THE GOVERNMENT INSURANCE DEPARTMENT.

Evening Post, Volume XXII, Issue 32, 6 August 1881, Page 2

THE GOVERNMENT INSURANCE DEPARTMENT.

♦ IHB ACriTAftY'S REPORT. Tho eagerly looked-for report of tho Government Actuary, Mr. Godfroy Knight, on tho first quinquonnial division of profits in the Government Insurance Department, was laid before Parliament last evening. It should be clearly understood that this report is not yet officially issued by the Department, nor will it bo until the full report of the London actuaries arrive, when both will be circulated together. Mr. Knight's report, howevur, was laid on the table yesterday for the information of Parl anient, and so is to a certain extent public property. It is of a very interesting nature, and contains a large amount of important information as to the working of the Insurance Department during its ton years' exibtence. 'lho report is dated 20th Juno last. It states that the first Government Insurance policy was issue i on the 26th. March, 1870, and up to 30th June, 1830, 1 1,843 policies had been issued, of which 3187 were discontinued for various causes, leaving 11,656 still in force, insuring .£4,17 1,004. Thero is an increase of about 130 per cent, over the previous five years, tho new business being equal to about half a million annually. During the last five years the funds have increased 318 per cent., and the income 113 per cent. The expenses of management amount to 15 9 per cent, of the premium income, being less than the cost of a company 20 yea's older, and only about half that of private offices of the same age. In some casodeaths have occurred from causes which might have boen foreseen by the medical examiners, but on the whole the medical examination has been very, effective. Intempurance is a fertile cause of death. A larger number of polioios have been taken out for £500 than for any other sum. Next to that £200 is tho favorite Bum, then £100, next £300, and then other sums in diminishing numbers. Thero are 4949 policies for £100 to £200 ; 5265 for .£2OO to' .£500 ; 1263 for .£5OO to .£3OOO, which is the largest sum taken on any one life, and for which only 22 policies have been issued. The department has been urged to extend this limit to £4000, but this is not considered advisable unless at least 5 policies for the larger amount could be depended on to be taken out yearly. The result of the actuarial valuation of the affairs of the department, its assets and liabilities, was reported by Mr. Knight on 10th May last to show a surplus of £73,760. He recommends that .£17,670 of this, being 5 per cent, on the net liability, should be retained to form a reserve fund to meet unforeseen contingonoies.and to equalise future bonuses. This would leave a divisible surplns of £56,000 for distribution as bonus. After analysing the various methods employed by British Life Insurance Companies in the distribution of their surplus, Mr. Knight cornea to tko conclusion that the mo3t equitable mode of division is that in proportion to the " loading " — that is the difference between the net premium? and office premiums — accumulated at interest, all the other methods unduly favoring old policy-holders at the expense of the new. Tho valuations of the department have been ina^e on the net premium system, and at a rate of interest about 4 per cent, below the actual rata realised, consequently the "loading " is the chief source from which a surplns arises, and he recommends the adoption of the plan which returns the surplus to tho policy-holders in proportion to the accumulated loading. He advises that all holders of life and endowment policies, who have paid two years' full premiums, and whose policies were in force at the date of valuation, should participate in the bonus. Some offices do not pay a bonus until a policy has lasted five years, but this is condemned as liable to cause dissatisfaction. Instead of this, he proposes that no policy-holder shall participate until he has paid two years' premiums. The allotment of the bonus is recommended to be made in the form of a reversionary bonus, to be added to the sum payable at death, but this to be commutabl c > in one of the three lollowing ways :— (I) A cash bonus, or (2) a permanent reduction of future premiums, or (3) a temporary reduction of fntnre premiums, such change to bo permitted at any time. To adjust the expenses fairly between new and old policyholders, he recommends that a year and a halt's " loading " should be deducted from the accumulated loading of those who have entered during the last five yeais. Mr. Knight remarks that he does not know of any office which has attained S3 high a standard of valuation in its tenth year, and that there are very few old offices able to make such strong reserves as he has recommended. He strongly advises the resumption of the industrial branch, on the ground of the claim of the working classes to be supplied with a system of insurance adapted to their requirements, the industrial branch being more urgently needed by tho poorer classes than the ordinary branch by tho wealthier classes. Mr. Knight gives some illustration of the way in which the plan of bonus allotment which he recommends would work in practice. For instance, a policy for .£lOO, which was taken out at tho ag3 of 30 and has been fi e ypars in force, would be entitled to £1 Is 3d as reversionary bonus to he added t^ the sum payable at death, or £1 2s 3 J as cash bonus, or to a reduction of premium by 4s 1 1 d for five years or by Is 4d for life. A similar poliov of 10 yeard 5 duration would be entitled to £3 6i reversionary bonus, £2 11s 8d cash bonus. reductioT of premiums by lla 5d for 5 years, or 3< 2d for life. Or, again, a policy for £1000 under the latter I'ondition would be entitled to £83 reversionary bonus ; £25 16s 8d cash bonus, or to have tne premiums reduced by £5 Its 2d annually for 5 years, or by £1 11s 8d annually for life. Mr. Knight points out that the low premiums charged by the Government are equivalent in such a case to an additional reversionary bonus of £200, thus making the total real bonus in the ca.se quoted fuliy £-83. Mr. Knight concludes his report with a warm testimony to the zeal and energy of the staff, and with congratulations to the policy-holders on the eminently satisfactory position and prospects of the department.