Evening journal. [volume] (Wilmington, Del.) 1888-1932, 1892-02-04


shall receive commission of twenty-five per
cent, of the first years premium of all policies
palcsd by him, and renewal commits
sion of five per cent. on each renewal
premium paid on such policies. Brown, OF
course, flRds It necessary to employ Jones and
others as sub-agents and he ordinarily pays
them the twenty-five per csnt. commission
allowed him by the company on first year pre-
miums. Brown relies upon his renewal COM
mission for his own compensation, but while
he con tinuea In active service he is frequently
allowed to draw fixed amount against com
mis- sions for his living expenses, such amount
being regulated by the oircumstan, es Of the
case As competition increases Brown finds
that In order to retain Sub-Agent Jones he
VIII be obliged to pay more than 70 per cent.
commission. To do this Brown Is Obliged U
make a new arrangement with the company.
Instead of increasing Browns first year com
mission the company agrees TO advance him
sum equal to two renewals or 10 per cent on
business secured by Jones, and to hold all of
Browns future renewal commissions under
the contract as security for the advance
Brown ~ now able to pay Jones 35 per cent.
commission aud so retain his services.
But at the end of the year Brown is appar-
entity indebted to the company in an amount
equal to ten per cent Of all first years pre-
miums secured by Jones, and the larger the
business the larger the apparent debt. This
viii continue until such time rs the old buai-
ne SIS kept on the books greatly exceeds the
amount of new business annually done. Ina
rapidly increasing business this result will
not be reached for several years, but If the
total amount paid to Brown had not exceeded
what the business was actually worth the
time will come when tho commissions accru-
ing under his contract Will exceed the total
cost of the years business. Browns business
from this time forth viii require q less ex-
penditure on the part OF the com oany in pro.
portion to ita volume than heretofore and
this sO-called infe btedness as Ii appears under
his contract win disappear more rapidly than
ii accumulated, at which time Brown viii real
ize the profit for which he has worked. The
faaraf
ness in large part will have "a lower expense
ratio to this extent IN the future and Its sur
plus Will be correspondingly increased. Yon
will notice that this debt does not represent
money which Brown has squandered or re-
tanned for his own uses. He has simply used
the money TO carry on the cOmpany's bust
ness II il should ever happen that Browns
renewal com missions fail to cancel the debt
the bushes has simply cost the company
what It cost Brown and the company has
taken good care that the total amount Of
commissions ard advance received by Brown
should never be a sum greater than the new
business secured By him was worth.
L. o. vanuxem q 90.
The superintendent criticises the agency OF
Messrs. L. G. Vanuxem q Co. at Philadelphia
and alleges debt tothe company on account
Of what he terms "extravagant allowances
Of several hundred thousand dollars. Re-
ferring 10 this illustration above Of the method
on which a general agents business is con-
| Quoted andlthe manner in which an apparent
debt might be contracted, when / state that
| from 1887 to 1891 inclusive this firm wrote
business aggregating enc hundred and thirty
two millions dollars y clear explanation Is
afforded you OF how under the above practice
L a large debt might appear to exist. In this
| parti aular agency tbs advance contemplated
in our illustration took on various forms
under various contracts, which, however,
were always subject TO our approval Against
the commissions earned and TO be earned the
/ members Of this firm drew advances for liv-
/ ing expenses as before referred to, and adj
Vances on account We're made to some sub
| agents, but ~ no time has the amount of
/ money advanced to l.. G. Vanuxem a. Go. ex-
ceeded the value of their entire business.
Under this system of organ izaLion 1t has been
/ possible for single firm TO handle large
I territory, and by creating renewal interest,
/ IL this case OF very large proportions, we
have avoided frequent changes in general
agents and have largely escaped the danger
1 of having our busint IS carried to other com
i ranies by an agent whose interest In any
/ given Motley ceased with the first year of its
existence.
in his way nIessrs. l.. @. vanuxem & Go.
/ have done for years larger business than
/ the entire new business of several of the
| smaller life insurance companies and the
! largest business 81 any single ageney in the
/ United States 1t has been done at not I'M
/ reasonable expense ana the cost of it, pro-
| curement has been incl ded each year in the
/ disbursements Of the company; The whole
/ theory Of its organization and the purpose of
! the advance Is, first, TO produce larg
/ business and secondly. 10 create on incentive
4 for the general agent or manager to procure
4 business at the lowest possible cost In order
4 that after period Of years he may begin 70
| realize a return commensurate with the
work done As the cost Of the business Is
/ charged off each year, II becomes necessary
to keep with the manager blottar or sub
| led ger, and the items are all brought for.
| ward from time to time OF course this under
the Illustration would show for an office do
ing twenty millions Of new busineFs In year
/ and for g. series OF years, large apparent
debt and the superintendent Of Insurance
| instead Of viewing the business as we have
| done. as simply business paid for, decided tc
| 90 into this sub ledger and spread before you
| the apparent debt.
RE Money Not Due.
Il is Of first importance that you under
stand clearly that this money Is not DUI
from L. O Vanuxem & Co. In the .ordinar!
acceptance Of the word debt, it is due undei
the terms Of their contract at such times a.
the commissions earned on the business dom
will l'quidate the money advanced from
time to lime for the conduct Of the business
1t has not been squanderad by them nor re
tsined by them, 1t has not benefited then
personally and meyer can u III, as sisted, tn
earnings Of their business have liquidated nj
| money drawn for every purpose under th
contract, including advances and agency ex
penses of every kind, and here let me cal
your attention to an extremely tmpOrtan
fact winch applies to II discussion of agenc!
1 matters by the Superintenf ent s. nd which hi
4 forgot to mention, namely. that these adj
vances In every case We're charged 70 ex
nensea in the COMPANY 3 books when the ad
, vances were made. and that tie company hai
never counted them a. part Of its assets o
sur lus, The superintendent therefore, In
stead Of unearthing with great difficult,
! something the company desired TO conceal, a
he states, practically set up an arbritar
1 standard Of what he thought our business
ought TO cost in any given ear and charge,
up as "A debt the differences between hi
, I opinion and ours.
1t would be SC freely less unjust to the com
pany had he al legged in any given year, thA
the n Rregate amount peld Tor the procure
, ! ment Of business of that year was one CT tw
, millions too large. and IN his report had Sc
this upas a sum due from the men to whom i
was paid. Right here l desire to state. and
the official with whose conclusions / differ
that in matters of his character the cOnclu
sions OF men who have had thirty ears exper
fence in this business as to the propriety @
paying agiven sum Tor given volume 2
: business ttbey alone being conversitnt witt
, all the surrounding circumstances and con
tlnRenciesl are as likely to be correct and l.
4 the interest Of the policy-hodorss as tn
] opinion of gentleman who, while eminentl
! I qualified for the duties OF his office, eanno
be credited with special knowledge in tn
. particular interests now under discussion.
! Span al American Department.
The Superintendent naturally treats g
& some length the affairs Of the Spanish Amer
G can Department. The invitation extende
to him BY our Board Of Trustees to examin
\ the condition Of this company was calle
: out chiefly by an incorrect and misleadiu
g sta ement relative TO an alleged defalcatio
! by one OF fits managers for which the CON
| pany, Il was stated, alone must suner. sha
y refer principally in the matters discussed
the superintendent u der this head. 10 thi
y | central. al TO you most import ant. question
: IL is a fact thpt Mr.. J Merzbacher, one OF u
Y | managers At that time of the Spanish An er
u can department became defaulter icr