You are reading a page from Life Insurance as a Life Work, by Hugh Hart
(1926)
Part of the American Term Life Insurance History Project
Term Life Insurance
CHAPTER IV
OPPORTUNITIES
The actual fact is that in this day opportunity not
only knocks at your door, but is playing an anvil
chorus on every man's door, and then lays for the
owner around the corner with a club. The world is
in sore need of men who can do things. Indeed cases
can easily be recalled by everyone, where opportunity
actually smashed in the door and collared her can-
didate and dragged him forth to success. These cases
are exceptional; usually you have to meet opportun-
ity half-way. But the only way whereby you can get
away from opportunity is to lie down and die. Op-
portunity does not trouble dead men, or dead ones
who flatter themselves that they are alive.—ELBERT
HUBBARD.
"We want you to turn now from your con-
sideration of the pitfalls of the life insur-
ance business to a view of its opportunities.
Many overlook the fact that vocations, like
individuals, differ in the degree of their
64
OPPORTUNITIES
success, for there are unsuccessful voca-
tions, as well as successful vocations; vo-
cations that are waning and others that are
coming into greater importance all the time.
Manufacturing by hand in this country is a
vocation which may now be called unsuc-
cessful. The moving picture industry is an
example of a highly successful business that
has grown up in recent years. Life insur-
ance is recognized as one of the most suc-
cessful of all businesses. In fact, its his-
tory constitutes one of the thrilling business
romances of our American life.
Although the business was carried on in
a very limited way some years previously,
the life insurance business may be said to
have started in the United States about
three-quarters of a century ago. It is,
therefore, a comparatively new business.
The amount of insurance written in 1923,
was approximately $12,000,000,000, or one
and seven tenths times the total amount that
was in force in 1900 and practically the
total amount that was in force in 1908.
65
LIFE INSURANCE AS A LIFE WORK
The life insurance business has grown since
1850 from about $68,000,000 to approxi-
mately $64,000,000,000.
About three per cent. of the total wealth
of the United States is made up of the assets
of legal reserve life insurance companies.
The following table reprinted from the
Insurance Field, is a compilation presented
to the Association of Life Agency Officers
by George H. Harris, Supervisor of Field
Service, Sun Life of Canada:
QUARTER CENTURY OF DEVELOPMENT
IN LIFE INSURANCE
[Compilation Presentedto Association of Life Agency Officers ty George
E. Earns, Supervisor of Field Service, Sun Life of Canada]
1. BUSINESS IN FORCE.
V. 8. A. CANADA TOTAL
Business Business Business
E^d Population" Millions Populantiono^Millions Popul'aHo^Mliong
1899 74,453,000 7°558 5,259,000 °404 79712000 7°962
1914 98,213,000 17,426 7,692000 1242 105q(MOnn IS'rra
1924 114,311,000 63:780 9;227;000 3,764 123;538;000 67:544
2. PREMIUM INCOME.*
End
of I". S. A. CANADA TOTAL
1899 .................. $283,000,000 $13,000,000 $296,000,000
1914 .................. 746,000,000 41,000,000 787000000
1924 ........... 2,122,000,000 130,000,000 2,252000000
* Includes small percentage of foreign business.
3. PER CAPITA INSURANCE IN FORCE.
TT" s- A- CANADA TOTAL
1899 $101.62 1899 $ 76.85 1899 « qq on
1924 177.43 1914 161.49 1914 1762?
1924 557.95 1924 407.93 1924 646'74
66
1899
1914
1924
1899
1814
1924
6. '
4.
8.80
7.59
18.57
OPPORTUNITIES
PER CAPITA PREMIUM PAID.
1899 $ 2.48 18
1899
1914
1924
2.48
5.34
13.87
1899
1914
1924
3.71
7.43
18.23
5. NEW BUSINESS WRITTEN WITHIN A TEAR.
U. S. A.
Millions of $
1,824
2,457
13,162
CANADA
Millions of $
67
217
629
TOTAL
Millions of ?
1,891
2,674
13,791
TOTAL BUSINESS IN FORCE, 1899, CONTRASTED WITH
BUSINESS WRITTEN, 1924.
Total in Force 1899
New Business 1924 ,
(in one year)
V. S, A.
Millions $
7,558
13,162
7. ASSETS.
1899
1914
1924
Millions $
1,576
4,935
10,394
CANADA
Millions ?
404
629
Millions $
104
370
1,001
TOTAIi
Millions $
7,962
13,791
Millions $
1,680
5,305
11,395
HOW LIFE INSURANCE IS FULFILLING ITS FUNCTION
PAYMENTS TO POLICY HOLDERS AND BENEFICIARIES.
1899 Deaths
Maturities
* Other Pymts.
