined within four walls, as the majority of business men are, with only a "breathing spell" on Sunday. He gets pure oxygen and a reasonable amount of exercise all the week. He is his own master. There is nothing humdrum about the work; it has all the charm of variety from day to day. "So many men, so many opinions," and each man must be handled differently from his neighbor; so the life insurance agent who follows his work in the best way, and with the highest aim, comes in time to be a diplomat as well as a man of bright mentality and 102 THE SUCCESSFUL AGENT keen judgment. He grows to be very much alive. He has to be. He reads of some happening in the morning newspaper and goes right out and takes advantage of the circumstance. He keeps up-to-date; he has no time to go to sleep. His neighbor may grow sluggish and stupid, but he cannot or he will quit advancing. The life insurance agent is constantly meeting different mentalities and battling with them. This, to a keen mind, is a delight. What a man can do is his greatest ornament. Not what comes to him by chance or inheritance; but what he can do. There is a dignity and a joy in doing, that many men never see, because their vision does not reach beyond the necessity and the drudgery of it. Our business in life is not to get ahead of other people, but to get ahead of ourselves; to break our own record; to outstrip our yesterdays by to-days; to do our work with more force and a finer finish than ever this is the true idea to get ahead of our- selves. CHAPTER III. GENERAL ADVICE TO THE YOUNG AGENT. WHAT HE MUST DO FIRST. If you have decided to become a canvasser, the first thing for you to do is to burn your bridges behind you ; draw your sword, and throw the scabbard away. It may have been all very well for you to have had doubts and fears in the beginning to have studied the situation very carefully before making up your mind but now that you have chosen your calling and taken it up, you should "lay aside every weight" and, "forgetting those things which are behind, and reaching forth unto those things that are before, " you should "run with patience the race that is set before you. " And I give this advice, not simply because of its general application, but because the work of the agent is of a character which makes this course essen- tial for the man who wishes to succeed. No man ever achieved conspicuous success as a can- vasser who did not rid himself of entangling alliances, and adopt as his motto, "This one thing I do." The reason for this is that his success will depend largely upon his own mental attitude on the effect produced by his mind and will on the man whose life he wishes to insure. The agent, therefore, who does not throw himself into his work, body and soul, with absolute devotion and enthusiasm, will fail. Consequently, 104 THE SUCCESSFUL AGENT having put your hand to the plow, you must not even glance behind you. Follow this advice, and, if you are resolute, you will certainly succeed. WHAT QUALIFICATIONS MUST THE GOOD AGENT HAVE ? For your encouragement, let me remind you that there are all sorts and conditions of men who need in- surance. Hence, all sorts and conditions of agents are needed to insure them. It is not essential that you should be a glib talker or persuasively eloquent. You need not have genius or vast erudition. You need not have wealth or influ- ence. If you have honesty, industry, courage and intelligence, you cannot fail; and if in addition you have common sense and tact you may count upon a brilliant future; for common sense and tact are the most precious possessions of the successful agent; for common sense is the bullion of which his in- tellectual wealth will consist, and tact is the money coined from that bullion with which he may buy what- ever he desires in every market. Or, to drop the fig- ure, common sense tells a man what to do, and tact shows him how to do it. THE AGENT MUST GET HIS EDUCATION WHILE AT WORK. In the beginning it is not so important to know what you must be as to know what you must do. Well, the first thing for you to do is to get to work. GENERAL ADVICE TO THE YOUNG AGENT 105 There are a great many men in the community who recognize the value of life insurance, but who are pro- crastinators. Even the inexperienced agent (if he represents a company whose financial strength and reputation are established) can, every now and then, sell a policy to such a man before he knows anything about the details of the business. By taking advan- tage of such opportunities, the young agent can earn his living while learning his trade. A long course of preliminary study is not essential. Financial, social and political backing are not essen- tial. Nor is it necessary that, in the beginning, you shall have capital. You must get an education, and acquire capital; but you can secure both as you go along. Experience will be your best teacher (just as the young physician learns more in the hospital than from his books) and, although money will always be useful, the capital which it is essential for you to have is of another kind. It is the skill which experience and practice will bring you. BE CONTENT WITH A SUBORDINATE POSITION AT FIRST. If you are astute, and wish to earn more than a bare living, and want to achieve genuine success without unnecessary delay, you will do well to get your educa- tion and accumulate your capital as speedily as possi- ble. To that end, the best thing for you to do will be to make a contract with some general agent who will give you the benefit of his experience as a consid- eration for the pecuniary interest he will have in the 106 THE SUCCESSFUL AGENT business you transact. And I advise you against try- ing to strike too sharp a bargain with the general agent. You must pay for your education in some way and this is the most economical and expeditious way within your reach. As soon as you have obtained your education you will be able to shift for yourself, and may then reap a full reward for your individual efforts. It is perfectly true that many a young man, having thrown himself into the business of life insurance, has, without any assistance, achieved brilliant results; but it is a ques- tion, even in such a case, whether success would not have come sooner if he had served an apprenticeship under an experienced guide. LEARN HOW TO USE YOUR TOOLS. One of the first things for the young agent to do is to make a list, or table, in four columns, embodying the following information : First Column: Title of every kind of policy, or annuity, issued by the company represented. Second Column: A word or two opposite the title of each policy indicating its specific purpose its chief object. Third Column: This should indicate the kind of people who can best utilize each policy named in the first column. Fourth Column: This should contain the title of each canvassing document describing, or advocating,, each policy. GENERAL ADVICE TO THE YOUNG AGENT 107 This list should be revised from time to time, so as to keep it up-to-date; and the agent should glance over it before starting out to canvass. The chief advantage of preparing such a schedule is not that it will be useful for reference, but that it will fix important facts in your memory. For when you are in the midst of an interview you must have every fact at the tip of your tongue. It is then too late to search your records for information. It is not a bad idea to keep three small memoran- dum books in your desk. In Volume 1, record the names, addresses, and other particulars regarding men whom you hope to insure. In Volume 2, jot down miscellaneous points regard- ing your business. In Volume 3, enter every new argument that comes to your notice. SCOPE OF MODERN UFE INSURANCE. A volume might be written on the scope of modern life insurance. It no longer limits its usefulness to the protection of the family on the death of the bread- winner. It may be utilized in a thousand ways, either under a single contract or by combining two or more contracts together. It protects mortgaged homes. It enables a man to borrow money from his bank. It secures debts and gives stability to speculative ventures. It enables a man to make liberal bequests without encroaching upon his capital. It gives support to the aged, and protects estates from shrinkage. 108 THE SUCCESSFUL AGENT But I cannot enlarge further upon this subject. Let every agent study every contract issued by his company, and determine for himself what each will accomplish, and what combinations can be made which will in the first place rouse curiosity, and, in the second place, furnish the basis for a sound busi- ness proposition which will commend itself to the man whose case it fits. CHAPTER IV. HOW THE AGENT MUST BEGIN. A policy on your own life is the best canvassing document you can start out with. If you already have in your pocket a policy issued by the company you represent, the only further ques- tion to consider is whether you cannot afford to apply for an additional policy. It is not only necessary that the doctor should take his own medicine, but that he should take it in adequate doses. It is a matter of choice whether you consolidate your insurance into one policy, or whether you add a small one to your pile every now and then. I may say in passing, that many a man can be in- duced, if properly guided by the agent, to form the insuring habit. Not long ago a wealthy man died in Philadelphia who carried a large amount of insurance on his life in a number of companies. His death re- vealed the fact that he had made it a practice to take a new policy whenever he embarked in a new specula- tion, or made an investment whose success depended in any degree npon his personal supervision. He rec- ognized the fact that his wife was not a business man, and that as she was unfamiliar with the details of his ventures, many of his investments would shrink in value in the event of his death. Hence, to relieve his mind of all anxiety, he placed his estate in an impreg- 1 10 THE SUCCESSFUL AGENT nable position by insuring every business risk that he ran. And his death came suddenly and unexpectedly from a rare disease of which he could have had no pre- monition. Now, the agent, whoever he was, that in- stilled the insuring habit into that man's mind must have been a canvasser of talent and discrimination. DO A CUMULATIVE BUSINESS. You should prosecute your business as a boy makes a snowball. See that it grows as you roll it along. See that you not only get new clients from day to day, but that, from year to year, you secure new insurance from old customers, and from the children of your customers as they assume the responsibilities of life. THE AGENT MUST APPEAL TO THE EYE AS WELL AS TO THE EAR. There are many things that you are competent to do before you know much about canvassing. For one thing, you can make a good impression by dressing well and looking prosperous. Do this at the very start, even if you have to borrow the money to pay for your clothes. You must also see to it that all the documents you carry in your pocket are neat and trim, and must have your rate book rebound if the cover becomes worn. These suggestions may seem trivial, but remember that small blunders wreck large enterprises, and little obstructions throw heavy trains from the track. Per- haps you will say that these are such obvious truisms that they hardly deserve to be mentioned. But, as a HOW THE AGENT MUST BEGIN 1 I 1 matter of fact, they are of overwhelming importance, and for a very obvious reason : Most people judge the company by the opinion they form of the agent. If you are shabby, the stability of your company may be questioned. If you look prosperous, the sta- bility of your company will be taken for granted. And, as nothing succeeds like success, an air of pros- perity will aid you in extending your business; for men are like sheep. Where one leads others follow. Hence, if those whom you approach get the impression that you are successful, they will conclude that their neighbors have seen the wisdom of investing in life insurance, and will be inclined to follow their lead. There is nothing new in all this. Here is what an- other writer has said. "Careless and shabby attire, and a rough demeanor, are not passports to success. Many withhold confi- dence and patronage from men who, having little apparent respect for themselves, cannot inspire respect in others. "A company or a business is largely judged by the men who advocate it, and no amount of persuasive power, or knowledge, or experience, will counteract the prejudice formed by a shabby solicitor." Avoid lavish display, but if you have an office let there be an atmosphere of prosperity about the prem- ises; and if you have only desk room, see that your desk suggests a flourishing and carefully systematized business. And don't lie back in your chair, with your feet on your desk and your hands in your pockets, until you have made your fortune and can afford to have people observe that you are idle. 112 THE SUCCESSFUL AGENT THE BEST POLICY. I love virtue, and wish it could be said that honesty is always the best policy. But I suspect that there are many pursuits in which an honest policy would prove both embarrassing and unprofitable. Of one thing, however, I am certain, and that is that honesty is the best policy for the life insurance agent not simply on moral grounds, but because it pays. The reason is obvious. Most men are conscious of the fact that they are ignorant of the details of life insurance, and know that they must depend largely on what the agent tells them. Consequently any agent who is able to build up a reputation for doing the best he knows how for all his clients will accumulate a capital which he can use to great advantage in his business. A good judge of horses is not afraid to buy from a tricky dealer, because he will not strike a bargain until he has examined the horse. A man of experience who wishes to buy a house can avail himself of the services of a sharp real estate agent without being victimized. The capitalist may not consider it necessary to investi- gate the reputation of the broker who offers him a block of bonds if he knows all about the bonds. But very few men will buy life insurance if they are in doubt as to the integrity of the agent. A life insur- ance policy, moreover, is a running contract which may extend over a long period. There are contracts in force today which may not finally mature for a century or more. Take the following example: A young man in 1907 marries, and insures his life. He becomes the father of a large family. His youngest HOW THE AGENT MUST BEGIN 113 daughter is born, say, in 1925. Time slips by, and finally his wife and all his children except this daughter pass away, so he stipulates that at his death the pro- ceeds of the policy shall be converted into an annuity on her life. He dies at last and the company issues an annuity on the life of the daughter, and continues to pay her an income from year to year until she dies at an advanced age, early in the 21st century. An intelligent man will consider it a serious matter to enter into such a contract. Hence the agent cannot hope for success unless he has established a reputation for integrity. I have spoken of the importance of be- ing neat and trim in your appearance. It is more im- portant to be upright in character. Puddin'head Wil- son was right when he said ; "Be careless in your dress if you must, but keep a tidy soul." CHAPTER V. HOW TO FIND CLIENTS. If some fairy should give you three wishes (limiting them to the scope of your legitimate business) you would doubtless ask, first, for a multitude of men able to buy insurance ; second, for free access to these men, and third, for the knack of insuring them. But if you were limited to a single wish, which would you select? Not the first, because there are men all about you who are uninsured or under insured. Not the third, for, although you may not know how to can- vass, you can learn. The second wish is the one you would cjioose if you are discreet, for the agent's chief obstacle is the difficulty of getting at the men he wishes to insure. I do not refer to the difficulty of getting an introduction or interview, but to the difficulty of secur- ing a man's undivided attention. However, if you have gone into this business to win, this evil will prove a blessing in disguise, for if your predecessors had been able to secure the favorable attention of all the men in need of insurance, little would now be left for you. And it is an interesting fact that some of the most successful canvassers are those who make a specialty of hard cases who sell insurance to the men who have refused to listen to other agents. In devising ways and means for getting at people HOW TO FIND CLIENTS 1 15 you must bring to bear every gift you possess tact, discrimination, judgment, ingenuity, industry and patience. But what, you may ask, is the young agent who is without experience and without influence to do? Well, if he is working among strangers he will seek the aid of the general agent. Or, if after securing an in- terview, he is unable to close the transaction, he can appeal again to his superior for help. Indeed, many young agents confine their efforts at first to the intro- duction of their friends to the general agent, watching his methods of procedure, and finding out how to do the trick later on themselves. All this suggests the inquiry, "Where is the young agent to look for material on which to work especi- ally if he must shift for himself?" Well, if he has es- tablished himself in a strange place, he must sharpen his wits and make acquaintances. He can find out if there are any men in the community who know his friends at home, or who could be reached through people he already knows. If you begin work where you are known, the best opening will be among your friends and acquaintances. But in approaching them you must exercise discretion. Those who have known you as a boy may not take you seriously at first ; or they may try to put you off. On the other hand, there is always danger that they may suspect you of making a handle of your acquain- tanceship so as to take them at a disadvantage. But if you proceed with tact all such difficulties can be easily overcome. 1 16 THE SUCCESSFUL AGENT You must always approach your friends with frank confidence, avoiding a hesitating or apologetic attitude. In some cases you can make an immediate attack ; in others you can only get into the citadel by gradual approaches. In one case it may not be judicious to ask a friend to do more than put you in the way of getting at people he knows. In another case you may deem it safe to go a step further and say : "I haven't come to take advantage of our social relations. But I have determined to succeed, and if I can get a few important clients to begin with, it will help me. So I want you to insure through me for a nominal amount. You will get full value for what you pay and the premium will be a mere trifle; but the benefit to me at this critical period of my career will be enormous. So, as a matter of friendship, I want you for my first client." Sometimes in such a case your friend will offer to take a larger policy ; or, having thus lured him into the membership of your company, you may induce him to take more insurance later on. Or you might drop into the office of an acquain- tance and say: "I have not called to bore you, but I want you to remember that I'm in the life insurance business that I represent a good company so that whenever you do want insurance you won't forget to send for me." To this you might add : "And, in this, I'm doing you a genuine service. I have no doubt you're pestered almost to death by the agents of other companies. After this you can HOW TO FIND CLIENTS 117 elude such people by simply stating that you have a friend in the business who attends to all matters of that kind for you." But in such a case you must remember that your friend will not send for you. You must follow him up. Or, you can go to a friend and say frankly : "I know that you spend a lot of money, and have a large family, and need insurance. The agents of other companies don't know this, or can't get at you. Now, I want you to insure, not as a favor to me (although it will help me) but because you can't do without it. You had a close shave in that auto- mobile smash-up the other day, and I've come to you first, because, of all the men I know, you need insurance most. It will be of great advantage to me to have your name on my list. But don't let that influence you. I'm doing you a favor, and if our relations are such that you can't turn me away as you would a stranger, so much the better for you and your family. You can easily pay for $100,000 of insurance. Any smaller amount would prove inadequate." Yes, sign your name at the bottom of the application. Thank you." When a young man talks with fire and enthusiasm when it is apparent that he speaks from conviction his friends may smile, but they will admire his pluck. So I say, "go first to your friends, being careful not to approach them in the wrong way, and let them see that you are in earnest, and have "a reason for the faith that is in you." MAKE ACQUAINTANCES. But you can't afford to depend forever on old friends. It will not take long to exhaust them in two senses. 