duty of financial management and of laying out the underwriting policy.

The policy of the company as to lines, hazards to be written, and territory to be occupied having been determined, you gentlemen are employed to organize the agency system and put into force the policy decided upon. You are thus placed in a position that requires the exercise of good judgment, patience, tact, and every quality that makes up the gentleman and successful man of business. Your acts will in all probability make or lose money for the company in your particular field, and no other man has it in his power to so make or mar the reputation of a company as its Special Agent. To the majority of agents he is the company, and the influence of the Special Agent upon the Local, always great, is becoming greater year by year. The Special Agent is a power in the business of fire underwriting, and those who can show profitable results in their territory hold positions of profit and honor. Their services are in demand, and in all the vicissitudes and ups and downs of the business the successful field man is certain of a position, and frequently of promotion. Likewise, the Special Agent whose field does not show satisfactory results sooner or later finds himself out of a position, for while companies are, most of them, patient and willing to accept more than one year of unsatisfactory results, eventually the man is measured by the net results in his field and treated accordingly. Especially is this true if other companies show constantly better results. Nothing illustrates the influence of the Special Agent upon the business better than the figures of the same company taken from different States when the average loss ratio is about the same. In one the figures for a number of years will show a handsome percentage of profit; in the other, a loss or a profit smaller than could have been made on the business of the principal city in the State had the Special Agent's services been dispensed with. Why is this? Certainly it is not in the management, for it has been the same in one State as in the other. Let us follow the work of these two Specials and see wherein their methods have differed, and why one has succeeded so well while the other has not. The first and perhaps the most important duty—the appointment of agents-has been performed by these two men in an entirely different manner. The one has weighed every appointment with care, has selected representative men who needed the company and appreciated the trust reposed in them by the appointment-men who, while they seldom gave a bond, always remitted promptly; who obeyed instructions cheerfully, recognizing that they were agents and

not the principals. With such a corps of agents the cultivation in each town becomes a pleasure. Having the respect and confidence of such representatives the field man carefully surveys the important risks in each locality, declining those undesirable, and, what is equally important, securing maximum lines on those most desirable. We have some Specials who are always talking of their cancellations, and how on this and that risk that burned they saved their company money. Such caution is indeed commendable, but it takes nerve as well as caution to secure net results in the insurance business, and it may be as great a mistake to cut off income as it is to have unsatisfactory losses. In the inspection of the business our Special proceeds in a most thorough and systematic manner. Making a study of the fire hazard of each particular class, and taking all of the time necessary to carefully look over each risk, always interesting the owners where possible, insisting upon such improvements and precautions as are needed, he finds himself in time thoroughly informed as to the business of the field confided to his charge. He handles the business of his field as the cashier of a bank handles the notes offered him for discount, accepting the good without hesitation (for he knows why they are good), and refusing the bad risks for the same reason. He makes the business a study, investigating the causes of fires, as well as the new fire hazards constantly presenting themselves. Risks are not accepted because "leading companies" are on, nor to help out the Local, who too often has no interest in their acceptance beyond the five per cent. brokerage paid by some other agent. Acting on his own judgment, having the courage of his convictions, and being always able to give a reason for action taken, he soon commands the respect of his most aggressive agent. The company becomes valuable to an agency controlling really good risks, as the same knowledge of the hazard which enables him to decline even small lines on poor hazards, enables him to increase lines on the good ones. Attending strictly to business, preserving the individuality of his company by acting independently, visiting his agencies alone, unless called there on committee work, he becomes valuable to the company employing him, and his position becomes more and more pleasant as the years go by. "Net results" are to him satisfactory, as he is not forgotten in the division of them. The methods of the Special Agent in whose field net results are not so satisfactory are very different. He hastens in the appointment of his agents, his anxiety to have a representative frequently causing the appointment of agents whose business methods cause not only loss of money but good name. It is, I believe,

a fact that out of one hundred agents, ten of which are unsatisfactory, the ten consume more of the time of the field man and cause more friction than do the other ninety. Further, the margin of profit being so small, one poor agent will cause the company more loss than frequently ten good agents can make profit. A good agent, where the volume of premium is sufficient to warrant a proper inspection and visits frequent enough to properly look after the interests of the company, is a most valuable acquisition; any other is a source of annoyance and eventually unsatisfactory. We know of a Special Agent, anxious to build up the business of a company, who appointed an agent whose only recommendation was that "he was a hustler for business" and could give a bond. He was untruthful, irresponsible, and sometimes "shaded" rates. I might call the name of this agent, but unfortunately there are several of him and he is demoralizing the business, making trouble in the Board of Underwriters and using up time of every Special Agent representing his companies that could be employed with profit in the cultivation of good agents. Our successful field man makes no such appointments knowingly, and if deceived he promptly severs the connection, even if the supplies have to be sent home.

