LIFE INSURANCE AS A SCIENCE 225 



The life insurance agent is, as a rule, an appointed employee of the 

 company and under contract to perform certain services in return 

 for a stipulated compensation. The employment of agents is so uni- 

 versal that but few policies are obtained otherwise than through 

 these representatives of the company. Out of this condition some 

 very important legal questions and problems have arisen, aside from 

 the occasional difficulties and misunderstandings between the com- 

 pany and its employees. The agent, as a rule, is the only personal 

 representative known to the insured, and the agent's position is thus 

 one of very considerable responsibility and importance. The com- 

 pany naturally aims at a narrow limitation of the agent's powers as 

 to the issue or modification of the contract between the company 

 and the insured, and most of the policies issued contain a clause to 

 the effect that " no condition, provision, or privilege of this policy 

 can be waived or modified in any case, except by an indorsement 

 signed by an executive officer of the company." 



Insurance in its relation to public policy presents some very inter- 

 esting problems of law and jurisprudence. A policy of insurance is 

 issued upon the faith of the statements made in the application for 

 insurance, and the applicant is required to warrant the truth of his 

 statements. The effect of warranty is to insure the accuracy of. the 

 state of affairs alleged in it; and consequently the greatest care in 

 making a declaration of them is requisite. There has been a con- 

 siderable amount of litigation and resulting decisions of the courts 

 on the question of concealment and misrepresentation, but as a rule 

 the decisions have been in favor of the insured. It should be mani- 

 fest that it is contrary to public policy to encourage fraud, con- 

 cealment, and misrepresentation, by means of which insurance is 

 obtained under conditions which would have precluded the issue of 

 the policy had the facts been truthfully stated to the company. A 

 common form of misrepresentation is as to the present state of health 

 of the insured, where even the most advanced methods of medical 

 diagnosis cannot establish with entire accuracy the facts at the time 

 the application for insurance is made. Losses are thus sustained by 

 the companies to the injury and disadvantage of the honest policy- 

 holder, and by this much the true progress of the business is retarded. 

 A strict construction of the statute of frauds is, therefore, one of the 

 most certain means of advancing life insurance interests. 



The economic theory of risk and insurance has only received the 

 incidental consideration of writers on economics and social pro- 

 blems, with the notable exceptions of Willett and Macleod. This is 

 unfortunate, for insurance, one way or another, reacts upon the whole 

 economic life of the people, and there is no hope of a rational political 

 economy until all the elements of social and economic progress are 

 taken into account. The economic value and utility of insurance 