118 THE SUCCESSFUL AGENT You must spend much of your time in making new acquaintances, and learning all you can about them; for if you know a man you can get at him, but unless you know all about his circumstances before you try to insure him, you will, as a rule, fail to interest him. And if you don't interest him you'll be damned. You can find out how to make acquaintances for yourself better than I can tell you. It will depend largely upon your environment and personal charac- teristics. Be constantly on the alert. Take advantage of every opportunity. Use every acquaintance to make others. You can always reach the tradespeople with whom you deal, and through them can get into communica- tion with their acquaintances. As soon as you begin to take in money, you must deposit it in a bank, and through that bank you can make valuable business connections. If you have identified yourself with a church, you can reach its members. If you join a club, you can use it as a stepping stone to establish business rela- tions with its members (outside the precints of the club of course.) You can join a political organization, and (if you remember that you are an agent and not a politician) you can thus extend your business. Be ready to serve on important committees; join the board of education, the municipal art society, or the city improvement association. Secure an election, if you can, to the Chamber of Commerce, or accept a directorship in the leading bank HOW TO FIND CLIENTS 1 19 of your town. Don't let these things distract your attention from your business, but use them to increase your influence and extend your acquaintanceship, and it will be money in your pocket. If Brown has applied for insurance, he may put you in the way of insuring his friends, or you may call upon his friends and make some courteous inquiries regard- ing his health, environment, or financial standing. From this you can lead up, sooner or later, to a direct appeal. Formerly, a company refused to insure a man until he produced a "friend's certificate, " recom- mending and endorsing him. This is no longer de- manded, but the idea can still be utilized by a tactful agent. PREDJUDICE MUST BE OVERCOME. There was a time when all sorts of men entered the agency field. There were many who were competent, and transacted their business reasonably and judici- ously, but there were others who were irresponsible enthusiasts, brazen-faced adventurers, or insufferable bores. Such men, nowadays, could not succeed even temporarily, and the reputable companies refuse to employ as canvassers those who are not men of respec- tability and standing. Nevertheless, the public have not forgotten the fact that formerly there were some black sheep in the business, and reputable agents some- times find it hard to secure interviews. Consequently when you obtain access to a busy man you must be able to show in the very beginning that you are not a bore, and that you have no intention of taking any 120 THE SUCCESSFUL AGENT undue advantage of his courtesy. Let him understand that you have come on a business errand ; that you are doing him a service in submitting your proposition to him, and that you wish to close a transaction with him because you know it will be to his advantage. Never permit a man to get the impression that you have tricked him that you have secured an interview under false pretences. Nothing is more irritating. With ingenuity you can always accomplish your object indirectly without giving offense. Consider a simple illustration : You wish to reach a Mr. Brown who has been in the habit of frequenting a certain Summer resort; or has lived for a long time in a certain section of the city; or is posted about a certain class of investments; or has expert knowledge on some scientific subject. Get a letter of introduction to him from his friend Smith, whom you already know, and get him to give you some information about the matter regarding which he is a recognized authority. Carefully refrain from can- vassing him for insurance, but take pains to see that he knows before you leave that you are in the insur- ance business. Having thus secured the entree*, it will be a mere matter of time and discrimination as to when you can safely take the second step which shall ultimately lead to a conference on the subject of insur- ance. But space does not admit of further enlargement upon this theme. Enough, however, has been said to set you thinking. And if you have any brains, and if you concentrate your thoughts on this and similar HOW TO FIND CLIENTS 121 problems, you will soon learn to solve every difficulty as it presents itself. AN HONEST DISGUISE IS NOT A CRIME. Many men who need insurance are so ignorant about it, or so prejudiced against it, that they would regard it as a sheer waste of time to give you the chance to talk on that subject. Hence, it is important for you to awaken their interest or curiosity. It is not always necessary to describe what you have for sale as an insurance policy. You must scrupu- lously avoid trickery, or any disingenuous method of procedure, but there are a thousand ways of describ- ing many kinds of insurance without introducing the word " insurance" at least, in the beginning. Many a man who would refuse to insure his life will be curious about an investment which will provide a fixed life income for his daughter. If you can interest a man in the subject of annuities, you can often lead up to the converse of an annuity, namely, a life policy. A policy under which the money at maturity re- mains with the company and yields the beneficiary an income, is, to all intents and purposes, a bond, and may thus be described. And there are many con- tracts called "life" policies that are more exactly characterized by some other name; for after all, it is not a man's life that is insured, but his earnings, or his experience, or his expertness, or his investments, or his estate. CHAPTER VI. THINGS TO DO AND TO AVOID. From what has been said you will see that the things which the agent must not do are quite as important as the things which he must do. Don't lecture or upbraid your customer. "You can catch more flies with molasses than with vinegar. " Always adopt a cheerful and encouraging tone. Dwell more upon rewards than punishments. Don't bewilder a man by offering him every variety of insurance at once. Use your expert knowledge in making a selection for him. Never offer a low premium policy with the idea of leading up to a high premium policy. It is easier to work down to the cheaper contract. Don't offer an expensive policy to a poor man, or a long endowment to an old man. Don't offer a term policy to the man who wants to save up money for the future. Never permit a customer to abandon a policy if you can help it. Never advise him to exchange an old policy for a new one. Sell your insurance, not in place of, but in addition to, the insurance already carried. Remember that every policy issued by a solvent company grows in value as it increases in age, and that it is scarcely better than a confidence game to "twist" a policyholder from one company into an- THINGS TO DO AND TO AVOID 123 other. Follow the opposite course. Congratulate your customer upon his foresight in having insured his life ; show him that he needs more, and induce him to take the additional 1 policy with you. You will thus strengthen your client's belief in life insurance, and in you. And your disinterested attitude will help to establish your reputation, and secure the confidence of other customers. Never force a man to buy more insurance than he can afford to carry. On the other hand, don't offer him a small policy if he can maintain a large one, or let him escape you if he carries a small policy and ought to have a large one. Never grant a rebate. It is better to lose an individ- ual application now and then than to sanction the dangerous and pernicious custom of giving away part of your earnings. Here are a few hints gathered from other publi- cations : Never solicit a man until convinced that he needs insurance, or until you have good reasons to give him why he needs it. Never, if you can possibly help it, solicit a man unless you know something about him, the more the better. Rehearse the objections he may raise and de- termine in advance how you will meet them. Assume that he will object, and if he does not so much the better. "Faint heart ne'er won fair lady," nor applications either. Sometimes you may get a man examined by ex- pressing a doubt as to whether he really can get 124 THE SUCCESSFUL AGENT a policy; and his assertion that he can may be followed up by advising him to be examined so as to find out. Everything you can do to increase your own determination to get the application will help you. Keep physically well; loyal to your company; convinced of the importance of life insurance; be as enthusiastic as possible about your cause, and you will be just as certain to increase your efficiency as a clergyman is to preach more effectively if he is en- thusiastic and zealous. A sick man; a faint-hearted man; a man not confident of his own company, not a firm believer in life insurance, will no more get applications than cold air will melt iron. Don't shirk the things that look difficult or un- pleasant. They help you in your development infinitely more than the easy things. In canvassing get disagreeable things out of the way as soon as you can. It is like having a tooth pulled to pay the first premium; so extract it as quickly as possible. Make it easy for every customer to pay his second and third premium, and all that follow. Do not go to him like a collector dunning him to pay a bill, but carry him an encouraging report of your com- pany; congratulate him upon the value of his invest- ment, and remind him that whenever he wants to in- crease his insurance you will be ready to procure it for him. Make him feel that in paying his premium he is not discharging a burdensome debt, but laying money by for future use. To talk convincingly you must think clearly. So, cultivate the habit of thinking. THINGS TO DO AND TO AVOID 125 The man who thinks, moreover, is the man who achieves. Here is what one of the shrewdest insur- ance men I ever knew has said on this subject. "It may be that you do not think enough that you are not thoroughly awake. Some men go all through life half asleep ; others until some tremendous event awakens them and they develop their latent energies; then the world admires and respects what is called their genius. Let us give a name to this awakening and developing power. Call it pressure." Observe what the same writer has said about work : "The most brilliant achievements which have been wrought by man, and which have elicited the admira- tion of the world, have not been the results of dreams of indolent genius, but the outcome of conscientious unremitting toil restless activity of mind, which is not satisfied until the best ways and means are ascertained for the accomplishment of the desired end ; and then the resistless force which carries them into successful execution." CHAPTER VII. TIME IS MONEY TO THE AGENT. ALWAYS GET YOUR MONEY'S WORTH. Time is money only in the sense that it may be util- ized in procuring money. Time and money, instead of being identical, are in certain respects totally dissimilar. For example : you can hoard money (and thus become a miser) but you cannot hoard time. You can waste it or lose it, but it is a mere figure of speech to say that it can be saved. You can save time only by spending it. This is a paradox which deserves careful thought. Now, you have just as much, but no more time, than other people. You have twenty-four hours of time- money, each day; and as your mind and body must be fresh and alert if you mean to succeed, part of each twenty-four hours must be spent in sleeping and eat- ing and resting. It is obvious that after these expenditures have been made you must lay out the rest of your time very prudently or you will become insolvent. Many things, in addition to energy and diligence, are necessary if you are to get your money's worth out of the time you have to spend. These may be classi- fied under the one heading, SYSTEM. Organize your work, and map out your annual cam- paign. At the end of each month review what you have accomplished, and make a definite plan for the TIME IS MONEY TO THE AGENT 127 succeeding month. Follow the same course from week to week, and plan every day's work in advance as thoughtfully and carefully as if you were going into a battle and were in supreme command of your forces. Carry a memorandum book in your pocket, and jot down every valuable thought that can in any way help you in your work. In addition to policy records, maturity records, death claim records, etc, gather statistics of the finan- cial standing of those in your community who are un- insured or underinsured. Gather information about those whom you intend to approach. Keep a sharp lookout for new business combinations, co-partner- ships, marriages, births, and deaths. All this will help you to economize your time. Get all the suggestions you can from your company and from other agents, but be original and resourceful and prosecute your work and keep your records, in your own way. Avoid disputes, which often waste much valuable time. Never raise objections merely for the sake of knock- ing them down, or argue when argument is superflu- ous. You can waste a great deal of time in proving to a man that life insurance is a good thing ; that you represent a good company, and that you have a good policy to offer, if your customer already recog- nizes these facts and holds back simply because he is not ready or willing to pay the premium. In such a case, if you concentrate your attention on that one difficulty, and remove it, the battle will be won. 128 THE SUCCESSFUL AGENT Don't talk too much. If one argument out of a hundred will suffice, save your time and the remaining ninety-nine arguments for subsequent use. Get in touch with your customer. Let him do some of the talking especially at the start then you will know how to deal with his case. If he has some objection to advance especially if he exhibits any heat let him exhaust his fire before you (so to speak) get within range. Then, instead of returning his fire, and shooting him down, you will be able to capture him. It is a waste of time to offer insurance to a man until you are prepared to submit a sound business propo- sition, which, if understood, cannot but appeal to his judgment. To save your own time, and that of your customer, prepare yourself for an interview as a lawyer gets ready to plead a cause. It is better, and less embarrassing to say, "At your age, a twenty year endowment policy for $10,000 will cost you so much and will accomplish such and such results, " than to ask a man how old he is, what kind of insurance he prefers, how his business is panning out, what his resources are, how much he can afford to buy, whether he has any dependents or not, etc., etc. Find out in advance every customer's age, financial rating, occupation, business and family connections, personal peculiarities, etc., etc. Discover if you can whether he needs the largest amount of protection at the lowest cost, or a policy by means of which he can lay by money for his own future support. TIME IS MONEY TO THE AGENT 129 A man who does not need insurance may be inter- ested in a safe channel for the investment of surplus funds, or in a policy that will furnish ready money for the settlement of his estate at his death, or that will create a fund for the endowment of some benevolent object. But you will not insure such a man if you do your talking first and discover his needs and circum- stances afterwards. Spend your time only for a pecuniary equivalent. Save it when you observe that the return will be in- adequate. Delegate to others, as far as possible, work that does not demand your personal attention. Remember that it is easier to insure one man for $50,000 than fifty men for $1,000. But gather in the $1,000 cases as you go along. Map out your work, as far as possible, in advance; but always be ready to pick up business that comes your way unexpectedly. Go first for the biggest man and the biggest amount ; after that it will be easier to succeed with smaller men for smaller amounts. Other things being equal, pick out the cases that will produce adequate returns with the least expendi- ture of time and labor. Never stop halfway ; your time will be wasted if the application remains unsigned and the premium un- paid. Never solicit poor risks. Your time is too valuable for blunders of that kind. Besides, it is embarrassing to tell a man that the contract you have proposed can- not be carried out. 130 THE SUCCESSFUL AGENT Never permit a man who has taken a policy to give it up. Deserters usually go over to the enemy. Gather a solid army of policyholders round you, and they will help you fight your battles. Finally, never let failures or blunders discourage you. Consider their educational value. Turn them to account and thus save future time and trouble. DON'T BE SIDE-TRACKED BY MERE EXCUSES. The inexperienced agent often mistakes excuses for arguments. And an old agent, unless he is wide awake, is often baffled by some new excuse. The agent who formerly succeeded because he was (to use a slang expression) "on to the curves" of the people whom he approached, may now fail simply be- cause he does not know how to meet new objections. In such a case the difficulty is with the agent rather than with the public. The agent who has the courage of his convictions overcomes these excuses and per- suades the applicant to take a policy. The agent who is timid or disheartened gives up the contest without a struggle, and is thus the cause of his own defeat. Men have always given excuses for not insuring, but, wittingly or unwittingly, they conceal their real motives, which are often as follows : The payment of a premium involves self-denial, and self-denial is difficult. Ready money is often scarce even with well-to-do people. Most men live from hand to mouth, and it is con- trary to their habit to make provision for the future. TIME IS MONEY TO THE AGENT 131 Most men live in the present and fail to see future dangers. Most men exaggerate the size of a present outlay when only a future return can be expected. Unfortunately, if the agent is lax, and is diverted from his benevolent purpose by plausible excuses, the real difficulties will never be met and overcome. And the serious thing is that the hardship and destitution and suffering which will result will not fall upon the agent or upon the man who refuses to insure, but upon widows and orphans. CHAPTER VIII. ORGANIZATION