The herald., 1897-04-09
INSURANCE

The committee OF three appointed by
the Los Angeles Fire Underwriters AS
sociation, to present to the managers
the resolutions passed at the meeting
held on Tuesday, already reported in
these columns, is now in San Francisco,
engaged In urging the objections of the
local agents to a cut made in their COM
missions. reducing them from 20 to Is
per cent.
This contest is not limited In its inter-
est to the men who are engaged in the
insurance business, but 1t Is a matter of
importance to the merchant, corpora
ton, business man and, in fact. to that
public generally which purchases insur-
ance indemnity.
The resolutions referred to give one
side of the argument in favor of main
tanning the higher rate Of commission.
On the other side may be found the
rather anomalous spectacle of an insur-
ance man who argues in favor of reduc-
| ing the rate of his own commission Dali
| ton Wheeler OF the firm of Wheeler
Bros, who represent fire companies in
| the highest standing, makes the follow
| ing argument to the conductor of this
department OF The Herald, and we give
| II place in order that both sides of the
controversy may be impartially repre-
sented. He says:
"I have for several years maintained
| that the commissions paid to insurance
| men of from 20 to 35 per cent have been
out of proportion to the work performed.
All over the United States, with the ex-
ception of a few locations, agents are
very glad to receive. and consider them
selves adequately paid, by getting is
per cent commission. The companies
have always been restive over the high
commission paid in few localities on
the Pacific coast. Fifteen per cent has
been the rate of compensation every
where here, except. in Los Angeles,
Stockton. Oakland, Sacramento. San
Jose and Portland. Recently the in
creased commission has been made to ap-
ply to San Diego, Santa Barbara and a
few other points in the north by some
companies. but not by all. The higher
rate of commission has been paid, not
because the business was worth 1t, but
because of the competition for busine ss
existing between managers of different
companies, who were represented to-
gether in a single local agency. While
rates on the Pacific coast were such as
to afford an average annual profit over
losses and expenses of 30 per cent per
annum and upward, the companies
would submit to high commission in
certain localities. AS rates have come
down, the old-time profits are no longer
obtainable, and many Of the companies
have instructed their managers to re-
duce the compensation to a uniform rate
of Is per cent. The Hartford, the Royal
and q few others have instructed their
managers to keep out of any organiza-
tion where the commission paid is high
er than Is per cent. Whatever the man.
ayers may think Of the figure, they are,
first of all, desirous to maintain the COM
pact and that will not be possible II the
two companies above named remain on
| the outside.
Much good will result toohe business
from the adoption OF the 15 per cent rate,
| and the local agents profits will be in
creased because of the decreased COM
petition. Quite a number of agents who
could maintain themselves in the busi-
ness when receiving high commissions
will now drop out, their business going
| to the offices able to maintain themselves
on the Is per cent.
Really. the commission does not come
pany. 1t comes out of the pockets of
the premium payer, whose rate has to
be made high enough to cover the risk
and expenses. including commission.
Another good result will be the contrac-
tion of the lines CT credit now extended,
| and the business will be brought, as 1t
| should be, to practically a cash basis.
There Is hardly possibility that the To-
cal committees now in San Francisco
will bring about any change In the rule
put In force on Wednesday last. If they
should be successful, the probable re-
suit will be to inaugurate another rate
war. It is for agents to decide whether
they want a low premium rate with
high commissions, or a fair premium
rate on which they will receive the COM
missions paid to agents generally
throughout the United States The mat
ter may be summed up by saying that
whenever insurance rates are high
enough to permit the companies to pay
over a Is per cent commission, rates
should be reduced in favor Of the pre-
mium payer, instead OF the commission
increased in favor Of the agent"