the office, you are going to find your work exceedingly hard. Following the same thought, however, I think the two greatest faults that an examiner can possibly possess are bluster and self-importance. I know of no two things which are more to be condemned in his makeup than these two which I have just mentioned. They prevent him from obtaining the maximum good from the energy which he must devote to his examining work.

In connection with this it is well to call attention to the attitude which an examiner should take toward the officials of the company he is examining; at its best, an examination is an interruption to the routine work of an office, and in view of this fact an examiner and his assistants should be courteous in asking for books, information and the necessary data. He should, of course, be firm and insist upon having his wants supplied, it being understood that he will not ask for any information other than that to which he is entitled.

It is almost unnecessary for me to refer to the fact that no examiner should accept any favors from the officials of the company he is examining; no matter how innocent are the attentions which are accepted, there is a feeling of obligation created which must have a bad effect upon the work. I likewise deem it unnecessary to point out that all information which is obtained in the course of an examination must be considered as strictly confidential and must not be discussed with outsiders or communicated to anyone except your superior.

To sum up the mental qualities which every examiner should possess, I think I would say that he

should attempt to have the combined qualities of a sponge and filter; the sponge, in order that he might be able to absorb all the information which comes to him, and the filter that he might be able to separate the valuable from the invaluable, retaining the former and allowing the unimportant details to rapidly pass from his mind.

There is a great temptation on the part of examiners to be too suspicious. You should, of course, attempt to find a reason for every fact which is presented to you, and should insist upon knowing and understanding the underlying cause of everything that comes to your attention, but on the other hand you should not allow your suspicions to influence your judgment. Very frequently entries which appear wrong to you will turn out to be perfectly innocent. It is quite easy to appreciate that an entry which has been made by a man who thoroughly understands the system and has been studying it for years, may present a strange appearance to you; a thorough study of the system, however, together with explanations, for which you should never be ashamed to ask, will enable you to promptly determine the correctness of the process.

There is another quality that an examiner should possess, but for the acquisition of it I can give no rules, viz., the power of instinct. I imagine that every good examiner at some time has had a fact presented to him which at the outset appears to have something wrong about it, but, if pressed for a reason, he cannot tell why his suspicions have been aroused; it presents no features out of the ordinary, and yet he feels that there is something wrong about it. While it may be impossible to acquire this sense, a careful attention to

the various details, and an analysis of the different methods, will unquestionably assist in the development of the mind along these lines.

Those in charge of examining work should not disregard suggestions which come to them from subordinates. It is extremely dangerous to assume that because one of your assistants is doing routine work, he is thereby prevented from seeing things which may be of extreme importance to you. Valuable suggestions are not always obtained from those who occupy positions of responsibility. Even an office boy may be able to give you valuable suggestions; in the case of one company it was the suggestion of an office boy relative to the unusually large consumption of stamps which led to the detection of the fact that the secretary of the company was in the habit of secreting in his private drawer a considerable number of stamps. I merely mention this to show that we may get information in a perfectly proper way from those who occupy minor positions, and we should never disregard any information, no matter how humble its origin.

As a final word I might point out that a good examiner attempts to obtain his information by unusual methods whenever possible. By this I mean that you should not content yourself with employing and following the methods which have been used by the clerks of the company; you should attempt to secure the information in a way differing from the one by which the entries have been made. You will thereby be enabled not only to satisfy yourself that you are securing the correct result, but you will be able to detect errors which would not be developed by simply following the work which has been outlined by the

clerks in the office. I recall that in the case of one company, the unearned premium account in its burglary department appeared to be unusually low; instead of simply confining our inquiry to tracing the entries which had been made in the office, we elected to treat the matter from the standpoint of cancellations instead of issues, and in this way we were enabled to detect the unusual, improper and abnormal cancellations which were being made in that office; by this means the amount of outstanding premiums in the burglary department had been reduced and the liabilities of the company correspondingly understated.

CHAPTER II

Investments - Limitation on Real Estate Holdings Examination of Title Title Insurance - Purchases from Officers or Interested Parties - Methods of Appraisal Certificates of Extension.

In order that a life insurance company may be successful it is necessary that the funds which it has collected from its policyholders, in excess of the current mortuary requirements, shall be invested in safe securities which bear a certain rate of interest; the underwriting departments of companies transacting other forms of insurance have not within the past few years been uniformly profitable and in consequence the returns to stockholders and the increases in surplus funds have largely come from the investment profits. I cite these facts as an illustration of the importance from the examiner's viewpoint of the condition of the assets of the corporation which he is investigating. I shall therefore briefly refer to the points to be noted in the various forms of investment with which you will be brought in contact.

Real estate is not regarded with favor by many statutes and supervising officers as a form of investment for the funds of policyholders; the holdings in real estate of insurance companies in nearly all of the States are limited to that amount which is necessary for the transaction of their business and to those par

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