AND CONCENTRATION. As we have seen, system is important because it saves time, but it is important for other reasons. No business can be prosecuted with efficiency with- out system, and it is peculiarly important in a busi- ness which depends so much on mental activity. The happy-go-lucky, slovenly, haphazard agent is usually a failure, whereas the agent who organizes his business thoughtfully and carefully usually succeeds even if he is a man of very moderate attainments. I need not enlarge upon this, but it may not be amiss to touch upon one or two kindred topics. CONCENTRATION. If you organize your work properly you can concen- trate your energies upon it in a way which will tell. You can light a fire by concentrating upon one point the feeble rays of sunlight, which, diffused about your face, scarcely warm your cheek. MOMENTUM. Momentum is not weight alone or motion alone, but the force engendered by the combined weight and velocity of a body in motion. You can drive a tallow candle through a board by firing it out of a gun. That illustrates the momentum due to velocity. ORGANIZATION AND CONCENTRATION 133 I once saw a great steamship, whose progress was almost imperceptible, carry away the massive sup- ports of a great ocean pier. That illustrated the momentum resulting from weight. Combine with the greatest velocity the utmost weight, and you have a momentum which will be al- most irresistible. Thus it is that an active agent (furnishing speed) who has a solid company behind him (supplying the weight) may exercise an influence which will excite the wonder and admiration of those who are ignorant of the secret of his power. If you will to insure a man's life there are four chances to one that you will succeed. Your success is sure, (1) if your will is stronger than his; (2) if his will is strong but his opposition weak; (3) if you succeed in removing his objections ; or (4) if he has viewed your proposition favorably from the start. You will suffer defeat only in case you are met by the immovable opposition of a will stronger than your own. ENDORSEMENTS OF EXPERTS. To sum up the advice embodied in the last two chapters, let me quote a few paragraphs from the writings of others who have given expert opinions. GOLDEN MAXIMS. "A man who walks against time accomplishes more than one who starts out for a morning stroll. He turns neither to the right nor to the left; takes 134 THE SUCCESSFUL AGENT not only a longer but a quicker step, and if he loses a little at one point strains every nerve to make it up farther on." "Let the problem be to produce a given result. Consider all the present means of accomplishing it; go out of the old ruts; think deeply; invent new ways; choose the best plan; develop it; weigh every point; when proved, change your anxious thought to determined action." "I have seen men who possessed ability and capacity for hard work who produced no results. Is it that the minds of such men are not intent upon their work ? Are they in business only as a necessity ? Are they without clearly defined plans? Do they lack persistency and continuity of purpose? Their failure answers 'yes* to all of these questions." "Anything that is worth doing at all is worth doing well. Make up your mind, with all the lights you have, as to the ways and means that you should employ. Having decided, use the greatest system in conducting your agency. Order, regularity, and system are indispensable," CHAPTER IX. CONFIDENCE. The sellers of gold bricks and green goods are called confidence men because they victimize people by gain- ing their confidence. But the most dangerous men are not bare-faced swindlers, but those promoters who offer investments of little or no value, which, never- theless, they honestly believe to be meritorious. Such men carry everything before them because of their confidence in what they have for sale. If what has little or no value can thus be sold through confidence, think of the advantage you enjoy in having something to offer which is pre-eminently valuable something that you can have absolute confidence in yourself, and which you can offer with full confidence to every customer. If you should ask me to compress all the advice I have to give into a single word, I should select this word CONFIDENCE. All successful business is based on it. Without it no enterprise can succeed. You must have confidence in yourself. You must have confidence in the life insurance prin- ciple. You must be confident that the particular man 136 THE SUCCESSFUL AGENT whom you are trying to insure will find the policy you offer well worth the money he must pay to secure it. And you must give him confidence in the company back of that policy, and in yourself. Just here a difficulty appears. How are you to know that you have a man's confidence ? Most people are courteous, and are reluctant to wound the feelings of those with whom they come in contact. Often- times a man will say that he has not made up his mind, or that it is not convenient to pay, or that he wishes to think the matter over before deciding. The ex- cuse he gives may be perfectly true, but his chief difficulty may be that he has no confidence in what the agent tells him. If this difficulty can be removed, every other obstacle will be swept away; but if it re- mains the agent will fail, and may never know the reason why. Hence, the only safe course is for you to so conduct yourself, and so handle your business, that you shall demand, and retain, the confidence of your neighbors. Establish a reputation for truthfulness, integrity of purpose, and devotion to the interests of your clients, and lay before the public the facts regard- ing your company in so forcible, and at the same time in so moderate a fashion that its trustworthiness will be obvious. Then you will reap rich harvests; for people will confide in you, and follow your advice. THE FUTURE OF LIFE INSURANCE. Life insurance, when properly conducted, is safe. We have recently passed through a period during which ill informed people have become greatly per- CONFIDENCE 137 turbed. But truth is mighty, and will prevail. And the following opinion, expressed by the president of a prominent company, is, in my judgment, eminently sound. "It is due to the hundreds of thousands of men in the community whose families depend on the protec- tion of life insurance, that their confidence, wherever shaken, should be re-established. ' ' The recent revolution in life insurance has resulted in a great number of important reforms; and as the fut- ure management of these companies will be subjected to the most minute public scrutiny ; and as I believe it to be the aim of the officers and directors of these com- panies to conduct the business hereafter with a single eye to the interests of policy-holders, I am sure that there has never been a time when the people have been in a position to know more certainly than now that their investments with the responsible companies are as adequately protected as anything of human origin can possibly be. "There are many business and professional men in every community who are without capital, but whose income is sufficient to permit them to protect those dependent on them in this way. To such men life in- surance is, in the vast majority of cases, their only re- source and it is a grave truth that if they neglect this opportunity the chief injury will fall, not upon them, or upon the life insurance companies, or upon the community at large, but upon widows, orphans, and aged men and women." CHAPTER X. USE YOUR WITS IN SELLING YOUR POLICIES. THE VALUE OF ENDOWMENT INSURANCE. To illustrate the advantage of getting together all the important facts about each policy, consider the case of a man who is looking for a safe investment, and who takes little or no interest in the protection which life insurance would give his family. You can- not interest such a man in a life policy, but you ought to be able to sell him an endowment. COST OF AN ENDOWMENT POLICY. The following table shows the cost, under all con- tingencies, of a twenty year endowment policy for $10,000, issued at age 35. A non-participating policy is selected because the exact cost of a participating policy cannot be stated in advance, since the dividend which reduces each premium is a variable quantity. Hence, a non-partici- pating policy, under which the charge is fixed (and which, so to speak, allows a dividend in advance) fur- nishes the best basis for illustration. From the table it will be seen that if death occurs during the first year, the insurance money, if invested at 4%, will yield an income of $400, which is equiva- lent to an annual income, thereafter, of 89% on, $446.20, the sum deposited by the insured. If death USE YOUR WITS IN SELLING YOUR POLICIES 139 occurs during the second year the investment will yield an annual income thereafter of 44%. And so on. 20 YEAR ENDOWMENT POLICY, AGE 35. Non-Participating. Premium $446.20. i INCOME Money Invested Face of Balance of Profit on Face ol on Money mp to end of Policy. to Estate Policy invested if if 4% death occurs is real- during ized. IstYr. $446. 20 $10,000 IstYr. $9,553.80 $400 IstYr. 89. % 2d 892.40 10,000 2d 9,107.60 400 2d 44. % 3d 1,338.60 10,000 3d 8,661.40 400 3d 29. % 4th 1,784.80 10,000 4th 8,215.20 400 4th 22. % 5th 2,231.00 10,000 5th 7,769.00 400 5th 17.7% Cth 2,677.20 10,000 6th 7,322.80 400 6th 14.8% 7th 3,123.40 10,000 7th 6,876.60 400 7th 12.8% 8th 3,569.60 10,000 8th 6,430.40 400 8th 11. % Oth 4,015.80 10,000 9th 5,984.20 400 9th 9.8% 10th 4,462.00 10,000 10th 5,538.00 400 10th 8.9% llth 4,908.20 10,000 llth 5,091.80 400 llth 8. % 12th 5,354.40 10,000 12th 4,645.60 400 12th 7.4% 13th 5,800.60 10,000 13th 4,199.40 400 13th 6.8% 14th 6,246.80 10,000 14th 3,753.20 400 14th 6.3% 15th 6,693.00 10,000 15th 3,307.00 400 15th 5.9% 16th 7,139.20 10,000 16th 2,860.80 400 16th 5.6% 17th 7,585.40 10,000 17th 2,414.60 400 17th 5.2% 18th 8,031.60 10,000 18th 1,968.40 400 18th 4.9% 19th 8,477.80 10,000 19th 1,522.20 400 19th 4.7% 20th 8,924.00 10,000 20th 1,076.00 400 20th 4.4% 140 THE SUCCESSFUL AGENT The last column in the table shows the annual income which the investment will yield in the event of death at any time during the endowment period. If the insured is living at the end of twenty years he will have paid $8,924, and will then receive $10,000, which, at 4%, will yield an income of $400, equal to 4.4% on the sum invested. This return is larger than a superficial glance would indicate ; for it represents the balance left after paying for the twenty years of protection which the insured has enjoyed a protection which (if taken by him on the term plan, the basis on which fire insurance is issued) would have cost him $179.30 a year, or $3,586 for the entire period. It is fair, therefore, to describe the return under the foregoing endowment policy at maturity, as follows: Total premiums paid $8,924 Less cost of term insurance for twenty years 3,586 Balance representing actual cost 5,338 Cash returned by company at maturity of policy 10,000 Excess over actual cost $4,662 THE ANNUITY A VALUABLE TOOL. Get all the information you can about the annuities issued by the company you represent. Read at least one book on the subject, and see what the encyclo- pedias have to say. The sale of annuities forms an important branch of the business of every life insurance company. But USE YOUR WITS IN SELLING YOUR POLICIES 141 this is not my reason for advising you to study this subject. I recommend it because an annuity may be used both as an entering wedge and as a weapon of defense. AS AN ENTERING WEDGE. You wish to insure the life of Henry Brown, but he refuses to be interviewed on the subject of life insur- ance. You have discovered that he is 50 years of age, and have learned that he is working hard and making money, with the hope and expectation of retiring from business at the age of 65. You ask him for the opportunity of explaining an investment which will yield him an income of $10,000 for life after reaching the age of 65, and state that the cost to him will be an annual deposit of $4,110,during the intervening period of 15 years. Having secured an interview, and having shown how this marvellous result can be achieved by a deferred annuity, you can either sell him an annuity of that kind (or of some other kind) or you can, by a natural transition, emphasize the advantages of an endow- ment policy. If you have ingenuity you can devise an infinite number of ways in which some form of annuity may thus be used as an entering wedge. AS A WEAPON OF DEFENSE. I have said that the agent must prepare for every interview with as much care as a lawyer arranges to plead a cause. And like the lawyer, he must be ready 142 THE SUCCESSFUL AGENT for surprises, and must be prepared to change, at a moment's notice, his mode of attack or defense. But, unlike the lawyer, he will, as a rule, be greatly limited as to time, and will be forced to win his cause in as many minutes as the lawyer has hours iri which to de- velop his argument. Now, an annuity is a good thing to fall back upon when you discover unexpectedly that the man whom you have urged to take a policy is uninsurable, or is too old to insure; for no examination is necessary in connection with an annuity investment. A life annuity is the converse of a life policy. The company receives a large sum from the investor and returns a small sum, from year to year, as long as he lives. In the case of a life policy, the younger the insured the larger the return. In the case of an annuity the older the investor the larger the return. The Manager for the East of one of our American companies told me not long ago that on one occasion Li Hung Chang asked him to insure his life. For a moment the manager was embarrassed. He knew that Li Hung Chang was too old to insure, but did not wish to tell him so. So he beat a graceful retreat by explaining the large income which the Chinese Prime Minister could obtain by investing in an annuity. After you have persuaded a man to insure, and he is waiting expectantly for his policy, how much better it is for you to go to him, and instead of saying, "You have been declined, " tell him that, although the origi- nal programme cannot be strictly followed, an invest- USE YOUR WITS IN SELLING YOUR POLICIES 143 ment can be made with your company which will have such and such advantages. This subject is too broad to be enlarged upon here. A few facts and figures, however, will be found in Appendix D, which may be of interest to you, pending your more careful investigation of this whole subject. CHAPTER XI. THE RIGHT POINT OF VIEW. A POUCY IS AN ASSET, NOT AN EXPENSE. There are many men who own buildings which may never burn down, but which have been insured against fire for fifty or a hundred years, and which will be similarly insured for many years to come. And yet they expect never to receive any return for the premi- ums they pay. Most men view life insurance from the same point of view. They regard the premium as a necessary but irksome expense. All this is wrong, and no competent agent should permit his customer to view his insurance as anything but a good investment; and every premi- um as a deposit on account of that investment. If death occurs prematurely the investment will yield an enormous return. If life is prolonged, it is true that the aggregate sum paid for the investment may be high, but there can be no shrinkage in the value of the policy itself, provided it has been issued by a solvent company. The history of a twenty year endowment given on page 139 is a good illustration of this. What is true of an endowment policy is true, to a certain extent, of a life policy. The policyholder must be made to see that the cost of his policy is not to be measured by the aggregate amount paid in premiums, THE RIGHT POINT OF VIEW 145 but by the cost per annum. Like any other current expenditure the man who is earning an income should estimate the cost of his life insurance as so much a year. There is nothing to be gained by adding to- gether the butcher's billspaid during a period of twenty years ; and no man has a right to conclude that he pays a higher rental for a house in which he lives for twenty years than for one in which he lives for ten years, if the rate per annum is the same in each case. The whole theory of life insurance is that the man who lives, and is able to earn an income, can afford to pay so much a year for his insurance. Whereas, if he dies, and his income is cut off, the insurance will pro- vide what he can no longer supply, i. e. support for his dependents. In this sense all life insurance is an in- vestment, and is properly so designated. When the protection furnished by the insurance is combined with the element of saving, then the policy is in a more literal sense an investment and the com- bination is a good one, notwithstanding the opinion expressed by some shallow critics that "straight*' life insurance is the only legitimate kind.* WHEN IS A MAN ADEQUATELY INSURED? A building is fully insured, when, if it burns down, its total value will be restored to the owner. The lives of few men are fully insured in this sense. There may be good and sufficient reasons for this in many cases: The capitalist may see the wisdom of insuring his life for a large amount, but may not deem it necessary to insure it for its full value as measured *This topic is dealt with more at length on page 191. 