A GREAT MARVEL

Hawke's Bay Tribune, Volume XXII, Issue 153, 14 June 1932, Page 4

A GREAT MARVEL

LIFE ASSURANCE BUSINESS TREMENDOUS PROGRESS MADE IN MODERN TIMES. “Life assurance is one of the greatest marvels and achievements, if not the greatest, of modern times,” said Mr. I l '. 8. Budd iu an address to the Hastings Rotary Club ou Friday. “Except in some very isolated cases, where a man’s life was covered at au exceptionally high rate for a limited period, life assurance as wo know it did not come into geural use until well into the 10th century,” Mr. Budd continued. “During the last eighty or a hundred years the growth of the business has been colossal. Some idea of the immensity of the business may be gathered from the fact that the funds of the oiiices in the British Empire amount to £1,150,000,000, and the amount of insurances in force to £3,250,000,000, not including industrial policies. In spite of these tremendous figures, the life assurance carried by the people in the Empire, excepting Canada, where the average is much higher, is very far below that carried in America.

“The theory of life assurance,” added the speaker, “is fully developed in what is culled actuarial science. The actuary is responsible for the valuation of the liabilities and the method of distribution of the surplus. Life assurance is based upon two theories — the theory of probabilities and the theory of compound interest. Those two theories are applied to a mortality table, and in a life office are the basis of every calculation dealing with the contingencies of life policy annuil' premiums, surrender values, valu: of liabilities, and so on. The the ..

of probabilities is expressed iu the saying: ‘lt is always possible to increase the number of trials until it becomes a certainty that the proportion of occurrences of an event will differ from the probability on a single trial by a quantity less than any assignable,’ and that is why it is essential that a life office should receive a good continual flow of new business so that this remarkable law of probabilities may have sufficient scope to work. If we could trace 100,000 from the cradle to the grave and in each case record the number dying each year, and the number living at the end of each year, we should have a mortality table. It is impossible to trace any fixed group of people in that way, but an actuarial table used iu a great number of offices shows that of 127,283 people, 112,980 are alive at the age of one year, and so on to 30 years of age, 88,994 are alive at 31, four at the age of 100, one at 101, and none at 102. At the age of 30 the chances of living another year are .992—a good bet. The number dying between 30 and 31 is .008, and so on.” BUSINESS IN NEW ZEALAND. There are 13 life insurance offices in New Zealand, said Mr. Budd, and their total assets were about £34,000,000. The sum assured under new policies written iu 1930 amounted to nearly £12,000,000 ordinary business and over £1,500,000 of industrial business. The total assurances excluuiug industrial policies and annuities amounted to over £98,000,000, not counting bonuses. A good deal more than £1,000,000 in a j ear was paid under policies becoming a claim either by death or by the ma turity of a policy. It could safely be said that this amount would have been paid out last year, and that at least £1,000,000 would bo paid every year by life assurance companies in New Zealand to the representatives of policy-holders or to the policy-holders themselves. “We are apt to forget,” Mr. Budd added, “what a great work life assurance offices perform. There are hundreds of cases every year where the policy was the only asset that a deceased policy-holder possessed, and it does not need much reflection to understand what the policy means to the family loft behind. My own company, the A.M.P. Society, paid out last year £15,000 every day of the 365 days of the year. The assets of the company in New Zealand total £15,285,000. New business last year amounted to £3,372,000 in New Zealand, and the business in force in this country amounts to £41,000,000. The official Government statistics show that the total New Zealand assets of twelve leading companies amounted to £33,794,000.

“There are five good rules to follow in choosing a company in which to insure. Firstly, see that the office earns on its funds in interest at least a quarter per cent, more than it assumes, in its valuation, that it will earn; see that it spends in expenses a less proportion of the premiums than it reserves for expenses; see that it obtains a fair amount of new business at a reasonable rate of expense; see that there is an adequate surplus; and that it declares a fair bonus in relation to the premiums paid. INSURANCE-PROTECTED LEGACIES. “The late Earl of Levcn and Melville stated in his will that he had effected a large insurance on his life, involving the payment of a large premium, in order to pay for the death duties payable on his decease. The duties, by the way, amounted to £120,000. His will declared that he wished to induce each successor to the title and estates to effect an insurance on his life for a similar purpose, and concludes that should any such successor not give effect to this within six months of his succession, he desired that the benefit of the policy should pass to the next in succession. That is to say, the carl, who led an active business life in the highest financial circles, sought the help of insurance to maintain the estate and prevent a forced sale.” Referring to the origin of the A.M.P. Society, Mr. Budd said that the society’s first meetings were hold in an upper room in George street, Sydney, over a grocer’s shop. The rental of the office was £3B a year to start with, but before the end of the year a reduction to £2O was obtained. Mr. Budd concluded his address with a warning against the blandishments of unscrupulous agents who attempted to induce people to insure in the agents’ office and to surrender an

existing policy, the agent asserting that the more favourable rates of blown company would make it profitable to surrender a policy in nnothi r. Mr. Budd warned his hearers to report any such canvasser to his principals. reputable company would tolerate such conduct, and it was absolutely false tn make such assertions.