PRACTICAL LESSONS IN
Life Insurance Salesmanship
Assistant Manager of the Home Office General Agency,
Pacific Mutual Life Insurance Company
The chapters composing this text-book are greatly
curtailed summaries of lectures delivered by the author
to the city agents of the Home Office General Agency
of The Pacific Mutual Life Insurance Company of Cali-
fornia. It is believed that they will be found useful to
managers and superintendents of agencies as the basis
for similar oral instruction.
The writer has gained several valuable suggestions
from a clever series of pamphlets, entitled "The Knack
of Selling", issued by the publishers of "System".
Los Angeles, Jan. 1, 1914.
EFFICIENCY is the Alpha and Omega of
Success. Efficiency is fitness: it entails the
ability to do things and to do them rightly.
There is a Hindi proverb which runs: "The
road is paved with leather for the man whose
feet are shod". In other words, Adaptation is
the key to Facility. The man who has quali-
fied himself for his work will find conditions
favorable to success.
The untrained life insurance salesman is
constantly encountering difficulties due to his
inefficiency. His energy is more or less mis-
directed. His processes are largely haphazard
and hampered by the friction of accident. In
a word, he is Unfit and, consequently, Ineffect-
THE ESSENTIAL ATTITUDE.
Self Assurance Honest Dealing Earnest Attitude Preparation
ELEMENTS OF LIFE INSURANCE.
Participating and Non-participating Insurance Forms of Life In-
surance The Premium and its Constituent Parts Methods of
SECURING AND APPROACHING PROSPECTS.
Preparation for the Approach Meeting the Prospect Overcoming
Obstacles to Interviews.
PRESENTING THE POLICY.
Divi'sions of the Policy Statement Logical Sequence in Presenta-
tion Discriminating in Selection of Forms Motives that Move
Men to Insure.
PREPARING THE CANVASS.
Scientific Method of Preparation Mode of Setting Forth Data
Specimen Illustration of Monthly Income Proposition Memo-
randa of Arguments Verbatim Specimen Canvass Explanation
of the Design and Purposes of the Method.
Essentials to Success in Closing Keeping Control of the Inter-
view Closing at the Earliest Opportunity The Consecutive
Stages of the Closing Effort Methods of Influencing the Pros-
STANDARD FORMS OF INSURANCE.
Term Insurance Life Policies The Monthly Income Policy The
Endowment Policy Explanations of Various Forms and Illus-
trations of Peculiar Advantages.
COMMERCIAL LIFE INSURANCE.
Purpose of Business Insurance Business Insurance for the Corp-
oration Business Insurance for the Firm Joint Insurance for
Commerci'al Purposes Specializing in Commercial Life Insur-
MATERIAL AID TO EFFICIENCY.
The Use and Abuse of Illustrations and Printed Matter in General
The Advantage of Making Statements in Percentages Prospect
Cards and other Memoranda A Valuable Time-keeper and Check
on Results Systematic Record Card A Method for Detecting
Weakness and Strong Points The Detective Card.
Systematic Work Securing Cash with Application The Psycho-
logical Moment Extra Issues Making it Easy for the Prospect
Cultivating Policyholders Warning Against Underestimating
1 * ' . ' ' ' *.
THE ESSENTIAL ATTITUDE.
Although the writer is not without hope that this
little volume may be of some service to experienced
Life Insurance agents, it is intended primarily for the
use of beginners. To the latter this prefatory advice
is especially addressed.
The spirit that actuates you in an undertaking is of
vital importance. Your success or failure may depend
entirely upon it.
What is your attitude toward the Life Insurance
business? Are you treating it as a convenience or a
make-shift? If so, your chances of success are slim
indeed. Have you taken up the work as an experiment,
or on trial? In that case you are handicapping your-
self heavily. The doubt in your mind is acting as a
brake on your progress.
If you would give yourself a fair chance to "make
good", you must set out with determination never to
turn back. You must bring wholehearted devotion to
your work. You must be moved by a singleness of
purpose by the idea of directing all your energy and
faculties upon your business.