146 THE SUCCESSFUL AGENT by his money-making ability. Others may not be able to save from their incomes sufficient money to fully insure their lives. Hence, it is a safe practical rule for the agent to advise a man to insure his life for as large an amount as he can conveniently pay for, and let it go at that. A large majority of the policyholders of the various companies are insufficiently insured. Many a man who spends $5,000 a year is content with a policy for $5,000. If he dies the amount of the insurance (if invested at, say, 5%,) will yield his wife and children the munificent income of $250 a year ; or, if they spend the principal, they may be able to keep out of the poor- house for possibly, two or three years. Is that a fair business proposition? Consider the case of a man who is without capital but whose income enables him to spend $20,000 a year on his family. Is he adequately insured if he carries a policy for $10,000 ? Hardly, for $10,000 invested at 5% would yield an income of only $500. Consider the following case : A man who is without capital, and who earns $4,000 by his intellectual or physical labors, finds it necessary to spend, say, $3,000 a year for living expenses. Assuming, that in the event of his death, his family could move to the coun- try and live on half the amount he now spends, is it not a fair business proposition that he should insure for an amount which will yield an income of at least 50% of his present expenditures? If so, he should insure for at least $30,000; for that amount invested at 5% would yield only $1,500. THE RIGHT POINT OF VIEW 147 IP THE EARNING POWER OF A MAN'S CAPITAL IS IM- PAIRED HE SHOULD INSURE HIS LIFE. Many men of means who need life insurance are complacently ignorant of the fact. These are the men who have worked hard while young and have, laid by, as they suppose, sufficient capital to provide for the future. Consider the case of such a man : Let us suppose that when money was worth 7%, he had accumulated $100,000. That amount of capital at that time earned $7,000. As this seemed sufficient, he stopped saving. Does that man recognize the fact that instead of leaving his family an income of $7,000 they will get (at 4% or 5%) only $4,000, or $5,000 when he dies ? What is such a man to do ? It would not take long for an astute agent to advise him : He must insure for a sufficient amount to make good this shrinkage. THE VALUE OF LOW INTEREST RATES TO THE AGENT. Most men are complaining of the prevailing low rates of interest, but this is " money in the agent's pocket" if he chooses to take advantage of it. He can show the man who insured his life twenty years ago for $10,000, that he now needs $20,000, or $30,000 of insurance, first, because the insurance money will yield scarcely more than half the income it was ex- pected to yield when the insurance was taken; and, second, because it now costs more to live than it did twenty years ago 148 THE SUCCESSFUL AGENT If good investments were now yielding 7% or 8%, agents would not be able to induce capitalists to insure for such large amounts as they are willing to take. SENTIMENT VS. BUSINESS. There are two ways of selling insurance. One is to appeal to the sentiment of your customer ; remind- ing him of his responsibilities; telling him that it is a crime not to provide for those dependent on him, and pointing to the harrowing instances of misery re- sulting from neglect or procrastination. This is the old-fashioned sentimental way but it is obsolete. If you want to insure a man's life you must keep him in a good humor, and you can't keep him in a good humor by dwelling upon disagreeable themes. Nor does any man like to be told by a stranger that he is neglecting his duty. Nor does it cheer him to be told that death is staring him in the face. Therefore, I advise you to sell insurance on a strictly business basis. Modern life insurance has become a mighty force throughout the civilized world because it appeals to a man's business needs. It is the easiest way of laying up money for the protection of his family, or for his own support in after life. The man who is able to save a sufficient sum from his income to pay for a large policy can spend the balance of his earnings with out any twinges of conscience. Many a man after protecting his dependents by means of life insurance has felt justified in embarking in business ventures which otherwise he would have been afraid to consider for a moment. THE RIGHT POINT OF VIEW 149 Many a man who has been almost overwhelmed by heavy losses has succeeded in extracting himself from all embarrassment by protecting his future, and his family, by insuring his life. A man should invest in life insurance just as he in- vests in a block of bonds. Offer it in that way, appeal to his common sense and business experience, and you will sell your wares. Permit me to quote the following paragraph from an earlier publication: Men are like children. If the agent goes like a doctor to dose them with wholesome but bitter physic, they will seek to avoid him. But if he goes like St. Nicholas, with choice gifts, they will rejoice. And remember that you do go laden with precious gifts. You give capital to men who are poor; give them, the right to spend then- income freely; help them to pay off their mortgages, and strengthen their credit ; bring comfort and happiness to widows and orphans; educate children, and start young men upon then- business careers. There are a thousand ways in which you can interest and delight men in the subject of insurance without preaching to them, or upbraiding them, or calling upon Death to act as your solicitor. DANGERS OF DELAY. Procrastination is not only the thief of time ; it robs widows and orphans of food, clothing and shelter. There are many ways of talking to the man who hesitates or doubts. Here is a sample of what you might say : "Search your heart, and if the reason you have given for not insuring is that you are waiting until you find a 150 THE SUCCESSFUL AGENT company that is ideally perfect, you will discover that you have been resting on a very flimsy excuse. The day of miracles is past. You can camp by the Red Sea if you choose, but you will wait forever for a chance to walk dry-shod to the opposite shore. "If you wait for ideal conditions you will wait in vain. "Hawthorne tells the story of a man whose young wife was without flaw except for a single inconspicu- ous blemish a mere speck on her cheek. It was really no disfigurement, but it annoyed the husband; for to that extent ideal perfection was lacking. He was a learned chemist, and resolved to get rid of the offending spot. Finally he succeeded in distilling an elixir which proved efficacious. From day to day as she drank the elixir the blemish faded from her cheek. The husband was exultant, and was so ab- sorbed in the success of his experiment that he failed to observe, until it was too late, that the elixir was also sapping her strength. And at the moment that the spot disappeared she expired. "While you are waiting for perfection in life insur- ance the future of your loved ones may be in peril. "You know that the fire insurance companies have heavy expenses and that their premium charges are high, but do you, on that account, leave your property unprotected ? "The mariner does not throw his compass overboard because at times the needle may be slightly deflected. Nor does he cut his cable because his anchor may not hold firmly on all bottoms. Nor does he throw his watch away because sometimes it needs regulating. Surgeons are necessary, although surgical operations are not always successful. Banks are sometimes mis- managed, but we use them constantly. Life insurance is a business necessity ; and the necessity is immediate in the case of every man who is without capital to pro- THE RIGHT POINT OF VIEW 151 vide for his old age or for the support of those depen- dent on him. "To insure at any time, in any company, may in- volve some self denial. With your check book in front of you the amount of the premium under your eye seems large, while the amount of the insurance seems small. (One of the laws of perspective is that a near object looks large and a distant object, no matter how big it may be, looks small.) For this and other reasons men procrastinate. They believe in insurance but they exhibit faith without works. "Do such truths as these prick your conscience? Do they make you uncomfortable? Then exercise, forthwith, the common sense which directs your acts in other matters. Give your loved ones a fair deal, and without delay, and you will be happy. "The excuse that you are waiting for perfect condi- tions will not avail. The only sound reason you can give for not insuring at once is either that you are with- out money to pay the premium, or that you are an im- paired risk and, consequently, uninsurable. " CHAPTER XII. INCIDENTAL ARGUMENTS. Don't be content with threadbare arguments. Be original and inventive. Remember the incidental benefits resulting from insurance. Exploit these so that people who have turned from it may be converted to it. Think of the hundreds of thousands of men who are trying to save and have failed dismally. Such men can be taught to save, and to insure their savings, by means of life insurance. The extravagant man, once he is adequately insured, can become a spendthrift with a clear con- science, provided he saves each year from his income enough to pay his premium. Teach people that you offer them life insurance not death insurance; that a policy is a desirable pos- session, not a burdensome expense; that to insure is not the performance of a disagreeable duty, but the acquisition of a valuable asset. Show them also that it is life insurance in the sense that it renews life by relieving the sick man of distress- ing anxieties. Whereas, the man who has made no provision for his family worries himself to death. In this sense moreover, life insurance is also health insur- ance. The content it gives "doeth good like a medi- cine." INCIDENTAL ARGUMENTS 153 APPEAL TO SELFISH MOTIVES. You cannot appeal to the benevolent instincts of some men. In such cases, appeal to their selfish in- stincts. The man of moderate means envies his wealthy neighbors. Let him pay the first premium on a policy for $50,000 and he will instantly experience the satis- faction of becoming a capitalist. Advise the wealthy man to insure his fortune. "Riches take unto themselves wings and fly away." Of course your customer will claim that he is immune ; but if you are tactful you can show that accidents happen in the best regulated businesses. And you can call his attention to the fact that since he is rich he will not find his premium a burden; or an endow- ment policy anything but a sound investment and, in case of accident, it may become (as it has in multi- tudes of instances) the only means of getting bread and butter for the ex-millionaire and his family. You can always point your argument by citing the cases of men known to your customer who, after accumulating wealth, have gone to pieces And in many of these cases you can show that disaster came through no fault of the victims. Then think of the multitude of men who can serve their own selfish ends by insuring the lives of other people partners whose death would result in pecun- iary loss ; debtors whose death would, practically, can- cel their obligations; employees whose experience or skill has a money value. If a man has a $10,000 mortgage on his house he 154 THE SUCCESSFUL AGENT will experience great satisfaction if he acquires a $10,000, endowment policy, which will in time free his real estate of every encumbrance. Why should a selfish bachelor fear the approach of a time when he may be unable to make money ? He can protect his future by an endowment policy which, at maturity, can be converted into an annuity that will yield him a liberal income as long as he lives. Why should a man who wishes to leave his estate in- tact for his heirs, but who also desires to perpetuate his name and reputation by some endowment or bequest, hesitate as to his course, when he can pay a premium out of his income which at his death will yield ten, fifty, one hundred, or five hundred thousand dollars of capital? Why should the man who is forced to provide for some retainer, set aside a large slice of his capital for that purpose if he can insure his life for the benefit of that dependent? Follow lines of thought such as these and you will discover many novel ways of reaching men who don't believe in life insurance, but who can be made to believe in it and be induced to buy it. CHAPTER XIII. FALLACIES THAT MUST BE DEMOLISHED. The popular errors which the agent must be ready at all times to combat would fill several volumes. I shall touch upon only a few by way of illustration. That a man can insure himself. There are several ways of getting across a river, but no man ever lifted himself over by his own boot straps. There are sev- eral ways of securing the protection of life insurance, but no man ever succeeded in insuring his own life. Life insurance is based on averages, and there is no such thing as an average of one.* That a man can take better care of his money than any insurance company. He can if he has exceptional opportunities, and if he has infallible judgment, and if he could be sure of long life. But these ifs can never be eliminated except by life insurance. No man has ever been able to take care of his money after his death, or to earn money by post-mortem exertion. That a man can invest his own money more profitably. Not if death intervenes, nor unless he has opportunity, experience, and aptitude. And most men fail to make *See chapter II. 156 THE SUCCESSFUL AGENT small savings fruitful. The insurance company, on the other hand, consolidates in one large investment fund the small savings of many individuals, and thus obtains special facilities for causing money to breed money. That a man should put all his savings into his busi- ness. But it is seldom wise to put all your eggs into one basket. Besides, the object of insurance is not to make, but to protect money ; not to stimulate trade, but to guard business interests. Insurance does not take the place of a man's business enterprises, but it often renders those enterprises safe and successful. That a savings bank is better. Not if death inter- venes. One man puts $200 in a bank and another pays a premium of $200 for a $10,000 policy. Both die. Which has made the best use of his money? The one whose family receive $200 plus a little interest, or the one whose family receives $10,000 ? That the man who insures is a gambler. The gam- bler is the man who does not insure. He is betting against death, and, sooner or later, will lose. Insurance removes the gambling element from life. You can gamble about the fate of the individual, but the company triumphs over the uncertainties of life by so combining a multitude of individuals as to secure broad averages, producing scientific uniformity, thus eliminating chance. But the applicant may say, " In my case it will be a FALLACIES THAT MUST BE DEMOLISHED 157 gamble whether I pay much or little for my insurance." This you can grant for the sake of argument, for you can call the applicant's attention to the fact that his insurance cannot cost more than so much a year, and in the event of early death will prove a veritable bar- gain. If this is a gambling transaction it is one of an altogether innocent character. And it is better that he should engage in an innocent form of gambling than one that is pernicious. It is better that he should gamble about the amount which an investment made for the protection of his family will cost than that he should stake the hearts, the prosperity, the health perhaps even the life itself of his wife and children. For the man who does not protect his family against the accident of his premature death is a reckless and heartless gambler, for if he does not win his widow and orphan children will be the ones who will be forced to pay the stakes, and he will go to heaven, scott free. That the Company is inimical to the policy/holder. This is one of the most insidious of fallacies, and the agent who helps to expose it in his own community will be doing a great public service. Every company that is properly managed is conduct- ing its affairs for the benefit of its policyholders ; for whatever is really advantageous for the company is good for the policyholder, and everything that is really injurious to the company hurts the policyholder. Many of the legislators who are seeking to increase the taxes imposed upon insurance companies are them- selves policyholders, and are ignorant of the fact that 158 THE SUCCESSFUL AGENT these taxes must ultimately be paid by them. Legis- lators seem to think that the companies have some separate source from which taxes may be paid, and that it makes no difference to the policyholder whether the company is taxed or not ; that even if the company should be victimized the policyholder would go scott free. If they knew they were taxing themselves they would act very differently. Men are keen enough about avoiding the payment of direct taxes, and when they discover that in permitting insurance com- panies to be taxed they are taxing themselves, they will exert an influence which will be potent to sweep this evil away. It is a curious fact that most of the laws enacted for the benefit of policyholders carefully protect the in- terests of those who are inconstant, and leave stead- fast policyholders to shift for themselves. The companies if let alone, while dealing fairly with retiring policyholders, would be chiefly solicitous about continuing members. And this is as it should be. Agents throughout the country will perform a valuable public service if they will unite in teaching the public that life insurance will be cheaper and bet- ter, and more satisfactory in every respect, if policy- holders, agents, and companies, work together for the common good, instead of working at cross purposes. That insurance is an expensive luxury. There are many men who are so unfortunate as to be unable while still living to support themselves or their FALLACIES THAT MUST BE DEMOLISHED 159 families. Such men cannot be expected to make pro- vision for the future, or for the protection of wife and children after they are taken away. The agent may well sympathize with such people, but he cannot do business with them. But when a man who has money to spend makes the excuse that he can't afford to insure, or finds it so hard to pay his current bills that he can't pay a prem- ium, ask him how he expects his family to meet these obligations if he should be taken away. The man who finds it hard to pay current expenses is the man who is most in need of insurance, and will become the most appreciative of your customers if you deal wisely with him. That premiums are enormously high. This fallacy is so widespread and insistent at the present time that the question calls for more extended consideration than can be given to it here. Hence I have discussed it in Appendix F,* and commend the facts there stated to the careful consideration of every agent. That all Insurance is costly. The premiums charged ior certain kinds of insurance are high, and ignorant people have jumped to the conclusion that therefore all insurance is expensive. But many of the policies issued by the representative companies are very inex- pensive. This, and several kindred topics are dealt with in Appendix F.* *See page 187. 160 THE SUCCESSFUL AGENT That the man who means to insure can afford to wait. Procrastination is the agent's chief enemy. Put that thief out of business and your treasure will accumu- late rapidly. I shall not waste time by puncturing the innumerable specious arguments which men ad- vance simply to put the agent off. The young agent will soon know them all by heart, and will find that to successfully combat them he will need all the weapons in his arsenal common sense, tact, wit, wis- dom, good temper, patience, perseverance, will, and the rest. CHAPTER XIV. THE GENERAL AGENT. HIS DEVELOPMENT. The best way to become an efficient general agent is to begin at the bottom and work up. You must know how to canvass before you can be- come a competent manager. You must be a competent agent yourself before you can become a successful employer of agents. It is conceivable that a successful general agent may be found, now and then, who has never learned how to canvass, and who, nevertheless, has the faculty of gathering about him a body of efficient workers; but the only general agents that I have known who have achieved conspicuous success and I have known many are those who have been productive canvas- sers, who have been able to go out with young agents and teach them how to work; who have known how to come to the rescue of subordinates who have carried negotiations to a certain point and have then stuck fast ; who have been able to fill their subordinates with courage and enthusiasm by visiting their districts and writing applications where they have failed ; who have been able to prove to sluggish or inefficient canvassers that their lack of success has been due not to unfavorable conditions, but to their own short- comings. 