The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-07-23
THE AGENCY system.
Jts Abolition by LILO Insurance Cempa'
niles Advocated.

letter In The BUN OF this morning with reker-
ence-to the employment Of highly paid agents
to solicit hfe. insurance strikes at funda-
mental vice of-SAe whole system. As that
business is now conducted the insured Is OBJ
llged to take out his policy In q life insurance
company through the mediation OF an agent
who receives commission on the premium
paid by him. large In the first instance ana
continuing thereafter at a smaller percentage.
Even II no goes to the headquarters OF the
company to get his Insurance he Is turned
over to an intermediary.
consequence OF this system OF employing
soliciting agents Is that the company Is held
under the tyranny of It's numerous retnue OF
agents. This was demonstrated In the early
stages OF the Equitable controversy by
meeting OF the agents for the purpose OF
debating the terms OF the settlement which
would be agreeable to them, They assumed
that they were rlghtfully entitled to run the
concern. or at least that they were the main
spoke In the wheel. Nor was their assump-
tlon without justification. The company had
depended on their solicitation Of policies for
! its means Of existence.
| Mr.. James W. Alexander, during his presi-
denoy OF the Equitable society, had always
taken pains to ingratiate himself with Its
large body Of agents. and he was popular
| among them. They looked on him as their
own creation and applauded In him bis con-
| had their way he would still be at the head
OF the Equitable society, and the exposures
| regarding Its management during his presi-
dency which have been made since their
meeting would have been prevented. They
wanted simply to hush UP the matter as
means Of saving their business. and to accom-
pllsh that end they would have made scape-
| goat OF young Hyde only.
The question now ls, Can there ever be any
thorough reform in the life insurance bust
ness until 1t Is placed on sounder business
basis by eliminating the system OF soliciting
| agents and their commissions? 1t is very
grave question. and 1t has received much at
tention from life insurance companies here
and abroad from actuaries and from ex-
perts OF distinction in the life insurance spe-
| cialty. The vast preponderance Of Judgment
rendered by these undoubtedly has heen
against the abandonment OF the soliciting
agency system. The insurance paper from
which you recently quoted the opinion that
the Intervention OF an agent cannot be dis
pensed with except at ruinous cost to the
companies is sustained by the great body OF
actual experience. All our chief and con-
siderable life insurance comp anies have been
built up from small beginnings to their pres
ent strength by the agency system. By
means OF soliciting agents they have obtained
q sufficient body Of the insured to make an
average actuarial basis for a solid insurance.
Without such solicitation the elder Hyde could
never have built up the Equitable into the
great company it now is. As was recently
related by the insurance paper from which
THE Sun quoted. the attempt OF the powerful
Mutual LIE, made about twenty-five years
ago. to supersede the soliciting agent by
offering much lower rate of premium than
any other company II the applicant presented
himself without such Intervention, proved I'M
successful in practical application; the only
result was to demorallze its agency force"
The correspondent in The sun Of to-day
raises a question well worth consideration
when he suggests that now. under changed
conditions. such an experiment would work
more successfully. For the first time In the
history Of life insurance the whole public Is
now directing its attention to the subject as
pivotal In Importance. Never before has 1t
been advertised now: but. unfortunately.
the advertisement Is Of exposed evils OF tho
system as practically managed. The conse-
Quence is that life insurance companies.
great and small. the well administered no less
than the Ill managed. are brought under popu-
lar suspicion. and the business OF the soliciting
agent Is interfered with seriously and In
many cases has become profltless.
At best the life insurance solicitor works
against great obstacles. He is made the
butt OF rather stale ridicule. and usually his
appearance has not been welcomed. He has
earned his money at the cost Of many rebuffs
notifying to his self-love. Since~the Equi-
table disclosures his difficulties have increased
greatly, and they. will continue to be discourag-
ing. at least for long time to come. The
sub ect. instead-ef being showed aside. az
the Equitable agents expected. will be made
even more prominent in discussion because
of legislative Investigation Of life insurance
methods and management and the new
legislation for the regulation OF the companies
which is sure to result from the investigation.
Attempts will be made to cover up the inlqui-
ties of indlSiduals responsible for corruption
or beneficiaresoi It, but the attention OF the
whole public Will be concentrated on the
proceedings of the Investigating committee.
and they will be fruitless. From one end OF
this country to the other the eyes Of the Ameri-
can people will be on that inquiry. and wo to
the politician or fnancer who ventures to
obstruct 1t or divert it from Its assigned pur-
pose OF making a thorough investigation.
whoever may be the men exposed to oondem-
nation by public opinion. II not by the law.
At such a time 1t is questionable II the
life insurance business can ever recover its
prestige unless 1t proceeds to Introduce radical
reforms In its methods. and the chief among
these Is the roofing out Of the system Of solicit
| ing agencies and the large consequent fees
and commissions. As your correspondent
| OF to-day points out. the methods Of con-
| Quoting large enterprises nave undergone
a very great change OF recent years owing
to the development Of advertising. Not
| only have all the important mercantile estab-
| llshments proved the necessity Of obtaining
publicity for their wares and the advantages
they offer through the means Of conspicuous
and persistent newspaper advertisements.
but the number Of large manufacturing
establishments which have been forced to
| like conclusion Is increasing daily. Towns
| and other communities have begun to ad-
| vertise their advantages. to their great profit.
| Great railroads are using the same means
Of attracting attention to their peculiar ex-
cellence and facilities.
| Not only has the whole business Of adver-
Using been extended but meantime 1t has
| been systematized and made scientific. The
| advertisements In a newspaper have been
made an important feature Of interest to
| its readers The literary form OF adver-
tisements has been improved greatly. Their
preparation has become adistinctive speciality.
| to which large number of special papers are
| devoted.
| l do not profess to DO an expert In tho life
| insurance business. though since the early
days Of the elder Hyde | have been brought