Fire Insurance Costs Low in New Zealand

Manawatu Times, Volume 59, Issue 272, 20 November 1934, Page 5

Fire Insurance Costs Low in New Zealand

NEED FOR STABILITY OF UNDERWRITING FIRMS An interesting review of the development of the fire insurance business in New Zealand and elsewhere was given to tho Palmerston North Eotary Club yesterday by Mr. D. E. Wilkie, president of the council of the New Zealand Underwriters’ Association, who was, however, offering his personal views on the subject. Tho speaker said he was utterly opposed to Government interference in business, though he did not wish to appear as one of those who were always carping at the Government. It had been said by ono English authority that economic planning cut at the root of insurance, ■which originated with international trado and grew w r ith its expansion. The industry was subject day in and day out to fierce competition, and supported itself by risks which tho ordinary business unit could not possibly assume. Eire insurance really started in 16C6 when the first companies came into being after the disastrous fire in London in that year. A notable fire of more modern times was that in Chicago in 1871. Other disastrous fires had occurred in San Francisco, Havana, Tokio and elsewhere. In every case British.insufance companies had met their liabilities in full. The first company was formed in New Zealand in 1859, and since then several other companies had come into existence. The business of fire insurance was carried on to-day on much the same lines as in the early days, though certain modifications had been made. A fire insurance policy was primarily an undertaking on the part of the issuing authority to indemnify the holder against loss or damage arising from fire, and was usually valid for a defined period. In New Zealand, at present were 20 fire insurance companies with their head offices in England, and five with their head offices in Australia. Nationals of a few other countries had also entered the field, and there was unduly keen competition forcing the price of insurance down to a very low level. New Zealand wanted prosperous firms to make prosperous people, and only economic concerns that really paid their way could mako this thing possible. It was a popular idea that fire insurance w'as a gold mine, returning a handsome profit, but this belief was most erroneous. It was even fostered by some people for their own ends, who seized upon one or two good years as the basis for their settlements. It was unfortunate from the national viewpoint that, owing to the lack of co-or-dination among Government departments, the tax-paying possibilities of fire insurance firms in New Zealand had been steadily whittled away. In 1918-22 the figure stood at £623,000. In 1928-33 the sum fell to £191,000. Politicians should not be allowed to meddle with such matters, which should be the special province of competent officials. An economic council might possibly have avoided this decline in revenue, Dut it was very doubtful. Speaking of present conditions in New Zealand, Mr. Wilkio said the cost of insurance was now about 9s Id pgr cent., having steadily declined since 1922. Unfortunately there had been no corresponding improvement in building conditions. The total amount insured was about £400,000,000, and although a small portion was devoted to detached risks, the majority of the premises were dwellings, factories and warehouses in compact areas. There was always the risk of conflagration, and fire insurance companies should be strong enough to meet suck a contingency. Their assets should have the utmost possible liquidity. The speaker detailed tho nature of the fire covering business, its assets, and the endeavours of the Underwriters’ Association to reduce risks. An insurance company did not gamble, he said; it based its rates on experiences gained over a wide area and a long period. Insurance companies in New Zealand and elsewhere circulated large amounts of money, in rents, taxation, local body rates, wages, and other appropriations. All companies not domiciled solely in the Dominion had to pay a deposit to tho Public Trustee as a guarantee of good faith. Having declined to 9s Id per cent, from 12s 2d a few years ago, the rate of insurance was now at a record low level in New Zealand, and it was difficult for firms to avoid loss without adding further to unemployment. Tho ultimate cost of insurance was determined by the carefulness or carelessness of the people. Cheap insurance was not-a- good investment as was commonly believed. In New Zealand the annual payment on account of defective -eiectrie- wiringsand chimneys was surprisingly large.

The annual insurance loss in New Zealand was about £3OOO a day or £125 an hour, and -whether the victims were covered by insurance or not thero was obviously a community loss. If this loss could be minimised there would be a saving of capital. Luck, concluded the speaker, paid as large a part .in,in-, suranee as in any other form of business operation. Somo of the apparently most stable firms of the world had recently been compelled to cease functioning, one such being an American firm with reserves of £105,000,000.