Benfrs. of
Dead P. H.
93,000,000
Pymts. to
Living P. H.
15,000,000
48,000,000
Benfrs. of
Dead P. H.
4,281,000
To Living
P.H.
1,370,000
1,631,000
93,000,000 63,000,000
Total $156,000,000
191A Deaths 222,000,000
Maturities 61,000,000
* Other Pymts. 227,000,000
4,281,000 3,001,000
$7,000,000
9,647,000
4,604,000
8,636,000
222,000,000 288,000,000
Total $510,000,000
1919 Deaths 450,000,000
Maturities 139,000,000
* Other pymts. 617,000,000
9,647,000 13,240,000
$23,000,000
20,000,000
10,000,000
35,000,000
450,000,000 756,000,000
$1,205,000,000
Totabpaid out in 1924 To Beneficiaries
U. S. A. 450,000,000
Canada 20,000,000
20,000,000 45,000,000
$65,000,000
To Living P. H.
756,000,000
45,000,000
470,000,000 801,000,000
Total Payments, $1,271,000,000
* Dividends, Cash Surrender Values, etc.
67
LIFE INSURANCE AS A LIFE WORK
These figures are so stupendous that they
stagger the imagination and prove conclus-
ively that life insurance is a business that
has succeeded in the past.
Formerly, the idea prevailed that most
men who sold life insurance had failed in
other lines of effort. It stands to reason,
however, that no such successful structure
could have been built up by failures.
A superficial observer might be led to
suggest that with $64,000,000,000 of insur-
ance in force, it would be impossible to
continue writing insurance much longer be-
cause the point of saturation would soon be
reached. As a matter of fact, however, the
amount of insurance in force in this coun-
try is pitifully small in comparison with the
actual insurance needs of the American
people. The amount of insurance in force
per capita in 1924 among our total popula-
tion was only $557.95. Roger W. Babson
states that the average per capita income in
this country is more than $600 per year an^l
is steadily increasing, so that, on the aver-
68
OPPORTUNITIES
Insurance in force in America in 1924 compared with what
it needed.
Conservative estimates place the amount of insurance a
man needs as five times his yearly income.
69
OPPORTUNITIES
age, the insurance carried by the people of
this country would not equal one year's in-
come.
Conservative estimates place the amount
of insurance a man needs as five times his
yearly income. The chart on page 69 shows
in a striking way the difference between the
amount which should be in force, according
to this standard, and the amount actually
carried—in other words, the opportunity
which is presented to the life insurance
salesman. The fact that the people of this
country could carry more insurance if they
realized its value is also emphasized by the
proportion of the nation's income which
goes into luxuries as compared with the
amount which is spent for life insurance.
Every man who is in good health and who
can afford to pay a life insurance premium
is a potential life insurance prospect. In
order that you may obtain some idea of the
inadequacy of the insurance generally car-
ried, we suggest that you apply the Insuro-
meter which follows to your own situation,
71
LIFE INSURANCE AS A LIFE WORK
INSUEOMETER
(Pronounced In-sur-OM-e-ter)
A METEB TO MEASTJBE LIFE INSUBANCE NEEDS
Applied to Conditions Obtaining in the Life of..............
.................. of ....................................
Date of birth............................................
(Please answer all questions very carefully and conscien-
tiously, except those which manifestly do not fit your case.)
1. At your death, what amount of money do you estimate
will be required to settle the following final expenses:
(a) Doctors', nurses' and drug
bills ....................$...........
(b) Funeral expenses, including
cemetery lot and monu-
ment ...................$...........
(c) Unpaid income tax. ......$...........
(d) Unpaid local taxes. ......$...........
(e) .Federal estate taxes.. .....$...........
(f) State inheritance tax. .....$...........
(g) Miscellaneous expenses al-
ways arising at death... ;$...........
Total......................$...........
2. What amount of money will be required to
pay debts?
(a) Mortgage on home...... .^...........
(b) Mortgages on other real es-
tate ....................$...........
(c) Loans at banks or else-
where, including loans on
life insurance policies .-..$...........
(d) Notes endorsed or on which
there is a contingent lia-
bility ..................$...........
(e) Miscellaneous debts, judg-
ments or claims.........$...........
Total......................f...........
3. What amount of money will be needed to pay
minimum living expenses for the family?
(Figure these needs on monthly basis.)
(a) Bent or upkeep of home,
including taxes .........$...........
(b) Food ...................$...........
(c) Clothing ................$...........
72
OPPORTUNITIES
(d) Water, heat, lights, ice and
laundry ................$...........
(e) Servants ................$...........
(f) Education of children. ...$...........
(g) Recreation ..............$...........