162 THE SUCCESSFUL AGENT ORGANIZATION AND SYSTEM ESSENTIAL. All that I have said about organization and system regarding the work of the canvasser applies with aug- mented force to that of the general agent, because his field of operations is broader and his problems more complex. The general agent must have executive ability ; be a good judge of character, and have magnetism and en- thusiasm. He must win the confidence and esteem of the men he employs, and, while protecting himself, must aid them in making their business profitable. If he has capital he must utilize it. If not, he must establish his credit, so as to obtain funds on favorable terms with which to develop his business. He must establish not only a reputation for personal integrity, but must see to it that the men he employs are worthy of confidence, and transact their business in the right way. If he is shrewd he will succeed in advertising his business in such a manner as to insure an adequate return for all the money he disburses. It should be the ambition of every canvasser to be- come a general agent ; and if he has the right qualities he will succeed, for he will always find plenty of room at the top. IMPORTANCE OF THOROUGH CULTIVATION. Perhaps the most important piece of advice I can give the canvasser who has developed into a general THE GENERAL AGENT 163 agent is this : See that the field under your charge is cultivated thoroughly. You can get more money out of a small district if you develop all its resources than out of a large terri- tory which you do not adequately cover ; just as you can get more money out of a small garden or farm well cultivated, than from a large one half cultivated. It costs more in time, labor, and money to cultivate a large field than a small field. Hence a liberal return from a small field pays better than a meagre return from a large field. If you richly fertilize a small plot it will bear abundantly. If, on the other hand, you spread your fertilizer thin over a large tract it will be wasted. The best plan in starting an agency is to cultivate a small field round a convenient center and gradually take in more ground as you are able to extend your organization. Inthisconnectionasuccessful agent gives this advice : "First organize your work. No matter whether your territory extends over several states, or several counties, or if it is confined to a single city or some country town ; organize your work and make up your mind whether or not you will endeavor to accomplish the task which is before you, and whether you will, by every means in your power, not only endeavor to suc- ceed, BUT SUCCEED." CHARACTERISTICS OF THE SUCCESSFUL GENERAL AGENT. The successful general agent (whether the field of his operations be large or small) is the man whose com- pany is well and favorably known wherever he has 164 THE SUCCESSFUL AGENT jurisdiction. Who is himself known by reputation at least in every town, village and hamlet within his field. Whose agents are the representative men in their several communities. Whose customers are the prominent men throughout his field. Whose busi- ness is done largely with men who are already policy- holders in his company. Who is able to reach new customers through the friendly influence of old cus- tomers. Who, in the most remote corner of his field (with the information which his local representative is able to furnish) can clean up a lot of business during a short visit, and then go on his way and accomplish similar results elsewhere. SUCCESS BREEDS SUCCESS. Nothing succeeds like success. The best way to advertise your wares is to sell your goods. If you have satisfied the fathers and grandfathers in your community, you will capture their children and grandchildren. If you are diligent, and if your work is comprehen- sive and thorough, you will exemplify the lesson taught in the parable of the Ten Talents. You will not only reap the profit resulting from the diligent use of the five talents entrusted to you in the beginning, but will soon have five other talents added thereto. And as you turn your capital and surplus over and over, your income will grow rapidly under the combined influence of prudence, diligence, enthusiasm, courage, brains and compound interest. CHAPTER XV. A PARTING SHOT. It is easier to feed a soldier at the mess-table than to condense his rations into a small package to be carried in his knapsack. In the same way it is easier to deal adequately with the broad subject of life in- surance in a book of many volumes than in a compact treatise such as this. But as the agent must be always on the march and has little time for reading, I have aimed at conciseness ; and, without claiming that this book is the quintessence of wisdom, I hope it will be found to contain within a narrow compass, much that will prove of practical value to the man in the field. The successful agent must always be a contempla- tive man. He must do a great deal of hard thinking ; but he must be able to think on his feet ; to form his judgments while moving ; to make up his mind quickly and accurately when in action like the commander of a battleship, in his conning tower. Hence the ad- vice I have given in this book has been suggestive rather than exhaustive. Finally, if I have made my object clear, the reader will by this time have arrived at some such conclusions as the following: Advice which will aid the canvasser in his work is of 166 THE SUCCESSFUL AGENT the kind that will set him to thinking and planning. The agent who fails to assimilate, and use in an original way, the instruction given him by others, will accomplish little. The successful agent must be a diligent student as long as he lives ; he must seek to learn something new every day; he must take advantage of all the outside help he can get, but all assistance given by others will necessarily be incidental to the education which hf must give himself. When all has been said and done, the best agent is the self-made man. You can gain from books much valuable information about swimming, but you will never become an expert swimmer until you get into the water. APPENDIX A THE COST OF INSURANCE WHEN PAID FOR BY A SINGLE PREMIUM. THAT IS WHEN ONE I*UMP SUM IS PAID IN ADVANCE, AND NOTH- ING THEREAFTER The following is a simple method of finding the cost of insur- ance when a single premium, payable in advance, is charged. First determine how much money a certain numbei of men of the same age, who associate themselves together to insure one another, must pay into a common fund in advance, in order that $1 of life insurance may be paid upon the death of each member. Then (having established a unit of measure by determining the rate for $1 of insurance at a given age) the rates for larger amounts, and for other ages, can be computed. The net natural premium at age 40 has already been computed (see page 26) and it would be ea*sy to compute the net single premium for the same age, but here a practical difficulty presents itself. The calculation necessary to determine the single premium at that age would require no less than fifty-six separate computations, after which it would be necessary to con- solidate and analyze the figures thus brought togethej. Such a calculation would be long and wearisome. But if we compute the rate at, say 90, only six short computations will be neces-" sary, because the 847 persons surviving at age 90, according to the American Experience Table, (see page 21) will all die within a period of six years. But here another difficulty arises. Men 90 years old never insure their lives, for the reason that the cost would be prohibitive. Thus we are confronted by a dilemma. If we select a young age the calculation will be wearisome: if we select an old age the rate will be absurdly high. Which horn of this dilemma shall we accept? Let us choose the second, and compute the premium at age 90; for if 168 APPENDIX A (overlooking the incongruity) we can succeed in demonstrat- ing that the correct rate can be found for age 90, the truth will be evident that the rate can be determined for younger ages, although in such cases the calculations will necessarily be longer and more intricate. As a matter of fact, rates have been computed for all ages (see page 30). Assuming, then, that the 847 men surviving at age 90, accord- ing to the mortality table, have decided to insure one another, let us see what it would cost them to do so. PROBLEM. What sum, as a net single premium, must each of the 847 sur- vivors at age 90 pay in advance, in order that a sufficient fund shall be established from -which $1 may be paid upon the death of each one? By referring to the mortality table (page 21) we find that 385 will die during the first year ; hence $385 must be provided to pay the losses of that year. For the second year $246 must be provided; for the third year $137; for the fourth year $58; for the fifth year $18 ; and for the last year $3. Total $847. AGB. Year. Number of Deaths Each Year. Number of $1 Insurances Payable Each Year. 90. . 1st 385 $385 91 2d 246 246 92. . 3d 137 137 93 4th 58 58 94 .... 5th 18 18 95 6th 3 3 96 7th 847 $847 But to pay this $847, the members of the association need not deposit so large a sum. All the money they contribute must be deposited in advance ; and as long as any part of it remains in the fund it will yield interest ; and whatever interest is realized may be utilized in paying the death losses. Hence, APPENDIX A 169 the members need only contribute a sum which, together with the interest earned, shall be sufficient to pay the $847, as the deaths occur. It is usual, at the present time among life insurance compan- ies to assume that their funds will earn 3% interest. More may be earned, but it is well, in making calculations of this kind, to be conservative. So we shall assume that the money con- tributed by our little association of old men will earn 3%. To discover the amount of interest which our fund will earn we must find the 3% discount of the amount of money which must be paid out each year. The amount payable at the end of the first year ($385) must thus be discounted for one year, which reduces it to $373.78. The second item, ($246) must be discounted for two years, reducing it to $231.87. And so on. Here is the whole com- putation : AOB. Year. Number of Deaths Each Year. Discount at 3%. 00 01 02 03 04 05 1st 2d 3d 4th 5th 6th 385 246 137 58 18 8 $385 = $373.78641 = 231.87850 = 125.37441 51.53225 = 15.52696 == 2.51245 (1.03) $246 (1.03) a $137 $58 $18 (1.03) 8 $3 (1.03) $800.61107 170 APPENDIX A The amount, therefore, which must be paid in advance, in- stead of being $847, is a trifle over $800.61. Or, to be exact $800.61107. Now, as there are 847 persons who must contribute this sum, the share of each will be $800.61 107847 =$0.94523149, or a trifle over 94J cents. This is the net single premium at age 90, according to the foregoing assumptions, for $1 of life insurance. And if this is the rate for $l,the rate for $1,000 will be just one thousand times more, or a trifle over $945.23. ($945.23149) That there may be no doubt of the accuracy of this computa- tion, I append the following DEMONSTRATION 847 persons must each pay $945.23149, in advance: 847 X 8945. 23149 = $800,611 .07203 Add 3 per cent interest earned during year. . . 24,018.33216 $824,629.40419 Deduct 385 losses during year, payable at end of year 385,000 . OOOOQ Balance on hand at beginning of 2d year $439,629 . 40419 Add 3 per cent interest 13.188.88213 $452,818.28632 Deduct 246 losses 246.000 . OOOOQ Balance on hand at beginning of 3d year $206,818 . 28632 Add 3 per cent interest _ 6.204 . 54859 $213,022.83491 Deduct 137 losses 137.000 . OOOOQ Balance on hand at beginning of 4th year $76,022 . 83491 Add 3 per cent interest 2.280 . 68505 $78,303.51996 Deduct 58 losses. 58.000 . OOOQQ Balance on hand at beginning of 5th year $20,303.51996 Add 3 per cent interest _ 609 . 10560 $20,912 . 62556 Deduct 18 losses 18,000.00000 Balance on hand at beginning of 6th year $2,912 62556 Add 3 per cent interest 87.37877 $3,000.00433 Deduct 3 losses _ 3,000 . 00000 $0.00433* *This fraction of one cent left over can be eliminated by carrying the figures representing the premium to a greater number of decimal points. APPENDIX B THE COST OF INSURANCE WHEN PAID FOR BY A LEVEL PREMIUM. Knowing the amount of the net single premium which will buy $1,000 of life insurance, we can discover a series of level premiums (or annuities) which will buy the same amount of in- surance, as explained below. In order to find a unit of measure, let us assume that the 847 persons who, according to the mortality table, are alive at age 90,* agree to pay into a common fund, as long as they live, a level annual premium of $1 each ; then let us see how much money they will thus contribute, and then see if we can discover how much insurance these $1 premiums will buy. Using the mortality table (page 21) as a guide, we find that the contributions will be as follows : YEAR. Number of Survivors. Number of f 1 Premiums Paid. 1st. . . 847 $847 2d 462 462 3d. . 216 216 4th .... 79 79 5th 21 21 6th 3 3 Total annual payments of SI each $1 628 This computation shows that the total amount contributed in $1 premiums aggregates $1,628. Now let us see if we can dis- cover the purchasing power of this fund by comparing it with the single premium, whose purchasing power we already know. *The reason for taking this advanced age is explained on page 167. 172 APPENDIX B This we can do if we can find what single premium will be equivalent to this level premium of $1,628. To solve this problem we must begin by finding the "present value"* of each of the items in the last column of the foregoing table . The present value of the first item ($847) is $847, for this item is payable in advance and no allowance can be made for interest. As the second item ($462) is not due for a year, it will earn 3% interest for one year. Hence the amount must be discounted for one year. This is done by dividing $462 by 1.03, which re- duces the item to $448.54369. The third item ($216) must be discounted for two years. That is to say, $216 must be divided twice by 1.03, which reduces the amount to $203.60072 The fourth item must be discounted for three years ; the fifth item for four years, and the last item for five years. When this cal- culation has been made we discover that a single premium of $1,592.68 (or, to be more exact, $1,592.68666) is the equivalent of the annual premium of $1,628, as the following calculation proves : DEMONSTRATION. Present value of $847 payable in advance $847 . 00000 $462 - 462 " -1 year. . . .- = 448 .54369 (1.03) $216 " 216 " 2 years. . .- (1.03) a $79 79 " "3 " ... = 72.29619 $21 21 "4 " ... = 18.65823 $3 -= 2.58783 (1.03) 1 Total $1,592 . 68666 *The "present value" of a sum payable in the future is an amount which, compounded at a given rate of interest, will equal that sum when the time comes for it to be paid. e.g. The present value, at 3%, of $100 payable ten years hence, is $74.4094; for $74.4094 compounded annually at 3% will amount in ten years to exactly $100. APPENDIX B 173 This computation shows that these 847 persons would have to pay an aggregate single premium of $1,592.68666. Hence the amount which each individual would have to pay would be $1.88039; for $l,592.68666-r847=$1.88039. This indicates that a single premium of a trifle over $1.88 has the same purchasing power as a level premium of $1. Now, we do not know how much a single premium of $1.88 will buy, but we do know that a single premium of $945.23149 will buy $1,000 of insurance.* Hence we can discover the level premium equivalent to a single premium which will buy $1,000 of insurance by simply finding out how many times $1.88039 is contained in $945.23149. This is $502.68; for $945.23149+$!. 88039=4502.68. We now have our equivalent, and know that the net level premium for $1,000 of insurance is $502.68, at age 90. Know- ing this we can find the rate for any larger or smaller amount at the same age. And if we can determine the rate for age 90, we can, in the same way, calculate it for any other age.f DEMONSTRATION. The fact that the correct net single premium for $1,000 of in- surance at age 90, is $945.23 has been proved in page 170. The following computation proves that the correct level premium is $502.68. See page 170. tSee page 33 for table of net level premiums. 174 APPENDIX B 847 persons must pay a premium of 1502 . 68 each for the first year. 847 X $502.68 = $425,769.960 Add 3 per cent interest earned during year 12,773.099 $438,543.059 Deduct 385 losses for 1st year ($1,000 each) pay- able at end of year 385,000 . 000 Balance beginning of 2d year $53,543 .059 462 survivors must pay for the 2d year 232,238.160 Fund, 2d year $285,781 .219 Add 3 per cent interest earned during year 8,573 . 437 $294,354.656 Deduct 246 losses for 2d year 246,000.000 Balance at end of 2d year $48,354 . 656 216 survivors must pay for the 3d year 108,578.880 Fund, 3d year $156,933 .536 Add 3 per cent interest earned during year 4,708.006 $161,641.542 Deduct 137 losses for 3d year 137,000 .000 Balance at end of 3d year $24,641 .542 79 survivors must pay for 4th year 39,711 . 720 Fund, 4th year $64,353.262 Add 3 per cent interest earned during year 1,930.598 $66,283.860 Deduct 58 losses for 4th year 58,000 .000 Balance at end of 4th year $8,283 .860 21 survivors must pay for 5th year 10,556.280 Fund, 5th year $18,840.140 Add 3 per cent interest earned during year 565 . 204 $19,405.344 Deduct 18 losses for 5th year Balance at end of 5th year. . . ... $1,405 . 344 3 survivors must pay for 5th year . . ............ 1,508 .040 Fund, 6th year . . $2,913 . 384 Add 3 per cent interest earned during year 87.40 $3,000 . 786 Deduct 3 losses (all that remain) for 6th and last year 3,000 . 000 $0 . 786* *This fraction of one dollar left over is due to the fact that the premium employed in the foregoing calculation is stated at $502.68, whereas the exact premium is a trifle less, namely $502.678428. APPENDIX C THE PURE ENDOWMENT, THE TERM POLICY, AND THE ENDOWMENT POLICY. A pure endowment is paid if you live. A term policy is paid if you die. An endowment policy is paid whether you live or die, and is consequently a term policy and a pure endowment merged in a single contract. The Pure Endowment. The net premium on a 10 Year Pure Endowment issued at age 30, for $1,000, may be discovered in the following way: At age 30, there are, according to the mortality table,* 85,441 survivors. Of these 7,335 will die during the following ten years, and will consequently receive nothing; but, the 78,106 persons who will still be alive will receive $1,000 each. Hence, if interest should be disregarded, $78,106,000 would be needed. But as the sum payable will not be due for 10 years, the amount actually needed will (at 3% interest) be And each man's share will be $58,118,198. 93-^85,441 =$680. 2144. This, then, is the net single premium for a 10 year Pure En- dowment for $1,000, issued at age 30. The Term Policy. The net single premium on a term policy may be found in the same way that we have already found the *See page 21. 176 APPENDIX C premium on a life policy, and as the length of the computation is limited to 10 years, we need not select an old age, such as 90, but may conveniently take 30 (as in the case of the pure endow- ment.) COMPUTATION TO DETERMINE THE NET SINGLE PREMIUM ON A 10- YEAR TERM POLICY FOR $1,000. Basis. American Experience Table, with 3% interest. We have seen that, of the 85,441 persons living at age 30, 78,106 will be alive at the end of 10 years. Now these survivors will receive nothing; but $1,000 of insurance must be paid to each of the 7,335 persons who will die. Hence $7,335,000, must be disbursed during the 10 years; but as most of this money will not be needed for some time we must take advantage of such interest as can be earned. We must therefore determine the present value of each item, as follows: APPENDIX C 177 YBAR. Number of Deaths. Total of the $1,000 Death Claims Payable Each Year. Computation of Present Value of Each Item. Discount 3%. 1st 2d 3d 4th 5th Oth 7th 8th 9th 10th 720 721 723 720 729 732 737 742 749 760 1720,000 721,000 723,000 720,000 729.000 732,000 737,000 742,000 749,000 750,000 $720,000 = $699,029.120 = 679,011.051 = 661,647.420 = 645,041.598 (1.03) $721,000 (1.03)3 $723,000 (1.03) $726,000 (1.03)* $729,000 (1.03) 5 $732,000 = 613,038.478 = 599,248.443 = 585,741.649 = 574,046.131 = 562,534.990 (1.03) 8 $737,000 (1.03)' $742,000 (1.03)8 $749,000 (1.03) 9 $756,000 (1.03)io Total present value $6,248,781 .294 178 APPENDIX C The net single premium, therefore, for each person is $6,248,781. 294-r85,441=$73. 1356, or to the nearest cent, $73.14. The Endowment Policy. The net single premium for a 10- year endowment policy for $1,000, issued at age 30, is found by simply adding together the premiums chargeable on the two policies just described ; for, as has been stated, the endowment policy is constructed by combining a pure endowment with a term policy. Net single premium on a 10-year Pure Endowment. 1680.2144 Net single premium on a 10-year Term policy ...... 73.1356 Total, being the Net Single premium on a 10- Year Endowment policy ................... $753 . 