INSURANCE RATES.

Dominion, Volume 1, Issue 124, 18 February 1908, Page 6

INSURANCE RATES.

- 9 . ■ ... . .-; .v A natural result of the recent, conflagration in Christchurch lias been; increased public interest in the rumoured intention of >tlie fire insurance companies to increase their ' rates. Ever since the State Fire Insurance Department / commenced doing, busi-, ness, the companies have complained at intervals of the unprofitable nature of the underwriting business in New Zealand,' and the public lias' as often been assured by the advocates of cheap fire insurance that the companies have, little, to complain of, inasmuch as they: continue' jto pay respectable dividends. The greater portion pf these dividends is known to be furnished, not by underwriting profits, but by the interest upon reserve :investments.;' .'This fact,-' however,->is not taken into account by. the people 'who would not object to have' private enterprise in the under? writing business driven out,' of the country by' State competition.- The Christchurch ' "Press" has. collected son^ interesting figures to show thatfire: underwriting is not nearly, so pro-, fitable in New Zealand as it would appear. to.be. ; The geaeraj- manager-of the 'South British Conman'y has stated that, during tlie years 190'i,1905, and 1906, the insurance companies have, as' a' wholej _made a los? of £112,QOO; The losses _ in Canterbury alone last year are gaid- to amount, : to £119,00Q; The "Press" points out that the loss already incurred in Canterbury this year will account for the premium ini come for more than two years to come, while for'; the whole of New Zealand the losses of the past six 1 /weeks have' swallowed up in advance the year's premium incomes, -Accordingly 1 the losses of the next 10| months will,have to be paid out of premiums received in other, countries; ', ; v ■ / An investigation l ' of the balancesheets of the four New Zeiland fire and marine insurance companies for the ten years ended 1906 gives the following results:— '"V; i Total Interest Dividends and , . on Investments,. Bonuses for/ ' ■ for decade. decade.. . . Company ' £ . '• Standard 48,433 66,562 Noiv Zoaland'. 228,455 : 260,000 South. British . ... 183,454 . ... 197,913 National. , .110,569 ... 136,224

Totals v ~....£670,911 ... £660,699 About 86 per cent, of the dividends, that is to say, came from interest on investments, only 14 per cent; being yielded by' underwriting profits. Tlie actual underwriting profits; therefore, are not deducible from the dividends paid, If the companies' investments returned no interest, and; the dividends were maintained, it is clear'that tlie; swallowing up in dividends of ' the underwriting profits would quickly land the companies in difficulties by preventing the accumulation of strong ,reserves.. Instead of drawing money from the insurer to hand out to shareholders, tlie companies have used a great part of that money in building up tlieir strength for times of trial; It is only, proper tliat this aspect of the companies' • position should joe placed before the public. The impor-. tance of strong reserves, not only to the companies themselves, but to* the public who look to them for. protection against fire risks, is too obvious to require emphasis.