(h) Church and charities. ...$...........
(i) Doctors, dentists, health
and miscellaneous .......$...........
Total......................$..........
4. What amount of money per month will be re-
quired to protect you and your wife against
old age dependency?...........$...........
5. What amount of money do you feel you should
now begin saving monthly as your savings
program ? ....................$.........
6. What amount of business life insurance do you
feel should be carried on your life, payable to
your firm, in order to stabilize your business,
protect credit, and otherwise absorb shock of
your death? ..............................$..........
7. Total lump sum needs (add totals of 1, 2, 6) $..........
8. Total monthly income needs, $.........., or
lump sum ................................$..........
On basis of each $1,000, yielding 6% per annum, or
$60.00 per year, or $5.00 per month, monthly income
needs may be converted into lump sum basis by di-
viding total monthly income needs by five, resultant
total being in lump sum terms o( thousands, as above.)
Grand total needs, gross (add 7 and 8) .....$..........
CREDITS:
1. What is total of all property owned by you,
value based on actual sale price which prop-
erty would probably bring under forced sale
conditions ? ..............................$..........
2. What is amount of all life insurance policies
carried by you ? ...........................$..........
Admitted total credits......... .$..........
INSUROMETEB CONCLUSIONS
1. Your total insurance needs are.............$..........
2. Your total credits are.....................$..........
3. Net result ...............................$..........
RECOMMENDATIONS: .................................
Date Signature ot Insurance Adviter.
73
LIFE INSURANCE AS A LIFE WORK
answering each question carefully, and then
observe the final result. It would be well
also to apply the Insurometer to the case of
some acquaintance of yours, whose condi-
tion is different, in order to get a different
result. Does not the final result in each
case indicate an insurance need far greater
than you realized? If this is true in these
instances, is it not likely to be just as true
in the case of the vast majority of people ?
There are two kinds of values: property
values and life values. There are various
methods of measuring property values and,
likewise, several ways of measuring the
economic value of a life. Perhaps the most
logical method is to ascertain a man's earn-
ings and capitalize these earnings on a cer-
tain basis, say five per cent.; thus the life
value of a man earning $5,000 a year is
the equivalent of $100,000 invested capital,
yielding five per cent. Since his life value
is $100,000, his death extinguishes a capital
valuation of $100,000.
The statement that the life value of a man
74.
OPPORTUNITIES
earning $5,000 a year is $100,000 does not
mean that a man earning this salary can,
in the ordinary case, carry $100,000 insur-
ance. Usually, he can afford to carry only
$20,000 or possibly $25,000; that is, he can
afford to extend his economic value to his
family only four or five years into the fu-
ture. When we look at the question from
this point of view, however, we realize the
inadequate amount of insurance carried by
the average man with a family dependent
on his earnings.
Dr. S. S. Huebner, Professor of Insur-
ance, Wharton School of Finance and Com-
merce, University of Pennsylvania, has
stated that if the earnings of the American
people were capitalized on a five per cent.
basis, the total life values would be from six
to eight times as great as the property
values. Roger W. Babson is the authority
for the statement that the total property
values of the United States are approxi-
mately $350,000,000,000. Assuming these
estimates to be correct, the total life values,
75
LIFE INSURANCE AS A LIFE WORK
if they were six times the property values,
would be $2,100,000,000,000. According to
these figures, the amount of life insurance
actually carried is only about three per cent.
of the total life values. Mr. Edward A.
Woods, in his book on "Life "Underwriting
as a Career," estimates that the amount of
life insurance carried is approximately
seven per cent. of the total life values.
If the life insurance carried by the Amer-
ican people ranges somewhere between three
per cent. and seven per- cent. of the total life
values, then those who fear that a point of
saturation will be reached in the writing of
life insurance in the United States have
made no proper inquiry into the facts. In-
a recent address on this subject, Dr. Hueb-
ner said: "When the economic significance
of life values and the need of their scientific
treatment through insurance becomes gen-
erally appreciated, life insurance will sell as
readily as fire and marine insurance. Then
life insurance will become the greatest fi-
nancial business in the world. The immen-
76
OPPORTUNITIES
sity of the aggregate of human life values is
bound to produce this result. The sixty bil-
lions of dollars of life insurance now on the
books of American insurers will then seem
small by way of comparison. If every per-
son in this country capitalizes his life value
for an amount equal to only five years' earn-
ing capacity (and what a small amount that
is) we would have one hundred and fifty bil-
lions of life insurance to-day, or more than
twice the amount now outstanding, and if
every person insured his life value only to
the extent of one-half of his capitalized
earning capacity, we should have between
four and five hundred billions of life insur-
ance. Important as life insurance is to-
day, its real progress is yet to come."
T7