When you have honestly attained this phase of
mental attitude you are already a considerable distance
along the road to Success.
PRIDE IN YOUR PROFESSION.
In these days, Life Insurance is such a highly spec-
ialized business that it justly ranks with the profes-
sions. Yale, Harvard, and half a dozen other universi-
ties maintain courses in Life Insurance.
Not a tew of the most brilliant and able men in this
country are engaged in the same calling as yourself.
Yoti ma? well be proud to claim it as your vocation.
But, do not disgrace it and yourself by poor workman-
Closely akin to Pride in your Profession is Faith in
your Company. "The best company'* is a relative term
in Life Insurance.
Your company must be the best for you. If there
is any better you should be working for it.
Satisfaction with your calling and belief in your
company will promote your Efficiency and, at the same
time, excite the Respect of your acquaintances.
Believe in yourself. Count on Success. Every vic-
tory is won in the imagination before the battle begins.
The man who doubts is defeated ere he faces the issue*
You don't know what you can do until you try. The
outcome of a determined effort will surprise you. Aim
at big things. What if you fail at the first attempt?
Go to it again. The man who can come back smiling
is the most formidable force in the world.
HONESTY IN YOUR DEALINGS.
Be square. Start out with a firm resolution to make
Honesty control your thoughts and acts.
Never fool yourself. Be a severe critic in Self-Exam-
ination. Be an exacting task master in Self-Discipline.
Remember your obligation to your company and your
duty to your manager. From these sources you are
receiving assistance, without which you could not carry
on your business. An investment has been made in you,
indicating Faith in your Integrity and Ability. Don't
betray the Trust.
The adage "Honesty is the best policy," is strikingly
applicable to the business of Life Insurance. If you
are permanently engaged in it, the best asset that you
can create is a Reputation for Honest Dealing. It will
act as a sinking fund, steadily earning interest, and
affording you a perpetual source to draw upon for
In considering a contract for a prospect, banish all
calculation of commission. Base your recommendation
on sincere judgment of his best interests. Every policy
properly placed will put a permanent support under
your structure of Success.
THE EARNEST ATTITUDE.
I have made no mention of Enthusiasm. It is apt to
be fleeting and ill-balanced. Earnestness is a more
Enthusiasm is the smoke and report of a musketry
discharge. Earnestness is the bullet. Both emanate
from the same source, but one represents emotion: the
other force. Enthusiasm is less substantial, less dura-
ble than Earnestness. The former may excite a pros-
pect's interest, the latter will secure his signature.
In order to produce good results, you must have an
Earnest Interest in your work. In order to have and
to hold Interest, you must understand your business
and be conscious of a certain degree of expertness in
it. And nothing can keep your Interest alive to the
same extent as constantly increasing Knowledge and
Efficiency, accompanied, as they must necessarily be,
by steadily growing Success.
RECEPTIVENESS TO TEACHING.
Successful men in every walk of life realize their
limitations and need of improvement. The "know-it-
alls" are always found in the ranks of failures. Com-
mencing as poor workmen, they gain, from sheer ex-
perience, a moderate measure of ability, remain sta-
tionary for a few years, and then retrograde. With-
out ever having run through a respectable edition, they
become back numbers.
To increase your Efficiency, you must be conscious
of shortcoming and anxious to learn. Maintain a good
opinion of your ability, cherish self-respect, cultivate
confidence but don't entertain the fatuous idea that
you are beyond the range of instruction.
There is nothing more important in life than Prep-
aration. The successful man is he who turns oppor-
tunities to account, and this can only be done by being
prepared for them.
Preparation as applied to Life Insurance salesman-
ship is general and specific. The scope of it is practic-
ally unlimited. Physical culture, mental training, ac-
quisition of knowledge all these are in line with it.
As long as you remain in the business you will be en-
gaged in Preparation general preparation for greater
accomplishment, and special preparation for particular
This phase of Efficiency is in itself an extensive sub-
ject which, if we should pursue it, would lead us into
the fields of logic, psychology, and other abstract
studies. In the following pages we shall be restricted
to consideration of the acquisition of technical knowl-
edge and practical methods of selling Life Insurance.
