Arguments Advanced in Favor of the Two Plans

Much has been written about the relative merits of the general-agency and branch-office systems, some supporting one plan and some the other, and it may be well to indicate the principal contentions. The general-agency system, it is argued, has the twofold advantage of definitely fixing the cost which the company incurs in securing its business; and of relieving the company of the trouble connected with the supervision of many agents and the risks incident to the financial relations into which the company would otherwise have to enter with numerous agents. The supporters of the branch-office system, on the other hand, maintain that it is more economical because of the more prompt collection and remittance of premiums, agents under this system being required to make prompt payments, and all collections of premiums and interest being deposited at once to the credit of the company and thus made available for immediate investment. This contention has reference to the common practice of allowing general agents a considerable period of grace in making their collections and remittances thus leading to the piling up of bank balances in favor of the agency or to slackness on the part of policyholders in paying their premiums. It is further argued that the general-agency system causes a lack of uniformity since the general agent can control and pay his agent as he pleases, whereas under the branch-office system "the company conducts all of its agency affairs directly from the home office through its own branch offices, rented in the company's name, and placed in charge of managers under salary. ... In a few words, the company acts as its own general agent, develops its own plan for the supervision, education and control of agents, and so conducts its affairs that any margin of profit in commissions reverts to the company for the benefit of its policyholders instead of going to a general agent". Again, under the general-agency system soliciting agents have direct relations only with the general agent, he being the only representative of the company with whom they come into business contact. It, therefore, follows that unless the general agent calls the company's attention to the fact, the records and abilities of competent solicitors may remain unknown to the officials of the company.