3300 Having discovered tke single premium, the level rate can be determined in the manner described en page 171 (although in this case the computation will be for 10 years, and not for life). Such a computation would show that the net level premium (equivalent to the single premium of $753,357) is $88.96. APPENDIX D ANNUITIES. The proper charges to make for annuities are determined by utilizing a mortality table, as in the case of life insurance policies. The people who buy annuities are usually old men and women, without dependents, who can afford to sacrifice their capital, in consideration of receiving an increased income for life. Consider the case of a man of 60, who has a capital of $15,000. Invested at 4% this would yield an income of only $600, but if it should be sunk in an ordinary life annuity it would yield a life income of more than double that sum; namely, $1,300.80 (over 8|%). The net rates for annuities can be determined as readily as the net rates for insurance policies. EXAMPLE. Of the 100,000 persons with which the American Experience Table begins, 69,804 will be alive at age 50. Now, let us sup- pose that these survivors determine to form an association for the purpose of paying each member an annuity of $1.* for life. And let it be understood that the first annuity is to be paid at the end of the first year; the second at the end of the second year, and so on. If we should take no account of interest the calculation would be very simple, for it would only be necessary to add together the number of survivors at the end of each year, until the last man died, and the sum of these items would give the number of dollars necessary. Thus: Of the 69,804 original members, 962 would die before the end of the first year. Consequently 68,842 members would be living at the end of the year, and $68,842 would be needed to pay the annuities for the first year. *One dollar is selected as a convenient unit of measure. 180 APPENDIX D At the end of the second year, $67,841 would be needed. And so on. But, as a matter of fact, the money employed will earn in- terest, and in order to give due credit for this saving, the pres- ent value of the sum payable at the end of each year must be determined by discounting it for the time during which it will be in hand. When this has been done for each year, and the items have been added together, the total sum needed in advance will be seen to be considerably less than the total which will have to be paid. It is not necessary to go into this calculation, as the process has already been sufficiently illustrated. Statistics indicate that women who buy annuities live a little longer than men who buy annuities. Hence female annuitants do not fare quite so well as male annuitants. But the difference is trifling. The following table gives the current rates for a number of ages. Some companies charge less, but the differences are slight. Note that the rates given are loaded for expenses. Hence they are not the net rates, but the gross rates actually charged APPENDIX D 161 GROSS LIFE ANNUITY RATES. MALES. tt PRICE OP $100 ANNUITY. ANNUITY PURCHASED BY $1,000. f*> 3 1100 Annually. $50 Semi- Annually. 125 Quar- terly. Annual Payment. Semi- Annual Payment. Quar- terly Payment. 9 30 2,075.60 2,102.70 2,116.20 48.18 23.78 11.81 30 40 1,832.60 1,859.70 1,873.20 54.57 26.88 13.34 40 50 1,520.50 1,547.50 1,561.10 65.77 32.31 16.01 50 60 1,553.20 1,180.20 1,193.80 86.72 42.36 20.94 60 70 772.40 799.40 813.00 129.47 62.54 30.75 70 80 543.00 568.00 580.50 184.16 88.03 43.07 80 85 468.00 493.00 505.50 213.68 101.42 49.46 85 FEMALES. PRICE OP $100 ANNUITY. ANNUITY PURCHASED EY $1,000. W 2 $50 $25 Semi- Quar- 3 $100 Semi- Quar- Annual Annual terly Annually. Annually. terly. Payment. Payment. Payment. 30 2,075.80 2,102.70 2,116.20 48.18 23.78 11.81 30 40 1,832.80 1,859.70 1,873.20 54.57 26.88 13.34 40 50 1,544.00 1,569.00 1,581.50 64.77 31.87 15.81 50 60 1,189.00 1,214.00 1,226.50 84.10 41.19 20.38 60 70 828.00 853.00 865.50 120.77 58.62 28.89 70 80 592 . 00 617.00 629.50 168.92 81.04 39.72 80 85 502. UO 527.00 539.50 199.20 94.88 46.34 85 NOTE. For ages older than 85 the rates are usually the same as for age 85. A pro rata allowance is usually made for each quarter of a year elapsed since last birthday. Some companies charge rates slightly more favorable than those here quoted. 182 APPENDIX D DIFFERENT KINDS OF ANNUITIES. As there are different kinds of policies so there are different kinds of annuities. However, the ordinary life annuity, des- cribed above, is the kind most frequently sold, because it meets the requirements of most investors. But if a man who has reached the age of 55 knows that he will inherit a fortune when he reaches the age of 70, and if, meanwhile, he is forced to subsist on the income produced by $4,000 (which at 5% would yield only $200 a year) he could well afford to sink his capital in a temporary annuity , to run 15 years and then expire; for such an annuity would yield an annual income of $381. Consider the case of another man who has reached the age of 50, whose circumstances are altogether different. He is in active business, has laid aside some capital and has deter- mined to retire at 65. If he chooses to sink $22,060 in a deferred annuity, he will, after reaching the age of 65, receive an annual income for life of $5,000, payable in semi-annual instalments of $2,500, each, the first instalment payable fifteen years and six months after the date of purchase. Or if he does not wish to pay out so large an amount of capital all at nee, the same annuity can be obtained by making an annual deposit, with the company, of $2,055. These annual deposits (or premiums) to cease at the end of 15 years. A Compound Annuity gives a man an admirable vehicle for laying something by from year to year for his wife or his daugh- ter. But space does not permit of further discussion of this fruitful theme. Thus far I have spoken of marketable annuties, but the life insurance companies constantly utilize annuities in computing the premiums on insurance policies. This branch of the sub- ject is well worthy of the agents' study, but here a single illustra- tion must suffice. APPENDIX D 183 In Appendix B. (page 173) it was shown that at age 90 the net single premium for $1,000 of insurance is $945.23, and that the equivalent level premium is $502.68. Now, this level premium is neither more nor less than an annuity of which the single premium is the present worth. In other words, if a man 90 year sold could find a company that would sell him an annuity without making any charge for the expense of conducting the business, and if that company should base its annuity rates on the American Experience Table, with 3% interest, the price the purchaser would be called upon to pay for an annuity due* of $502.68, would be $945.23. In other words, if he saw fit to in- vest a capital of $945.23 with such a company, on the conditions named, the company could afford to pay him an annuity of $502.68 for life the first payment in advance, and the others annually thereafter. This is proved by the following compu- tation which is the converse of the computation on page 174. PROPOSITION. The 847 persons surviving at age 90, according to the American Experience Table, agree to pay $945.23 into a common fund with the understanding that each member shall receive an annuity of $502.68 for life; the first annuity to be paid in advance. That this is adequate the following demon- stration shows. *When a man buys an ordinary life annuity the first instalment of his income is paid one year from the date on which he enters into the transaction. In the case of an annuity-due, the annuity is not paid at the end but at the beginning of the year. In other words, when an annuity-due has been bought the company immediately returns to the annuitant the first instal- ment of his income. An annuity -due is seldom purchased, but it is a species of annuity constantly used in life insurance computations, because life insurance premiums are always made payable in advance, and not at the end of the year. 184 APPENDIX D DEMONSTRATION. Original fund contributed by 847 members at $945.23 each S800.609.81 First Annuity. (Payable at the beginning of the 1st year, to 847 members) 847 X $502.68 = 425,769.96 Balance $374,839.85 Add one year's interest at 3% 11,245.20 Fund at beginning of 2d year $386,085.05 Second Annuity. (Payable at beginning of 2d year to 462 survivors) 462 X $502.68 = 232,238. 16 Balance $153,846. 89 Add interest 4,615 . 41 Fund at beginning of 3d year $158,462.30 Third Annuity 216 X $502.68 = 108,578.88 Balance $49,883 .42 Add interest 1,496 .50 Fund at beginning of 4th year. .. . $51,379.92 Fourth Annuity 79 X $502.68 = 39,711 . 72 Balance $11,668.20 Add interest 350 . 05 Fund at beginning of 5th year $12,018.25 Fifth Annuity 21 X $502.68 = 10,556.28 Balance $1,461 .97 Add interest 43 . 86 Fund at beginning of 6th year $1,505.83 Sixth Annuity 3 X $502.68 = 1,508.04* *The last item is a trifle larger than the fund from which it must be paid, because the items employed in the calculation are $945.23 and $502.68 instead of the more exact figures $945.23149 and $502.6785. APPENDIX E EXPECTATION TABLE. Years Old. EXPECTATION. Years Old. EXPECTATION. Years Old. EXPECTATION. Years. Years. Years. 10 48.7 40 28.2 70 8.5 11 48.1 41 27.5 71 8.0 12 47.4 42 26.7 72 7.6 13 46.8 43 26.0 73 7.1 14 46.2 44 25.3 74 6.7 15 45.5 45 24.5 75 6. 3 16 44.9 46 23.8 76 5.9 17 44.2 47 23.1 77 6.6 18 43.5 48 22.4 78 5.1 19 42.9 49 21.6 79 4.8 20 42.2 60 20.9 80 4.4 21 41.5 51 20.2 81 4.1 22 40.9 52 19.5 82 3.7 23 40.2 53 18.8 83 3.4 24 39.5 54 18.1 84 3.1 25 38.8 65 17.4 85 2.8 26 38.1 56 16.7 86 2.5 27 37.4 57 16.1 87 2.2 28 36.7 58 15.4 88 1.9 29 36.0 59 14.7 89 1.7 30 35.3 60 14.1 90 1.4 31 34.6 61 13.5 91 1.2 32 33.9 62 12.9 92 1.0 33 33.2 63 12.3 93 .8 34 32.5 64 11.7 94 .6 35 31.8 65 11.1 95 .6 36 31.1 66 10.5 37 30.4 67 10.0 38 29.6 68 9.5 39 28.9 69 9.0 By utilizing what is known as the mathematical theory of probabilities in connection with the mortality table, actuaries 186 APPENDIX E have been able to determine the probable average duration of life beyond any given age. The foregoing is such an expectation table, based on the American Experience Table of Mortality. According to this table men who are 29 years old may expect to live, on the average, for 36 years ; and men who are 67 years old may expect to live, on the average, for 10 years. This does not mean that any individual who is 29 years old has any right to expect that he will live for 36 years. He may die tomorrow or may live to be a hundred. The table deals with averages, and averages only. APPENDIX F POPULAR FALLACIES. That premium charges are abnormally high. Sometimes a man says, "I shall take no insurance until the premiums now charged are cut in half." And not long ago a New York newspaper announced that, "The man trying to save a little money for his family is paying four times the premium which would be nec- essary to make the company secure." Such exaggeration is grossly misleading. In the first part of this volume it was shown that if a company offered insurances at less than the net premium (even if it could conduct this business without ex- pense) it would be offering it at less than cost, and would neces- sarily become insolvent sooner or later. The premium actually charged is the net premium plus a load- ing for expenses. In some cases this loading is not more than 5% over the net 3% premium, and there are few kinds of insur- ance under which the loading is more than one third of the net premium. Now, as we have seen, no company can afford to cut off the entire loading. Hence, the only possible saving that can be made is a part, and that a small part, of the loading. If, in the main, policyholders have been satisfied in the past, they ought to be satisfied now, for the actual cost of furnishing life insurance has increased; first, because the companies earn a lower rate of interest; second, because taxes have increased enormously (for these taxes must be paid from the money re- ceived from policyholders), and third, because the face value of the modern policy plus dividends, does not represent all that the company returns. The companies now extend to their policyholders a great number of expensive benefits that were not formerly granted ; and yet there is no increase in the charge the premium remains the same. If a large saving from economy in management can be guar- anteed it will be safe to reduce premiums to some extent ; but if 188 APPENDIX F the companies should attempt to cut their premiums in half it would be an act of hari-kari; all would fail, and in a few years not a single company would be left in the land. WILL THE MAINTENANCE OF PRESENT RATES BE A REAL HARDSHIP? Many disinterested actuaries are of the opinion that the rates charged to-day should be maintained, and that the reduction in cost should come to the policyholder altogether through an in crease in the return premium, or dividend. This phase of the question, then, may be summed up in the following paragraph : The real evil is not that premiums are too high, but that the business has been so conducted that the dividend returns have been less than would have been the case if more scrupulous economy had been exercised. Now, the remedy for this is not to imperil the whole fabric of life insurance by cutting down premiums to, or beyond, the danger point, but by conducting the business in such a way that the ultimate cost to the policy- holder shall be reduced by larger dividends. AMERICAN COMPANIES CHARGE LESS THAN EUROPEAN COMPANIES. It is the general impression that the rates of American com- panies are high, and those of foreign companies moderate. The contrary is true. For example, at age thirty-five the highest standard rate for an ordinary life policy in the case of an Ameri- can company is $28.11 per thousand. In the London Life the rate is $34.25; in the Gotha of Germany, $29.60, and in L' Assur- ance Generales of France, $30.70. These are all old companies, and there is nothing experimental about their business. SHOULD INSURANCE BE ESCHEWED UNTIL PREMIUMS ARE REDUCED? If a man needs insurance he needs it now, If he delays he may leave his family destitute. If he pays a little more than is necessary he will get it back in dividends, if the business is man- aged faithfully. APPENDIX F 189 A man may sit a long time by the river waiting for the water to run by, or he can exercise a little horse sense and cross by the bridge. In the same way a man can refuse to insure on the ground that he is waiting until premiums shall be cut in two, but the chances are that the family of such a man will go to the poorhouse some of these days. That all Life Insurance is expensive. The first part of this book demonstrates the fact that life insurance companies charge as nearly as may be, the exact cost of the insurance, plus a load- ing for expenses. If, therefore, the charge for a certain kind of insurance is seen to be high the reason is because it costs the company more to grant than ordinary insurance. But it does not follow from this that the charges for all kinds of insurance are high. The contrary is true. The man who wants inex- pensive insurance can get it from any reputable company. Consider a few illustrations of the varying charges for differ- ent kinds of policies. EXAMPLES An agent offers a well-to-do banker, who is forty years old, an ordinary life policy for $10,000 at an annual premium of about $300. The provisions of the contract are that the banker must pay $300 a year as long as he lives, and at his death the company agrees to return $10,000 to his widow. But the banker objects. He explains that his object is to force himself to save ; that in fifteen years he expects to retire from business, and wants a policy that will mature during his own lifetime. So the agent gives him a fifteen-year endowment policy. The amount of the insurance is the same, $10,000, but the premium would be about $700. The policy costs more because it is worth more. But the fact that the company is willing to issue one policy at a high rate does not, as we have seen, preclude it from issuing another at a lower rate. Take another case: Let us suppose that the same agent approaches a clerk twenty-three years old, who has a family 190 APPENDIX F dependent on him, but whose salary is small. The agent again offers an ordinary life policy for $10,000, for which, at age twenty-three, the premium would be about $200. But this does not suit the clerk. He explains that, upon the death of a wealthy relative, he will fall heir to a round sum of money. If he lives, therefore, he will not need the insurance, but mean- while he needs it badly. Nevertheless, he frankly admits that it would be a physical impossibility for him to pay the premium demanded. So the agent offers him a yearly renewable term policy, the first premium on which is only $119. At this, the clerk manifests some indignation. Why should the agent at- tempt to collect $200 when he can give the same amount of in- surance at a premium of only $119? The explanation is simple. The premium on the yearly renewable term policy will increase from year to year. For the second year it would be $120; for the third year, $121, and would become very high late in life. The insurance is cheap at first, because it becomes expensive later on. Hence, it is not an economical form for a man who takes a policy with the expectation of keeping it permanently, although it is an economical policy for a young man if he simply wishes to bridge over a temporary period of special danger. All endowment insurance is expensive, because it couples with the element of protection the investment element. In the same way, a policy on which the premiums are limited to a fixed term of years is more expensive than one on which premiums must be paid for life. But every company issues insurance of one sort or another which grants the maximum of protection at a minimum of expense. The following for example, is a con- tract which many reputable companies issue: A "non-partici- pating" policy for $10,000, payable by the company in fifty annual instalments. The annual premium at, say, age twenty- one, is $84 (or at the rate of $8.40 per thousand). This is ob- viously a very small premium. The explanation is this: In the first place, the premium is less because the insured must relinquish all interest in profits. A low fixed premium is charged in consideration of the fact that the policyholder will receive APPENDIX F 191 no dividends. In the second place, the company will realize Interest on the money left with it and will be able to return a very much larger aggregate than it could if the amount due had to be paid in one lump sum. The premium is less, because it costs the company less to fulfill its contract. That the Investment Element Should be Eliminated from Life Insurance. Of late there has been a great hue and cry, in cer- tain quarters, against what is known as investment insurance. "Let us have nothing but straight life insurance," says the critic. "Give us protection and nothing else! Down with en- dowments and every variety of investment policy!" This, in my opinion is unsound. Endowment insurance has for generations been recognized by all experts as the best form of insurance for those who can afford to buy it and it is a well-known fact that hundreds of thousands of widows and or- phans have been rescued from want by means of investment policies, who would have been left destitute if the bread-winner had been restricted to a simple life policy. Why? Because simple insurance would not have attracted him. He wanted to save on his own account, and was glad to get the protection thrown in, but he didn't care for the protection by itself. Wiseacres say, "A man can do better by using part of his savings to buy straight life insurance, depositing the rest in a savings bank. " That doesn't necessarily follow. A man can eat sugar with a spoon and afterwards take a bite out of a lemon, but he will find a combination of these ingredients a lemonade more palatable. Besides, nine men out of every ten spend their savings after, or before, putting them into the