THE COLONIAL INSURANCE COMPANY.

Evening Post, Volume XVI, Issue 112, 25 April 1878, Page 2

THE COLONIAL INSURANCE COMPANY.

? TO THE EDITOR OP THE EVENING POST. Sir — It is frequently found that designing men take advantage of a popular feeling to reap a harvest of profit for themselves. This is usually called by the name of business tact, and the possessors plume themselves upon the result of even questionable expedients, so long as they are successful. If the Colonial Insurance Company had been promoted by men of admitted liberal character, who when they had acquired a competency for themselves had ever allowed their hearts to expand Jnto a genial glow towards their fellow colonists. I might not be induced to scrutinise so closely the motives that actuate them. Knowing the men, I naturally ask what do they intend to make, and who do they intend to make it out of ? The argument employed may be that the arrangement is materially beneficial to insurers and insured; and that as a holder of shares and owner of property he may be in the double capacity himself. However nice this may look as theory, in practice it is found that those engaged in mercantile pursuits, from whom emanate the principal insurance business, do not hold any great number of bhares. The return in the market price of insurance stock, viz., 0 to 8 per cent , is not sufficient lor a man iv business. Therefore, though an attempt may be made to amalgamate them at j the commencement, time will soon disM>lvc the connection. Tho public of ¦Wellington have expressed au opinion that the rates of insurance are ton \ high, and they have looked forward to Uie advent of a uew company to reduce them. TL« promoters of tho Colouial Insurance Company nave been clever enough to take advantage of this feeling, not directly by promising a reduction of rates, but indirectly by proposiug a little "swim," in which the insured may, if they give an unqualified support and help to fill this particular bag, have a chance of putting their hands into it at some future day and "we what God will send them." This day of recompense is said to be in twelve months time. But who knows what twelve months will bring forth ? Looking down the list of names on the directory, I find those that have been associated with other undertakings who, when the allotments of shares were being made, figured largely and partook of all good things going, but who when they had obtained their price — or perhaps frightened byfomebad dream— sold out and retired into their shell with a fre«h addition to the accumulation already there. If these people came forward boldly with a progianime to reduce rales, backed up by figures to show it would pay, they would l>e entitled to the sympathy of the people. But j they do not intend anything of the kind. The first half-yearly balance sheet of this as well as of any new insurance company is ' certain to appear favorable*, e^en though going i headlong to ruin. Why ia this .' The answer jis simpl«>. The premfums are paid at the I rctnmeiiceaaent of the risk, and the liability is

ft

*

current for twelve months. Where the business is steady, the actual proportion of risk incurred at tho first half-yearly period is onefourth the total premiums received, leaving three-fourths of the losses still to be met. But where the business is increasing the proportion of premiums earned on ttie balance day is smaller than that. To put the matter in a simple form. The policy issued on the first day the company started business would only have half expired at the half-yearly balance, and so those issued on the succeedings days would vary down to that issued on the balance day, on which nothing would be earned. Yet all premiums go to swell an apparent profit. People may say that the amount ot increased premiums ought not to appear. They are, doubtless, right; but would such a statement Suit the promoters ? I think not. A glowing balance-sheet sends the shares up to a premium, and their object is gained. To show that I have not overdrawn the picture, let anyone look up the balance-sheets of the established companies and compare later returns with earlier ones, and it must strike him that the apparent profit made at the commenceroant of the company was out of all proportion greater than that obtained at a later j>c-iod. But the reverse must be the fact, for a large and well-established business must be worked at an advantage compared with an institution in its infancy. In conclusion, I would advise the public to exercise great cautiob how they lend themselves to stipport any undertaking unless satisfied that the matter is in proper hands, and that their interests will not be sacrificed to the cupidity of the promoters. 1 am, Sec, "One not in the Swim."