The farmer and mechanic. [volume] (Raleigh, N.C.) 18??-19??, 1914-06-23

ance. ine larger the agents pay. The
more careful and falthful al agent .
the smaller his income That Il lust
the way i works. Instead af reward
ing fidelity r honesty. Il actually
remunerates carelessness and tn.1l-
cheney and encourages dishonesty.
Ii Is an eNerpresent temptation t. r..
responsible representation and makes
the Way IF ~nprlghtnesS IN his bust
ness aS difficult a III can - mae for
the local agent The remedy IL a very
simple one. Make 4 substantial parr
OF the agents compensation contln-
gent on his Tire losses. contingent on
the profits of his agency. contingent
on his fidelity and efficiency a. est-
dsnced hy th. record Il nls agency.
When YOU have done that. you have
reversed the present order and you
placed a premium upon careful. dill
gent. efficient representation and YOU
have penallzed careless. negligent. tr-
responsible representation II lusur-
ance and when yaa have
done that you have eliminated one -
the greatest contributing causes II
underwriting of the man an the
ground who decides upon the dcslr-
ability Of the risk. | know III one
city IN which there occurred within
l. months something like = half dozen
fires Every one Of these fires MAS re-
garded hy the community az If doubt
full origin aud it is~safe to say that
not one of them would have occurred
if the agents who placed the insur-
ance had been operating under thc
plan Of compensation which would
have reduced the profit or her
; agency as a result Of those fires. In
that case, they would either have de
clined To have insured the parties al
! together or would have Investigated
[ the values Of the property insured. and
woul have limited the insurance 50
that ii would have been no temptation
l to the owners To set fire To their
property. Most Of these fires were N
the business section of the city re
: ferred To and any III them might
| have caused Il disastrous confiaera-
g ton. When one thinks of the enor-
: nous destruction of property that &C
n ours every year as q result Of over
n insurance. it is staggering to con
I template. and it is strange that such
e a condition IS allowed to 90 u~nchang-
ed. This thing Of over Insurance. re
a sulting from an irresponsible agency
system, not only produces enormous
/ fire waste and loss of life. but i IS
the one thing that is responsible more
than anything else for the high in
i surance rates which prevail in this
;; ountr as compared with other coun-
tries. In the older countries Of
e Europe where the loss ratio is one
e fifth of what it is in this country, and
where the fire insurance rates are
II correspondence low, there IS nothing
g that bears any resemblance to the
American Agency System. There the
he business is accepted by salaried sub
If office managers. whose tenure of their
re Job depends upon their efficiency and
S, fidelity and this explains in large part
10 that vast difference in loss ratio n
Y insurance rates. The Salaried Sub-of-
&c see manager is hardly practiced in this
country, but the contingent plan If
a compensation is. and if a substantial
part of the agents compensation is
made contingent it viii serve much
the same purposes as il L4c We're work
'1r ing on a salary
RI The Contingent Plan.
or A reasonable basis Of compensation
os to agents would be a fiat commission
w OF Is per cent ana IN addition TO that
a contingent commission Of 10 per
cent, or probably a better schedule
ol still, would be II IL per cent fiat and
oh II IL contingent. A system OF re
porting by insurance companies and
% agents to the insurance department.
al and a system of records in that de-
~. partment could be worked out where
u by the contingent compensation OF an
OF agency could be made contingent upon
nc the profits of the entire agency for a
no given year. and could be apportioned
ID among the different companies IN the
les agency according to premiums rccelv-
" ed and losses sustained by each con-
N pany. This method if adopted
&c throughout the State would result IN
SacN q IeUuCllOH Vi i ioSSGS anu II
&c suranCe rates that a law compelling
III insurance companies 10 compensate
'ss their agents on a contingent basis. on
VI which the contingent rate or comnis-
sion would be at least one-half or the
fat nate. / say that such a law would
N in my opinion result in a very consid-
&c cradle reduction in the fire loss and q
on corresponding reduction in INSURANCE
n rates and would for that reason bs
on fully warranted on the ground Of pub
ice lie policy. This revolution in the con
re- duet Of the fire insurance business.
Is cannot be brought about b. agreement
Nt among the companies, and the ma
ne jority Of the companies VIII Oppose
HIS any legislation relating to this subJec'
IN of commissions to agents. l;ut thf
10 only way ii can be brought about j
III by legislation.
If this Investigation results in con
VS. structiye legislation whereby tht
nd state will do her full duty in the r.
duction If the fire waste ~ all reason
1uS able preventive and restraining meas