Have you a definite idea of an efficient canvass?
Probably not. It is one for which preparation has been
made by securing all available information about the
prospect, by a careful analysis of the concrete proposi-
tion to be presented, and by a thorough rehearsal of
the main argument to be advanced. It is one in which
the prospect's case is treated as a particular problem
to be solved in a definite manner. It is one in which
instead of a stereotyped description of the policy, just
such features of it as may be calculated to appeal to
the individual in the case are explained and dwelt upon
and no more. It is one which is brought to a suc-
cessful conclusion by alert, discriminating brain work,
by discovering and playing on the motive through
which the prospect may most readily be led to desire
the policy and resolve to take it.
Any man may qualify himself to make his canvasses
habitually in this manner no one but may become, if
he will, a good closer; that is master of his business.
You have been told, perhaps, that good closers are born
such. Some of them are, but many others, and among
them the best, are self-made and with pretty poor ma-
terial to start on, at that.
You can, with reasonable application and diligence,
convert yourself from a mere hack to a scientific sales-
man. It is surely worth the time and trouble.
THE ELEMENTS OF LIFE INSURANCE.
Some time ago an automobile salesman endeavored
to sell me a machine. In the course of a short talk he
interested me greatly. I did not see him again for
several weeks. When he next appeared, I learned that
the interim had been passed at his company's works.
He talked for an hour on the processes of manufacture
and when he left I hoped never to see him again. You
see, I was thinking of buying a car, not of setting up
So in Life Insurance, three months in the factory,
the actuary's department, would ruin the best sales-
man. Your prospect doesn't want to learn how we
manufacture our policies. He is interested in hearing
about the working parts and the service he may derive
It is sufficient for you to know the elementary princi-
ples of Life Insurance in their practical bearing on your
work. You can write applications efficiently with no
more technical knowledge than that of the composition
of a premium and the operation of the mortality tables.
You must not misunderstand me, however. The
danger I am warning you against is not the acquisition
of knowledge, but the misuse of it. This is almost
sure to result from too great attention to the technicali-
ties of the business.
A well-balanced daily ration would consist of one
part theory and nine parts practice, and the former
should have a close relation to the latter. For example,
let us suppose that in the course of a day's work, you
come into competition with another company, and take
occasion to familiarize yourself with one or more of
its policies. You have gained useful knowledge in a
much more nractical and desirable manner than if you
should sit down to study the contracts of half a dozen
companies, with an indefinite view to possible future
PARTICIPATING AND NON-PARTICIPATING
Legal Reserve life insurance is issued on two gen-
eral plans. Under one of these the premium is subject
to reduction by dividends. Under the other, the prem-
ium remains constant at a guaranteed figure.
Participating and Non-participating insurance have
advantages peculiar to each system. As a practical
issue the choice between the plans should be influenced
by consideration of the particular requirements of the
FORMS OF LIFE INSURANCE.
There are but two basic forms of Life Insurance-
Term Insurance and Pure Endowment. The principle
of the former is the payment of a certain amount at
the death of the insured, of the latter the payment at
the end of a specified period provided the insured is
living. The combination of these two forms in vary-
ing degrees produces the many standard forms of life
insurance. The Whole Life contract is simply term
insurance for the entire life expectancy and the insured
is required to pay premiums as long as he lives. The
Limited Payment Life policy is identical with the Whole
Life, except that the insured commutes the payments
that he would be called upon to make under a Whole
Life policy, undertaking instead to complete the pur-
chase of the policy with a definite number of payments.
An Endowment policy is a direct combination of Term
insurance and Pure Endowment, and as a result provides
for a certain amount either at the death of the insured
or at the end of a specified period if the insured is then
living. The Monthly Income policies differ only from
the standard contracts in the manner of paying the
claim. Such policies may be written on the life, limited
payment life or endowment plans.
THE PREMIUM How It Is Constructed.