savings bank. Advice is cheap, and it isn't worth much unless it is practical. Men would live longer if they never drank or smoked or turned night into day. And if all men were prudent and saving they could get along without investment insurance. But most men are heedless or extravagant, and investment insurance has a steadying and salutary influence on such men. Why are the great department stores popular ? Not because 192 APPENDIX F they stick to one line of business. That is precisely what they do not do. They combine different kinds of business, and are thus able to undersell their competitors. Moreover, buyers find it more convenient to do all their shopping under one roof. In the same way life insurance has been developed by combin- ing investment with protection. There are a great number of so-called investment policies that are sound and wisely adapted to the special needs of many classes of people who could not be induced to buy simple life insurance. A straight life policy is one on which premiums must be paid for life, and every now and then the companies receive letters from old men, bitterly complaining that their policies have become burdensome. That is because they have straight life insurance. These old men would have nothing to complain of if they had taken "limited payment" life policies. But the purist would protest at this. "That," he would exclaim, "is not straight life insurance an ordinary life policy will give the same amount of protection at a lower annual charge." True enough, but that is not the ultimate truth. The purist, to be really consistent, should call for the abolishment of "level" premiums, and insist that all life insur- ance should be issued on the "natural" basis, under which the premium pays the cost of the protection year by year, and in- creases as the policy grows older. Nevertheless, few sensible people want such insurance because they don't like to assume an increasing burden. There are various kinds of insurance, because the needs of different people vary. Give straight life insurance to the man who wants it, but that is no reason why the man who wants to force himself to save or who has surplus funds to invest, should be debarred from obtaining investment insurance. And remember that, although straight life insurance costs less in cases where death comes prematurely, it costs more in cases where life is prolonged. Hence this paradox : The cheap- est insurance for the man who lives long is investment insur- ance, although the premium is higher. The explanation is that APPENDIX F 193 the ultimate return (in proportion to the amount paid) is so much greater that, in the majority of cases, the advantage is largely in favor of the more "expensive" contract. That Special Benefits are all important. The amateur re- former is very solicitous about the policy holder. The policy- holder is supposed to be a victim, and must be protected even if the company suffers. But what is the company? It is simply an aggregation of policyholders. If you aim a blow at the company, and a wound is inflicted, whose blood will be spilt ? The blood of the policy- holder. Of course the amateur reformer is the most benevolent of men. He has forced the companies, for example, to guarantee large early cash surrender values; to offer the largest possible loans on policies; to fill the policy contract with a great number of novel benefits (such as grace in the payment of premiums; per- mission to engage in hazardous employments without charge; freedom to travel or reside in the most deadly regions without extra premium), and to grant many other expensive luxuries. But careful scrutiny will show that most of these benefits are for the advantage of deserters or people whose circumstances are exceptional, and not for those who are the most steadfast and deserving members. The modern policy is infinitely better for the man who deserts the ship than was the old-fashioned policy. But the old-fash- ioned policy, although less liberal in the beginning, was worth more in the end to the man who maintained his contract until its final maturity. The man who takes a policy for the benefit of his family will do well to consider the ultimate value of the investment rather than its temporary value. Again, if he takes insurance for the benefit of his wife and children, or to protect his own old age, he should consider whether it is to his advantage to belong to a class whose members are granted a great variety of expensive benefits which he himself does not want and never will utilize, 194 APPENDIX F but which, in the long run, will cut down the dividends on his own policy. "You can't eat your cake and keep it, too/ 1 and if policy- holders are disappointed with the dividends which the com- panies pay, they should be forced to recognize the fact that the chief reason for the smaller dividends paid during recent years is that the money formerly stored up and paid to those who kept their insurance in force, has recently been dissipated in paying large surrender values to those who have given up their insur- ance prematurely, or who have received other benefits that encroach upon surplus. That if a Company is Solvent it Need do no New Business. It is conceivable that a carpet manufacturer, could fulfill all ex- isting contracts ; shut down his factory, and close out his busi- ness without becoming insolvent. But a successful carpet manufacturer is in business not simply to fulfill existing obliga- tions. He intends to continue to sell carpets. In that way he ex- pects to make money. If he retires he may succeed in main- taining his solvency, but the chances are that he will sacrifice a great deal in the process. In life insurance new business is equally desirable. In fact, it is in a certain sense more desirable, for it is needed not only for the prosperity of the company but for the advantage of its customers the policyholders. They, indeed, are the company they are, in a sense, partners in the business. When a man buys a carpet he goes away, and the transaction is at an end. When a man buys a policy he becomes a party to a contract that may run for twenty or thirty or forty years. He has an in- terest in the future success of the concern. His future divi- dends will depend on the future earnings of the company. Another point: A manufacturer who is doing a large and flourishing business must maintain an extensive plant. He must invest capital in his buildings and machinery. And if he decides to go out of business he must get rid of his plant before he can retire safely. Thus it is with a life insurance company. From all this it will be seen that while a company can stop APPENDIX F 195 doing business, and so reorganize its affairs as to pay the face value of every policy as it matures, it is infinitely better for old policyholders that the business shall be continued. Besides, life insurance companies are organized to do a life insurance business. That is their province. Insurance is one of the neces- sities of modern civilization. And if all the companies should close their doors simply because they can do so safely, it does not follow that such a course would be expedient. APPENDIX G DEFERRED DIVIDEND INSURANCE. Few, if any, companies are now issuing deferred-dividend poli- cies. But much of the insurance now outstanding in the United States is on the deferred-dividend plan, and the argu- ments recently advanced against it are being used by the ' ' twist- ing" agent. Hence, every intelligent canvasser should know the truth, and advise his clients accordingly. WHAT IS A DEFERRED-DIVIDEND POUCY? The simplest way to describe a deferred-dividend policy is to show how it differs from an annual dividend policy. The premium is the same. In case of death during the first year (after only one premium has been paid) the return is the same in either case neither will receive a dividend the face of the policy and nothing more, will be paid. After that the first difference will appear. At the end of the first year, and annually thereafter, dividends are paid on annual dividend contracts. Not so with deferred- dividend contracts. Those who select deferred-dividend insurance, must first decide upon the length of the "accumulation period/' That is to say, they must decide for how long a period surplus shall be accu- mulated before the first dividend shall be paid. Those who select a 20 year period will join a class of policyholders who agree (1) that all surplus earned on the policies of that class, increased by interest, shall be held for 20 years by the com. pany; (2) that those who die, or surrender their policies prematurely, shall receive no dividends that the beneficiary in each case shall receive only the face value of the policy ; (3) that all the surplus shall be divided among those who remain at the end of the 20 years, and (4) that if the insurance is con- tinued beyond the period aforesaid, each policy shall receive annual dividends thereafter. APPENDIX G 197 ORIGIN OF DEFERRED-DIVIDEND INSURANCE. Years ago it was seen by insurance experts that under the annual dividend plan those who lived long were compelled to pay premiums for many years, making their policies burden- some after a time; whereas, those who died prematurely (after paying, perhaps, only one or two premiums) left enormous re- turns to their heirs. Such inequalities are inherent in life in- surance, but it did not seem necessary to magnify them by pay- ing dividends on the policies that thus matured prematurely. It was seen, of course, that the insurance must be paid in every case, but it was also seen that no hardship or injustice would follow if all those who took policies agreed in advance that in cases where death came quickly no dividends should be allowed, and that all surplus earned should be acculumated and paid only to* those who lived and kept their policies in force; thus providing a fund, not to remove, but to lighten, the weight of the necessary burden imposed upon those who lived long. The deferred dividend plan was also devised to check the lapsing which had become very prevalent under the annual dividend plan. The aim was to offer a reward in the shape of a deferred dividend so as to make the policyholder more stead- fast. Another objection to the old annual dividend ordinary life policy was, that, until death terminated the contract, no relief from the burden of carrying it could be looked for. That diffi- culty had been evaded in cases where policies were issued on the limited payment life or endowment plan. But it was recog- nized that many people could not afford to take such policies. It was seen, therefore, that it would be of great advantage to the holder of a policy on the ordinary life form if he could be given the opportunity of terminating the contract without sac- rifice at some convenient time prior to its final maturity. Hence the deferred dividend life policy was framed to meet that diffi- culty. A young man was thus enabled to take a policy at the cheapest (namely, the life rate), with the understanding that at the end of twenty years he could terminate the contract and withdraw in cash his entire equity in the company; i. e. t the 198 APPENDIX G entire reserve on the policy, together with his share of surplus. It was also provided that instead of cash he could obtain a sur- render value in paid-up insurance (thus relieving him of the burden of further premiums), or exchange the policy for an annuity for his own support. The enormous growth of life insurance in America dates from, and has been largely due to, the popularity enjoyed by deferred dividend insurance for many years. It follows from this that a multitude of widows and orphans and old people have been protected who otherwise would have been left destitute. OBJECTIONS MET. Deferred dividend insurance has been criticised because it has been alleged that dividends belonging to those who die prema- turely are forfeited ruthlessly snatched from those to whom they belong, and held for distribution among those who have no right to receive them. This is plausible, but it is not true. Each policyholder has a right to agree in advance upon the basis upon which dividends shall be distributed. He has a perfect right to relinquish all claim to dividends in the event of his premature death, if in consideration of that waiver he becomes entitled to a larger return if his life is prolonged. All objec- tions to such an adjustment have been due to ignorance or preju- dice. It has been objected that the deferred dividend plan results in a larger accumulation of surplus than is safe. But a large surplus is the chief glory of a bank or trust company, or of any other financial institution, and a life insurance company should be no exception to this rule. In fact, this rule applies with greater force to a life insurance company than to any other finan- cial organization, because its funds are chiefly held for the pro- tection of widows and orphans; and permanent safety must always be the consideration of first importance. Under the deferred dividend plan more money is ultimately distributed in dividends than under the annual dividend plan, and the part which is temporarily held in reserve, although ultimately to be distributed, necessarily increases the financial APPENDIX G 199 strength of the company. Besides this, it must be constantly borne in mind that the fund from which dividends are paid is nothing more nor less than the surplus assets of the company ; i. e. t the difference between its assets and its liabilities. And if the directors and officers of a company can be trusted to take care of the assets which must be held to meet its fixed liabilities, they ought to be competent to take care of the balance of its assets the surplus. Rules have already been devised under which, hereafter, surplus assets will be protected with the same care as the rest of the assets of every company. WHAT THE OWNER OF A DEFERRED-DIVIDEND POWCY SHOULD DO. If a man wants annual dividends on a new policy let him apply for that kind of insurance, but if he has a deferred divi- dend policy on which he has paid premiums for two years or more, he will do himself an injury if he surrenders it for an annual dividend policy, in the same or in another company. If premiums for several years have been paid on such a policy it cannot possibly be given up without sacrifice. The end of its "accumulation period" is nearer than when the policy was issued. If it is an endowment, or a limited payment life policy, the time is approaching when premiums will cease. If the policy is maintained it will not only receive its share of surplus, but will probably receive annual dividends thereafter. If no divi- dends have as yet been paid, that very fact furnishes an addi- tional reason for keeping the policy until the surplus accumu- lated from year to year is payable as a dividend. If a man has bought a piece of land ; has plowed and harrowed it; has enriched the soil; has planted it, and sees the approach of the time when it will become productive, he will make a mis- take if he swaps it (under the advice of a real estate agent, who is thinking only of his own commission) for an unimproved piece of land of equal size, even if it is con ceded that the new plot is worth a trifle more than the old plot was worth before its development began. Thus it is with a policy. Again, in most companies annual dividends increase as the individual policy grows older, and on this account alone a change 200 APPENDIX G to a new policy in the same, or in another company, is inex- pedient. As a general rule, the man who has a policy in any solvent company (whether it be a deferred-dividend, or an annual-divi- dend, or a non-participating contract) should hang on to it. And if the agent of some company advises him to exchange it for a new policy, it will be safe for him to conclude that the agent has selfish motives for giving such questionable advice. APPENDIX H THE ARTFUL TWISTER. "Ihere was a crooked man, And he went a crooked mile, And he twisted Simple Simon In a, very crooked style." A fair exchange is no robbery. Nevertheless, there are many exchanges, presumably fair, which are only so in appear- ance cases where there is actual robbery, although the robbery is covered up and remains undiscovered for a time. TWISTING. People are sometimes robbed who believe they are making fair exchanges who think, indeed, that they are giving up an inferior for a superior article. Among these people are the investors in life insurance who exchange old policies for new policies. They are not doing this of their own initiative, but under the advice of certain life insurance agents of the class called "twisters." For their own personal gain, these "twisters" are persuad- ing men to give up valuable policies in solvent companies for new policies in other companies. Occasionally an exchange may be expedient, but the excep- tions to the rule are so few that it is safe to advise every policy- holder to sift with the utmost care any proposition involving the surrender of any policy on which one or more premiums have been paid. WHY TWISTING IS POSSIBLE. The "twisting" agent usually does one of three things when he finds a man who has a policy in a responsible company. 202 APPENDIX H He either offers him, (1) a new policy for the same amount at a lower premium ; or (2) one for a larger amount at the same premium; or (3) one for the same amount at the same pre- mium, but in a company -which he describes as a much better company. HOW THE TWISTER SUCCEEDS IN FOOLING THE PEOPLE. But those who are uninitiated may ask, "How is it possible that a new policy can be issued for the same amount at a lower premium, or for a larger amount at the same premium?" There is one thing that even the most ignorant policyholder knows, and that is that premium charges are based on the age of the applicant when the insurance is taken; and that, other things being equal, a man who insures at thirty must pay a higher rate than he would have been called upon to pay if he had insured at twenty-five. How, then, can the "twister" make such plausible offers? The answer is simple. There are different kinds of insurance; some kinds cost more than others, and the "twisting" agent is most successful with the man who has the most -valuable kind, because the same amount of insurance of a less -valuable kind can be offered for less money. THE FACE VALUE OF A POLICY MAY NOT REPRESENT ITS ENTIRE VALUE. Another point: the face value of a policy is not the only thing to be considered in appraising it. If a man owns a diamond he may easily be victimized, even if he exchanges it for a larger stone, if the latter be of inferior quality. A pound of tea that costs a dollar may not only be better in quality than a pound that costs thirty cents, but it may make three or four times as many cups of tea. When the trees in an orchard are first planted they bear no fruit, and are worth less than older trees. So it is with policies. New insurance is less valuable than old insurance. Another point. If a policy has been taken at a young age the premium is correspondingly low, and a new policy taken APPENDIX H 203 later on (even if the contract is equally advantageous) can only be secured at a higher premium rate unless a cheaper and inferior kind of policy is substituted. But that is not all. A policy issued on the "limited payment life plan" should never be abandoned. The company has agreed that at the end of a certain term the policy shall be continued without further cost to the insured. Now, if the time is approaching when it will thus become fully paid up, the owner will be victimized if he exchanges it for an "ordinary life policy." For altkough the latter can be issued at a lower premium, it will cost much more in the long run if the insured's life is prolonged. Again, the older an endowment policy becomes the nearer does the time approach for it to be paid. It is easy for the "twisting" agent to exchange such a policy for a cheaper contract (on the "life" form), if the insured fails to understand that he is asked to give up an endowment that is approaching maturity. Again, dividends on most policies increase as the policy grows older, and that advantage is usually lost if an old policy is given up for a new one. Again, many existing policies are on the "deferred dividend plan." It is especially foolish to abandon a policy of that kind, because the time is steadily approaching when a dividend will be paid, which will be lost if the policy is abandoned prematurely. In addition to that, such policies usually give the holder the choice of a variety of valuable "options" at the end of a term of years; and if the time is approaching when the insured may realize the value of one of these options, it is folly for him to begin his journey all over again under a new contract, even if that contract will offer the same options and the same dividend benefits; because the time when those advantages may be reaped, while near in the old policy, will be thrown far into the future in the new policy. WHAT TO DO WHEN ASKED TO SWAP. Advise a man who is approached by a "twisting" agent to insist upon a written proposition. In ninety-nine cases out of 204 APPENDIX H a hundred, if such a proposition is shown to you the following facts will be obvious: (1) The original company can do precisely what the agent of the other company offers; but (2) the change proposed would be injurious to the insured and should consequently be scouted. Moreover, the chances are that the "twisting" agent represents an inferior company; for reputable companies do what they can to stamp out this evil. INDEX PAGE. Access to customers essential ... 114 Acquaintanceship must be util- ized 116 Adapt your arguments to fit each case 152 Adapt your offer to customer's needs 123, 128 Additional insurance worth striving for 123 Addition equivalent to a single premium poilcy 56 Additions 56 Adequacy of net single premium 170 Adequacy of net level premium 173, 174 Adequate insurance . 145 Adequate premiums essential 36, 41, 49 Advantages of agent's calling. 99 Adverse Selection 66 Advice to young agents 103 Agent a hunter 96 Agent a necessity 98 Agent a Sportsman ! Agent employed by Company. 63 Agents must analyse policy-con- tracts 108 Agent must carry insurance on his own life 109 Agent must dress well 110 Agents must educate them- selves 104, 166 Agents must think deeply. . . . 124, 134, 165 Agent represents customer .... 63 Agent, the Manager or General Agent 161 Agent's relation to policy con- tract 63 Agent' s relation to policy-holder 63 Agent's Status 63 Air of prosperity useful Ill American Com panics' dividends, how paid 55 American Experience Table of Mortality 21 Analogies between fishing and canvassing 93 Annual dividends 55 Annual level premiums 31 Annual level Rates, table of . . . 33 Annual Statement 45 Annuities 140, 179 Annuity a valuable tool 140 PAGE. Annuity as an entering wedge . 141 Annuity-due 183 Annuity-due the converse of a life policy 133 Annuity rates (Gross) ! 181 Annuity rates, how computed 179 Applicant 54 Application 64 Are premiums too high? 187 Argument seldom profitable. . . 127 Arguments must be advanced to demolish excuses 130 Arguments of an incidental character 152 Arguments to cure procrastina- tion 149 Assaults on other Companies reprehensible 52 Assessment companies '.'. 49 Assets 42 Average, law of 16 Average transactions uniform. 16 Avoid an apologetic attitude. . 116 Avoid mistakes 122 Babbage's maxim 49 Bachelors should insure 154 Basis of organization 56 Beneficiary 66, 67 Benefits 57 Benevolent men should insure. 154 Binding (or conditional) receipt. 64 Blunders should be avoided . . . 122 Blunders should educate, not discourage 130 Bill collector's methods to be avoided 124 Biggest men should be approached first 129 Bond a correct name for certain policies 121 Books that will aid the agent. . 47 Bores cannot succeed as canvas- sers 119 Business must be transacted in businesslike manner 119 Business rather than sentimen- tal arguments most effective . 148 Busy men require concise busi- ness propositions 119 Can premiums be reduced?. ... 187 Canvasser must be insured him- self 109 206 INDEX PAGE. Canvassing, hints regarding .... 103, 109, 114, 122, 126, 132, 138, 144, 148, 152, 164, 165. Canvassing on Sentimental ba- sis 148 Canvassing on strictly business lines 149 Capital which agent must ac- quire 112 Careful selection of risks 53. 64 Cash dividends 56 Change of Beneficiary 67 Characteristics of Successful General Agent 163 Cheap insurance 49, 189 Child's Endowment 74 Circumstances of customers must be known in advance. . 123, 128, 152 Clients, how to secure.. ..114 152 Combinations of policies 108 Companies a century and a half old 39 Company judged by character of agent Ill Company not inimical to policy- holders 157 Complete your work 129 Compound Annuities 182 Computation of premiums .... 19, 23, 28, 31, 35, 167, 171, 175, 179 Concentration, importance of . . 132 Conclusion 165 Conditional Receipt 64 Conditions 57 Confidence essential 52, 135 Confidence in the future of life insurance justified 136 Confidence of agent in insurance, his company, and himself 135, 136 Contemplation 124, 134, 165 Contesting claims 84 Continuous instalment Endow- ment insurance 82 Continuous instalment insur- ance 81 Contract, the policy 63 Conviction rests on clear think- ing and speaking 124 Co-operative companies 49 Co-operative nature of all insur- ance 49 Corporate organization necess- ary 42 Cost of Endowment insurance illustrated 139 Cost of insurance on Natural basis 23 PAGE. Cost of insurance varies accord- ing to its character 158, 159 Cost of level premium insurance 31, 171 Cost of Single premium insur- ance 28, 167 Costly insurance 158, 159 Courtesy must not be abused. . 119 Critical periods in policy's his- tory 69 Criticism of Compeititors Sui- cidal 123 Cultivation of agency field must be thorough 162 Cumulative business 110 Curiosity should be stimulated . 121 Customers, how to find. ..114, 152 Dangers of delay 149, 160 Death, proof of 67 Deferred Annuities 141, 182 Deferred dividends 55, 196 Definite better than cursory advice 128 Definite results must be aimed at 132, 133, 134 Delays often disastrous. . .149, 160 Delivery of policy 66 Description of policies 71 Deserters demoralize business. 130 Development of the general agent 161 Different Methods of Settle- ment 80 Difficult cases often remunera- tive 124 Dignity of Agent's calling 39 Diligence, importance of 164 Disagreeable things should be despatched quickly 124 Disagreeable work often pays best 124 Discouraged or disheartened agents fail 130 Discover in advance circum- stances of every customer!23, 1 28 Disputes waste time 127 Dividend additions 56 Dividend fund 43 Dividend reductions 56 Dividends 37, 54, 196 Dividends, different ways of utilizing 55 Dividends, history of 54, 196 Dividends, how paid 54, 196 Division of policy forms 71 Don't criticise competitors. ... 123 Don't make mistakes 122 Don't raise difficulties for pur- pose of disposing of them. . . 127 Don'ts 122 INDEX 207 PAGE. Double Endowment Policy .... 79 Duration of life of multitude may be accurately determined 19 Earning capacity should be in- sured 147 Easier to insure one man for $50,000 than 50 men for $1,000 129 Eccentric policies 71 Economize arguments 128 Economize time 126, 128 Economy 52, 53 Educate yourself as you go along 104, 166 Endowment insurance econom- ical 138 Endowment policy 71, 73, 138, 178 Endowment rates, how com- puted 178 England, birthplace of Scien- tific life insurance 54 Entering wedge 141 Enthusiasm pays 117 Erroneous notions that must be corrected 155, 187 Equal value of different poli- cies 71 Equitable of London 98 Evils of procrastination 149 Evolution of the general agent 161 Examination as entering wedge 123 Examination, medical 65 Excessive price must not be paid for business 53 Exchanges unprofitable 122 Excuses not arguments 130 Executors should be followed up 70 Expectation of life 185 Expectation table 185 Expense loading 35 Expenses must be considered in computing premiums 22 Expensive Insurance not e*x- pensiye 158, 159 Expensive insurance that hav- ing most value 158, 159 Facilitate settlement of death claims 70 Facts about people canvassed, required in advance 128 Failure impossible when com- pany soundly based and prop- erly managed 39 Failure of Assessment insurance 50 Failure should educate not dis- courage 130 Faint heart ne'er won fair busi- ness 130 PAGE. Fallacies that must be met . 155, 187 Fashions in dividends 55 Financial Statement 46 Fire insurance differs from life insurance 15 Fishing and canvassing com- pared 93 Foreign Companies change more 36 Four classes of insurance 71 Four per cent standard of valua- tion 46 Friends and acquaintances must be approached first 115 Friends, how to insure them. . . 116 Fundamental truths 18 Future prosperity of the busi- ness 136 Gambling element 156 General agent must be a success- ful canvasser 161 General agent must thoroughly cultivate his field 162, 163 General agent must train him- self 166 General agents 161 Get pecuniary equivalent for labor expended 129 Golden Maxims 133 Government of companies .... 56 Grace in payment of premiums 68 Gradual maturity of obligations 45 Grounds for procrastination. . . 127 Gross level premiums, table of. 36 Gross premium 25, 35 Habit of insuring 109 Hard cases often most remunera- tive 114 Hard cases strengthen the agent 124 Hawthorne cited 150 Honest disguise no crime 121 Honesty the best policy 112 How agents must begin 109 How general agents can suc- ceed 163 How to approach friends 116 How to get material to work on 127 Idleness demoralizing Ill Ignorance of the public 14 Importance of gathering pre- liminary information 128 Importance of integrity of pur- pose 113 Importance of making acquain- tances 114 Importance of not wasting time 126 Importance of safety in insur- ance 39, 112 Importance of System 126, 132 208 INDEX PAGE. Importance of thoroughly culti- vating agency field 162 Incidental Arguments 152 Income should be insured 147 Incontestability 68 Increase the insurance when a man's policy becomes paid up 70 Individual reserves 44 Individual transactions eccen- tric 16 Information which the agent needs 14 Instalment insurance 81 Instruction from without valu- able, but the agent must edu- cate himself 104, 166 Insurance contracts extend over long periods 112 Insurance Department Reports 47 Insurance grows in value with age 122 Insuring habit 109 Insurance money may be left with company 121 Insurance need not always be called insurance 121 Insurance obligations 43 Insurance Reports 47 Insured, the 64 Integrity pays 112 Interest, utilized in computing premiums 22, 24 Interests of agent, company, and insured, identical 63 Interviews, how to secure 114 Introduction to Book 1 11 Introduction to Book II 61 Introduction to Book III 91 Investment element in life insur- ance 191 Investment insurance 121 Investments protected by insur- ance 109 Joint Life Policy 80 Knowledge necessary to the agent 13 Large averages necessary... .16, 41 Large membership or guaran- tee fund needed in starting company 42 Large return if policy-holder dies prematurely 138, 144 Lapsing 69 Lapsing should be prevented 122, 130 Law of average works accurate- ly only when large number of happenings considered 18 Law of Mortality 18 PAGE. Lawyers set canvassers good ex- ample 128 Learn all you can about the peo- ple you solicit 123, 128 Legal status of agent 63 Let your customer talk 128 Level premium 31, 171 Level premium, its adequacy proved 173, 174 Level premiums, gross, table of 36 Level premiums, net, table of. 33 Liabilities 42 Life annuities 140, 179, 181 Life insurance by other names. 121 Life insurance charges not ab- normally high 187, 189 Life of individual uncertain. . . 19 Life policy the converse of An- nuity-due 183 Limited payment life policy. .71, 72 Loans on policies 68 Loading 27, 35 Loading usually percentage of net premium 35 Loadings usually employed. . . 36 Losses paid, in theory, at end of year 25 Low interest rates help agents . 147 Loyalty to both company and policy-holder 63 Make acquaintances 117 Management all-important .... 53 Managers help needed by can- vasser at first 115 Managers or General Agents. . . 161 Map out work in advance 129 Maturing policies 69 Maxims 133 Means of enlarging acquaintance- ship 118 Medical examination 64, 65 Medical examination, why nec- essary 66 Memorandum book useful to the agent 107, 127 Mental poise, importance of 103, 132 Methods of getting at people. . . 114 Miscellaneous liabilities 43 Miscellaneous policies 71 Mismanagement not valid rea- son for failing to insure 150 Mistaken impressions needing correction 155, 187 Mixed companies 57 Moderate attainments sufficient if agent is diligent 99, 132 Moderate priced insurance . 49, 189 Momentum 132 Mortality, law of 16 Mortality table 21 INDEX 209 PAGE. Mortality table how utilized ... 19 Mortality table explained 20 Motives that may be appealed to 153 Mutual companies 56 Mutual plan 37 Natural Basis of computing premiums ; 23 Natural premiums explained. . 23 Natural premiums, net, table of 26 Necessity for concentration, determination, pressure. . . . 133 Necessity for insurance when capital is lacking 146 Need of protection not only pre- requisite 129 Net level premium table of rates 33 Net Natural premiums 26 Net Single premium table of rates 30 Net premium 25 Never permit lapsing 122 New arguments necessary 152 New Business desirable 194 New obstacles call for new me- thods 130 Non- participating policy 75 Notices, premium 68 Novice can secure some busi- ness 110 N. Y. State companies 58 Objections must be prepared for 123 Official Reports 47 Old policies worth more than new policies 122 Opportunities for the agent .... 100 Opportunity must be siezed. . . 118 Options 67 Order and regularity essential 126, 132, 162 Ordinary life policy 66, 71, 72 Organization, importance of . . . 132 162 Organization of companies... 56 Organization under N. Y. Law 58 Organize your work.... 126 162 Over insurance short-sighted. 123 Panics need not injufe life com- panies 40 Parable of the Ten Talents. ... 164 Participating plan 76 Participating policies 37 Parting Shot 165 Physical health, importance of 124 People the agent can reach. ... 118 Perfection never attainable. ... 150 PAGE. Periods of danger in a policy's history 124 Personal peculiarities must be studied 128 Plan put your work 126 Plausible excuses must be de- molished 130, 149 Pluck essential 117 Point of view 144 Policies increase in value 122 Policy an Asset, not an expense 144 Policy contract 63 Policy contracts described .... 71 Policy, delivery of 66 Policy forms of different com- panies 48 Policy loans 68 Policy-holder's interest and that of company identical , 157 Poor risks should not be solici- ted 129 Popular falacies 155,187 Preface 3 Prejudice must be overcome. . . 119 Premium charges not too high . 187 Premium Notices 68 Premium should be collected in advance 65 Premiums are paid in advance . 25 Premiums, are they unnecess- arily high 187 Premiums based on average experience 32 PREMIUMS Natural basis 23 Single premium basis. . .28, 167 Level basis 31, 171 Gross 35 Premiums not excessive 158, 159, 187, 189 Prepare for every interview. . . 123 Prepare like a lawyer who pleads a cause 128 Present value 172 Pressure 134 Privileges 67 Procrastination, how to meet . . 130, 149, 160 Profit to beneficiary if insured dies prematurely 138, 144 Prompt action all -important. . 149 Proof that an Annuity-due is the converse of a life policy. . 183 Proof that net level -premium charges are adequate. . .173, 174 Proof that net single premium charges are adequate 170 Proofs of Death 67 Proposal 64 Proprietary companies 57 Prosperous appearance essen- tial.... 110 210 INDEX PAGE. Protective laws sometimes in- jurious 158 Provisions in policies prescribed by law 67 Pure Endowment 74, 175 Pure premium 25 Qualifications of the good agent 99, 104 Ready money furnished by in- surance 128 Reasons for insuring 149 Rebating pernicious 123 Records must be carefully kept 127 Reductions, dividend 56 Regular life insurance 49 Re-insurance fund 45 Relation of agent to customer. 63 Relatives should be followed up 70 Reliability of mortality experi- ence 40 Renewable Term insurance 51 Reorganized Assessment com- panies 51 Reserve 42 Reserve must be adequate .... 44 Reserve, why less than policy obligations 45 Resourcefulness essential 127 Restoration 68 Return Premium Policy 79 Room for expansion in life insur- ance... 100 Run on life company impossible 40 Safety of insurance principle. . 39 Save your time 126, 128 Savings Bank deposit not of equal value 156 Scientifically based companies cannot fail unless mismanag- ed 39 Scope of modern insurance. . . . 107 Secrets of success 125, 161 Security, importance of 39 Selection, adverse 66 Selfish motives may be appealed to 153 Self-made man the best agent. . 104, 166 Sentiment may be appealed to in canvassing 148 Settlement, different methods. 80 Shabby Agent cannot succeed . Ill Shirk no toil 124, 162 Shrinkage in income repaired by insurance 147 Simple Endowment 74, 1 75 Single Premium 28, 167 Single premium adequate De- monstration 170 PAGE. Single premium, how computed 28, 167 Single Premiums, net, table of. 30 Single transactions misleading. 16 Slovenly methods disastrous. . 132 Southwood Smith's maxim .... 40 Special benefits not all import- ant 193 Standard N. Y. State policies. . 84 Standards of Valuation 44 Statement best of canvassing documents 45 Statement, Financial 45 Statistics 48 Status of Agent 63 Stock Companies 57 Stockholders 57, 58 Straight vs. investment insur- ance 191 Strong points of company repre- sented must be accumulated 52 Subordinate position best for agent at first 105, 161 Success breeds success 164 Success, ' concentration essen- tial to. 103 Successful agent educates him- self 104, 166 Suggestions from all sources should be utilized 127 Surplus 42 Surplus difference between As- sets and Liabilities 43 Surrender Values 68 System 126, 132, 162 Table illustrating cost of Endow- ment insurance 139 Table of Gross level premiums . 36 Table of Mortality 21 Table of Net level premiums. . 33 Table of Net Natural premiums 26 Table of Net Single Premiums . 30 Table of Yearly Renewable Gross premium rates 78 Tact essential 120 Talk Don't say too much. . . . 128 Talk listen to your customer. 128 Ten Talents, parable of 164 Term insurance 51, 175 Term rates, how computed. ... 175 Term Policy 75 Term premiums, how loaded. . 36 Things to do and to avoid 122 Thinking deeply helps the can- vasser 124, 134, 165 Thorough cultivation of field of operation essential 162 Three per cent Standard of Valu- ation 46 INDEX 211 PAGE. Three per cent Standard, why lower than four per cent stan- dard 46 Three ways of conducting busi- ness 56 Tidy soul 113 Time is money 126, 128 Tools, how to use 106 Trickery does not pay 120 Twenty Annual payment life policy 72 Twisting pernicious 122. 201 Uniform annual rates level premiums 31 Uses of insurance 107 Under-insured people should be followed up 127, 146 Valuation, standards of 44 Value of a policy increases with age 122 Value of Endowment Insurance 138 Value of Time 126, 128 PAGE. Value to Agents of Insurance Reports 47 Values, surrender 68 Various policies to suit various people 71 Warranty clause 84 Wealthy men, how to interest. 153 Weapons of defense 141 What agent must do first 103 Why premiums cannot be ma- terially reduced 187 Widows and orphans chief suff- erers when insurance neglect- ed 137 Will, importance of 133 Wits must be sharpened 138 Yearly Renewaole Gross prem- ium Rates 78 Yearly renewable term insur- ance 51, 76 Young companies exposed to perils. 41 ^^113^^^.^, / OF THE X I UNIVERSITY | \ OF / N^L.;FC>R.N\^X THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOQ^ ON THE DATE DUE. THE PENALTY WILL INCREAS% TO SO, CENTS ON THE FOURTH DAY AND TO $1.00 ON THE SEVENTH DAY OVERDUE^ "W a : -' 1934 J938 FEb 2b MAR 11 1938 APR 29 1< JUN 6 1946 LD21-100m-7,'33 YB ft4o~6f UNIVERSITY OF CALIFORNIA LIBRARY