The Special Agent we are now discussing does not inspect the business. He looks at it, to be sure, but his survey is not of that thorough character that develops the weak points in the risk. Suggestions for improvements are not followed up as they should be, and the pleading of the Local Agent to not cancel, coupled with the promise of dwelling houses and other good business, too frequently influence him. "Drop at expiration" is sometimes the compromise, with the result that it is not found necessary to "drop," the risk having already "gone up.” One word here about "dropping at expiration": If the physical hazard of a risk is such that it is undesirable for a year, why is it good underwriting to carry it for several months, or one month, or even for a day? He authorizes questionable risks because "other companies" are on, forgetting, perhaps, that it is his individual judgment that his employers pay for and desire, and that the conditions which will warrant another company in accepting a risk do not exist with him. It being notorious that quite a number of classes of hazards are written at rates that pay no profit, the money must be made on the other classes. In this regard the business of selling indemnity does not differ materially from other business interests. "Why," said a prominent merchant who was a director of a leading company, after listening to the Manager's report, showing that certain risks had been carried without profit,

"do you not cease writing these hazards?" The Manager, answering the question in Yankee manner, replied: "Why do you sell a million dollars worth of merchandise out of your annual sales of ten times that amount on which you make no profit?" "To sell the other nine million and keep down the expense account," replied the merchant. "I must answer your question in the same manner," said the underwriter. Undoubtedly every class of risks ought to pay a profitable rate, and going still further, every risk of each class ought to be rated and written on its merits; but Special Agents must meet the conditions that exist, and the authorization of too large a proportion of unprofitable risks means loss to the company establishing its business, even though successful companies with a profitable business on their books may find it for their interest to accept them.

In order to favor the agent delay in remittances, if not encouraged, is sometimes permitted, and many an agent can to a certainty charge his ultimate downfall to the fact that prompt remittances were not insisted upon. “He is doing us a good business; do not crowd him, even if he is slow," writes our Special to his company, and the agent, with the best of intentions, finds eventually that his 15 per cent. hand has been so many times into his 85 per cent. pocket that he is a defaulter.

The Special Agent who is not particular in his appointments, who does not inspect thoroughly, who permits others to do his thinking, who gossips about his business and travels with other Specials in "blocks of five," or even a larger number, who permits his agents to become careless in their remittances, and adjusts losses indifferently, never has and never will secure satisfactory net results either for himself or those whom he serves.

Gentlemen, the competition in our business is growing, but so is the business, and there is enough to return a profit on all of the capital employed if properly conducted. Time will relieve us of many of the existing evils, for unsound methods cannot prevail always. Stockholders will demand that sound business principles be applied to the conduct of the fire insurance business, and Managers will heed the demand. Even now there are those not satisfied with the results of handling an income of over eight million dollars in New York and the Metropolitan District at a loss, and the hope that coöperation and a change in methods will make this splendid field profitable is indulged in.

Changes are taking place in both the theory and practice of underwriting, but no greater changes than we see going on in the conduct

of other business ventures. The Special Agent must familiarize himself with changing conditions and be prepared to carry into effect instructions which, let us hope, mean simpler methods, lower expenses, fewer losses, and more certain profits.

In conclusion, I thank you for your attention, and trust that “net results" may be in every way satisfactory to each and all of you, not only for the present, but for all time.

The President

Are there any remarks to be made upon Mr. Harbeck's very able paper? If not, we will listen to the last address upon our pro

gramme.

Mr. Fox

Mr. Chairman, before you call for that last paper, would it be in order to offer a resolution, to have it on its way? I think that, following the line of thought suggested by Mr. Bryan yesterday, in his very excellent address touching World's Fair matters, this Association can hardly let this occasion go by without going on record with a view to some demonstration in connection with the Exposition. Certainly, a business of the magnitude of underwriting should not go unrepresented, and it would seem proper that some action looking to a demonstration of some kind should be taken. It may be asked why underwriters want to have a showing of any kind. The answer may be that there is a showing to be made. First, we can show the progress in our contract, comparing a modern contract with one of the early ones in the history of fire insurance; we can show progress in our assets, in our records. Beginning with the individual underwriter's bond, we come to the first policy written by a corporation, and we can show a policy now written by a corporation, showing the steps in advance made by corporations under the laws of the land. Then, again, there may be a convocation of underwriters from all over the land, from whom we can learn much of pleasure and profit. It is in this line that I wish to offer the following resolution:

Resolved, That in view of the great opportunity presented the underwriters of this country, upon the occasion of the approaching World's Columbian Exposition, to bring together the leading underwriters of the civilized world for conference and mutual profit, and the necessity for early and intelligent action looking to such convocation, that the President of this Association appoint, at this meeting, a committee of representative underwriters, members of this Association, to act for it in conjunction with the Insurance Congress Auxiliary of the World's Fair, and to take such action as may be calculated to secure such a convocation of underwriters,