The morning news. [volume] (Savannah, Ga.) 1887-1900, 1892-02-05

commission allowed him by tne com
pany on the FIRST years premium.
Brown relies on his renewal commits
sions for his own COMPENSATION. but
while be continues in active service he is
freouecily allowed 70 draw a fixed amount
against commissions for his living expenses,
such amount being regulated 10y the cir
cumstauces of the case. As competition in
creasss Brown finds that in order to retail
Subagent Jones he will be obliged to pay
more than % per ceut. commission. To do
this Brown Is obliged to make new ar
rangement with the company. Instead OF
OF increasing Browns first years COM
mission. the company agrees to advaHce TO
him a sum equal to two renewals OF 10 per
cent. ION business secured by Jones) and to
hold all of Browns future renewal commits
sions under the contract as security for the
advance. Brown is now able to pay Jones %
per cent commission and so retain his serv-
ices, but at the end of the year Brown is APP
parently in debt to the company In an
amount equal TO 10 per cent OF all the first
years premiums secured by Jones, and the
larger the business the larger the apparent
debt. This will continue until such time
as the old business kept on the books greatly
exceeds the amount of new business an
nually done. In a rapidly increasing husi-
ness this result will not be reached for
several years but IL the total amount paid
to Brown has not exceeded what the
business was actually worth, the time will
come when the commissions accruing under
the contract will exceed the total cost of the
wears business. Browns business from this
time forth will require a less expenditure on
the part of the company in proportion to its
volume than heretofore, and his so-called
indebtedness, as it appears under his con-
tract. will disappear moro rapidly than it
accumulated, at which time Brown will re-
alize the profit for which he has worked
The company, having already paid fer this
business in large part, will have a
lower expense ratio to this extent in
the future, and its surplus will be cor
respondingly increased. You will notice
that this debt does not represent money
which Brown has squandered or retained
for his own uses. He has simply used the
money to carry on the company's business
If it should happen that Browns renewal
commissions fail TO cancel the debt, the
business has simply cost the company what
it cost Brown, and the company has takea
good care that the total amount Of COM
missions and advance received by Brown
should never be sum greater than the
new business secured by him was worth.
L. G. vANUXEM & co.
l. The superintendent criticises the
agency of Messrs. L. G. Vanuxem e. Co. at
Philadelphia, Pa, and alleges debt to the
company on account of what he terms ex-
travagant allowances of several hundred
thousand d0llars. Referring to the illustra-
tions above of the mode by which general
agents business is conducted and the mans
ner in which an apparent debt
might be contracted, when l state
that from 1887 to 1891 inclusive,
this firm wrote business aggregating $780,
000,00 clear explanation is offered you of
how, under the above practice a large debt
might appear to exist in this particular
agency. The advance contemplated in our
illustration took on various forms under
various contracts, which, however, were
always subject to our approval against the
commission earned and to be earned. The
members of this firm drew advances for
living expenses as before referred to, and
advances on account we're made to some
sub agents, but at no time has the amount
of money advanced to L. G. Vanuxem & Co.
exceeded the value of their entire business.
Under this system of organization it has
been impossible for a single firm TO handle
a large territory and by creating renewal
interest lin this case Of very large proper
tons we have avoided frequent changes in
general agents and have largely escaped
the danger Of having our business carried
to other companies by an agent whose in
terest in any given policy ceased with the
| first year OF it's existence. In this way
Messrs. L. c.. Vanuxem a. Co. have done
| for years larger business than the entire
new business of several of 1.-The smaller life
insurance companies and the largest
business of any single life agency
in the United States. 1t has
| been done at a not unreasonable ex-
pense, and the cost of its procurement has
been included each year in the dishurse
| meptS of the company. The whole theory
Of this organization and the purpose of the
| advance is, first, to produce a large bust
ness, and second, the general agent
or manager to procure business at
the lowest possible cost, in order
that after a period of years hs may begin tc
| realize a return commensurate with the
the work done. AS the cost of the business
is charged off each year. it becomes neces-
sary to keep with the manager blotter or
| sub-ledger, and the items are all brought
! forward from time to Time OF
| course this, under the illustrations
would show for an Office doing
| $20, 100000 of new business In year, and
for a series of years, large apparent debt
and the superintendent of insurance. instead
Of viewing the buslness, as we have done, as
simply business paid for, decided to 20 into
this sub-ledger and spread before you the
apparent debt. 1t is of first importance
| that you understand clearly that this money
Is not due from l.. G. Nanuxem g. Co. in
| the ordinary acceptance of the word debt
1t is due under the terms of their contract
| at such times as the commissions earned on
the business done will liquidate the
money advanced from time to time
for the conduct of the business. 1t has not
been squandered by them nor retained
| by them. 1t has not benefited them per-
sonally, and never can until, as stated, the
earnings of their business have liquidated
money drawn for every purpose under the
contract. including advances and agency
expense Of every kind. And here let me
call your attention to an extremely impor.
tant fact. which applies TO all discussion OF
| agency matters by the superintendent, and
which he forgot to mention, namely, that
these advances in every case were charged
to expenses in the company's books
when the advances we're made, and
| that the company has never
counted them as part of its as
sets or surplus. The superintendent, there
fore, instead OF unearthing with great diff
Guilty something the company desired to
| conceal, as he states, practically set up an
| arbitrary standard of what he thought our
business ought to cost in any given year
and charged up as debt the difference be-
tween his opinion and ours 1t would be
scarcely less unjust to the company had be
alleged in any given year the aggregate
paid for the account of the business of that
year was one or two millions too large,
and in his report had set this UP as q
sum due from the men to whom it was
paid. Right here l desire to state, and
state with all due respect for the opinion
OF the official with whose conclusions diff
fer, that In matters Of this character the
| conclusions of man who haVa had thirty