We will now analyze a Whole Life Participating
premium at age 33, using this as a medium for demon-
strating why certain amounts are charged for Life
Insurance and what becomes of the money. Our fig-
ures will be approximations and may vary a little from
technical precision for the sake of readier understand-
At the outset, let me ask you to bear constantly in
mind that interest and the law of averages are the
bases of all life insurance calculations and the effective
factors in all life insurance results.
All practical working premiums are composed of
three elements: Mortality, or cost arising from death
losses during the year. Reserve, the portion set aside
for future losses; and Loading or Expense fund.
For the premium under consideration, as paid for the
first year, the segregation of these various elements is
WHOLE LIFE ANNUAL DIVIDEND.
Age 33 Premium $26.35
Mortality - - $ 9.00
Reserve - - - 11.00
Loading - - - 6.00
THE MORTALITY CHARGE.
Life Insurance companies calculate their "expected"
or mathematical mortality on certain statistics repre-
senting extensive experience. These tables may be
relied upon to indicate the number of deaths at various
ages which a well-managed company will need to pro-
vide for yearly. The actual experience may vary from
the tabular figures in certain years or even constantly,
but there will be an average correspondence in any
short period, say eight years and throughout the com-
Let us assume a group of 1000 men, aged 33, as being
insured for $1000 each. The American Experience
Table of Mortality calls for 9 deaths per thousand per
annum at that age, so that $9000 would be required to
meet the claims, and a contribution of $9.00 from each
man would furnish the necessary sum.
If the insurance were terminable at the end of the
year, there would be no need to collect a greater
amount. The mortality, however, is steadily increas-
ing. Whilst $9000 would meet the death losses in the
assumed group for the first year, it would require
$15 per 1000 to do so in the twentieth year, and when
the members had reached the age of 65, they would
die at the rate of 40 per thousand.
This increase in mortality might be, and, indeed,
sometimes has been, provided for by a gradually rising
premium. The objections to such an arrangement are
The method in general practice is the Uniform An-
nual Premium system. Under this a certain premium
is fixed for the age at entry, and the same amount is
charged every year throughout the life of the insured.
For instance, excluding the margin for expense, at age
33, the constant annual payment of $20.00 is equivalent
to graduated payments beginning with $9.00 and in-
creasing yearly during the life of the policy.
This $20 at 3 per cent interest will amount to $20.60,
let us say, for the sake of convenience, $21, at the
end of the first year. Death losses will call for $9,
leaving $12. Now, this $12 is the nucleus of a sinking
fund which will provide for the continuously increas-
ing cost of insurance. Each year the difference be-
tween the net premium of $20 and the amount of the
tabular Mortality is set aside and constantly improved
at interest. The fund thus created is called the Reserve.
The aggregate of policy Reserves represents the re-
source on which the Company depends to meet its
contractual obligations. The maintenance of the Re-
serve with accrued interest constitutes a distinct lia-
bility, is, in fact, a legal requirement. Its impairment
would entail technical insolvency.
The Mortality and Loading elements of the premium
being used annually in the discharge of current lia-
bilities, the Reserve represents all the money standing
to the credit of a policy, with the possible exception
of dividends, which we shall consider later. The Re-
serve provides the Loan and Surrender Values, pays
the Endowment, purchases the Paid-up Policy, and
aids in the discharge of Death Claims.
We have seen that $20 paid annually by a man en-
tering at age 33, and corresponding sums by men of
other ages, will suffice to meet all death losses as they
occur. But this does not leave any money for Ex-
penses, or for losses other than by death, in accord-
ance with the tabular expectation. It is necessary to
add to the net premium a loading to provide for ex-
pense of management, taxes, possible impairment of
The net premium is the result of mathematical calcu-
lation on exact data. The Loading is an arbitrary
amount, but much the same with all companies.
The principle illustrated here in connection with the
Whole Life policy, is applied to all forms of insurance.
Knowing the Level Premium necessary to be paid for
life at a certain age, it is a simple calculation to arrive
at the present worth of the future payments, and so
fix the Single Premium. It is equally easy to equate
these future payments into ten, fifteen or twenty prem-
iums. As a matter of fact, the Actuary first finds his
Single Premium and makes it the basis for calculating
The same principle applies to Endowment insurance.
