Civilization Has Devised Armour Against Fate

Dominion, Volume 32, Issue 65, 9 December 1938, Page 33 (Supplement)

Civilization Has Devised Armour Against Fate

flow Insurance Can Give Financial Security

INSURANCE is a financial buckler devised by civilized man to; shield him from the slings and arrows of ill-fortune. Originally purely a safeguard to commerce, it is today itself a great commercial undertaking, worth in New Zealand many millions of pounds yearly.

: Merchants of the sixteenth century discovered that by banding together to pay the losses of any members of the group whose argosies were listed missing, real security was obtained at small deprivation. All of the group would certainly have to pay a little every voyage, but none would be ruined.

This policy was evolved by the Spanish, Netherlands and “pirate Genoese*’ 'much earlier than that, in perhaps the fourteenth century; but in the sixteenth it became fairly general, and was applied not only to merchandise,apd shipping, but also to human lives., : It has been stated that in the insurance policy of thie Queen Mary will be found these picturesque words, dating back to those times when marine insurance was the only insurance known: — i “Touching the perils and adventures which we the assurers are content to take bn us and bear in this voyage, th'ey are: o,f the seas, men ,of war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisals, takings at sea, arrests, re-

straints, and detachments of all kinds, princes and people of what nation, condition or quality whatsoever, barratry of the master or mariners, and of all other perils, losses or misfortunes that have or shall come to hurt, detriment, or damage of the said goods, merchandise, or ship.”

Good coverage, today or 300 years ago. But it may be wondered, even now that we are so familiar with the principle of insurance, just how it is possible to guarantee all men against any such wide range of financial disasters, without the assurers themselves incurring a calamity equally bad.

Insurance is made feasible by the study of statistics, accident frequency and mortality tables. The proportion of any group of people to die, or suffer any other of the normal calamities of life, varies little from year to year. The number of houses burnt down does not greatly change. In dealing, therefore, with large numbers of lives, insurance companies can estimate accurately the proportion that will claim against them yearly. They can thus budget for that expenditure, plus the 10 per cent, cost of running the business. The money collected in premiums is reinvested soundly in assured undertakings that will not fail to repay a reasonable dividend. Temporary fluctuations of the stock market do not materially affect the issue, as the companies, like banks, transact their business over a long period of years.

Moreover, it must be remembered that no company insures “bad risks.” And in dealing with ordinary cases, the risks are as tabulated as the odds of a poker game. There is no such thing as chance to the insurance company: only the law of averages, with which all things comply.

Insurance was at first limited to risks of life, marine

disaster, and fire. Later it was extended to cover, personal accident, sickness, employer’s and third-party liability, burglary, motoring and aviation,' loss of livestock and crops, and even the vagaries of the weather, where they may prejudice human enterprise. In a farming community such as New Zealand, the scope for insurance is clearly particularly large. Indeed, in life insurance New Zealand ranks third per head of population of all countries of the world. The sum assured per head of population today stands at £B5, as against £6O a decade ago. Accident insurance, compulsory in the case of the motorists who form onesixth of the population, is correspondingly high. Fire insurance covers some £420,000,000 worth of property. The total life insurance coverage is now some £130,000,000 in extent.

The first life insurance office opened in New Zealand in 1861. By 1886, when first composite figures were obtainable, there were five offices operating, and assurances stood at £13,500,000. It then represented only £23 per head of population. The subsequent history of insurance in New Zealand, as throughout the world, is marked by two tremendous fluctuations—the war and the depression. In the' war years claims paid bulked heavier than ever before, and even with the great growth of insurance since, the same level was not attained until 1933.

The State entered the life insurance field in 1869, at a time when insurance was young and there were few other facilities. Fire and accident insurance are also undertaken by the State. The principle of State provision for the health, lives and ’economic security of the subject has been carried to unprecedented extremes in the National Social Security scheme, to be b-oup-pt into operation next