At age 33, the premium on a 20-year Endowment is
$50.80. The Reserve is approximately $35. This Re-
serve, together with the amounts accumulated from the
succeeding premiums, with 3 per cent compound inter-
est will amount to $1000 at the end of the endowment
THE PREMIUM What Becomes of It.
Each policy account is kept separately and in detail.
In the case which we are considering the first year's
statement would reveal something like the following
Expenses at 15% 3.95
Effective Premium $22.40
Interest for one year, assuming rate of 5% 1.12
Accumulating Fund at end of year $23.52
Reserve at end of year $11.85
Mortality Cost, $8.62, assuming a saving
of 15% 7.32
Total amount demanded
It should be explained that the Expense element of
the premium is abstracted from it at the beginning of
the year. The amount in question is used to meet cur-
rent expenditures, and interest is not calculated upon it.
This item is necessarily much larger in the earlier
years than later, owing to the expense of placing the
business on the books. For the sake of convenience
an average rate of 15% has been assumed and applied
to both exhibits.
The elements of the Net Premium are separated and
applied to their respective accounts at the end of the
year, and after a full year's interest has been .earned on
them. Usually it is found that the actual Mortality
experience does not call for the appropriation of the
full amount charged for the purpose, and a balance is
carried to the Surplus fund.
The next year's account would be similar except for
the addition of the previous year's Reserve, making in
all $11.85 and $22.40 or $34.25 at the beginning of the
year to be placed at interest.
The amount at risk decreases in proportion to the
growth of the Reserve, although the Mortality increases
at the same time. Let us take the 20th year. The death
rate will be 15 per thousand, consequently the tabular
Mortality cost will be $15 for one thousand of insurance.
But each reserve fund has accumulated $306, so that
the amount at risk is not $1000, but the difference be-
tween these amounts or $694. The individual contribu-
tion necessary to meet the death losses is not $15 but
$10.40, for if 15 die, involving a loss of $15,000, and
each has a reserve of $306, aggregating $4590, the net
loss is only $10,410. In the 20th year the policy ac-
count would be somewhat as follows:
Expense at 15% 3.95
Effective Premium $22.40
Reserve from previous year $287.90
Interest on $310.30 at 5% 15.52 $325.82
Mortality Cost 10.68
Reserve carried forward 306.33 $317.01
Balance $ 8.81
Our two policy statements show that the insured
paid $4.35 more than was necessary the first year and
$8.81 in the 20th year, and of course, there was a vary-
ing excess through intermediate years.
If the Company had realized exactly 3% on its in-
vested assets; if the death losses had exactly corre-
sponded with the mortality tables, and if the entire
loading had been used yearly, the amount on hand at
the end of each year would have been the aggregate
Reserves with the accrued Interest. We have seen, how-
ever, that Interest earnings in excess of the calculated
rate, gains from careful selection of risks and economy
in management will create savings. The sum total of
these savings is called the Surplus.
As the experience of the Company in the matters of
Mortality, Expense and Interest are apt to vary, a
portion of the earned Surplus is retained to provide for
contingencies. The balance is divided among the
policyholders in the form of dividends.
In the case under consideration the Surplus the first
year is $4.35 and at the end of the 20th year $8.81. The
company would pay dividends of about 16% and 34%
There are several ways of disposing of dividends.
They may be
(1) Applied in cash to reduce the succeeding premium.
(2) Left with the company to accumulate at 3*/2 per
cent Compound Interest.
(3) Used as a Single Premium to purchase Reversion-
(4) Employed to accelerate the Reserve accumulation,
with a view to curtailing the premium paying
(5) Retained by the company for a certain period, to
be paid at the end of the stipulated time only in
the event of the policy being in force.
The first named option, although the least profitable
to the policy-holder, is the most frequently exercised;
the second is the same in effect as the fourth; the last,
called the "deferred dividend system of distribution"
is virtually abolished.
To the man whose chief consideration is protection,
the privilege of converting his dividends into Paid-up
Insurance additions to fiis policy, should be the most
attractive. To illustrate the working of this method: