INSURANCE COVER

Nelson Evening Mail, Volume LXX, 25 March 1936, Page 11

INSURANCE COVER

COMMON FALLACIES REMOVING WRONG IMPRESSIONS Popular fallacies regarding insurance were exposed by Mr W. Skegg, manager of the Alliance Assurance Company, Limited, in an address at Auckland (reports the “Herald”). It would be impossible to carry on the intricate machinery of modern civilisation without insurance, lie said, yet no business was more maligned or came in for more uninformed criticism. In tlie first place there was a common fallacy in fire insurance that a policy was a wager and that, in the event of tiie destruction of the object insured, the full amount should bo paid, regardless of circumstances. The policy was a contract of indemnity only. If companies were compelled to pay the full sum, irrespective of the amount of loss, it would be an incentive to dishonesty and would greatly increase the cost of insurance. SCOPE OF POLICIES It was a fallacy that insurance companies tried to persuade clients to take out policies for greater amounts than the true value, in order to get premiums on insurance they would never have to pay out, continued Mr Skegg. The reverse was the case, and, knowing the likelihood of fraud or dispute, no underwriter worthy of the name wished to insure at inflated values. Members of the House of Representatives who spoke in favour of a, Bill in 1933, which aimed to compel companies to pay the full sum insured in the case of total loss, irrespective of the amount of actual loss, completely misunderstood the position and were voicing a popular fallacy. Again there was a wrong impression that a fire insurance policy covered every sort of mishap. After last month's storm, claims were made for all kinds of damage done by wind. Holders of marine insurance policies often did not realise they covered only perils of the sea and not damage of every kind, unless specially insured against. Employers sometimes did not realise that an employees’ indemnity policy covered only the employer’s liability under the Workers’ Compensation Act, and that, if there was no liability on him, there was none on the company. It was surprising the number of people who thought a motorist’s third-party policy was an all-round cover, and that the company would pay an injured pedestrian whether the accident was the driver’s fault or not,.

NO EXCESSIVE PROFITS Another popular fallacy was that insurance companies made huge and undue profits, said Mr Skegg. The average man felt dimly that no insurance company could fail in a British country. Although the feeling was largely due to the wonderful sagacity, foresight and conservative policy of the great Enghsh companies, it was erroneous. The speaker quoted examples of companies that had been unable to meet their obligations. The average profit of the 25 largest English companies did not exceed 5 per cent, of their underwriting revenue. There had been no profiteering by insurance companies. Mr Skegg concluded. New Zealand had never been a very profitable field for insurance, and quite a number of companies had withdrawn in the last 20 years. Statistics showed that the joint experience oi overseas companies doing business in New Zealand during the last 10 years disclosed a loss on their fire insurance business. The Dominion, however, comprised only a small percentage of their total business, and they carried on largely as a matter of prestige and in the hope of better times.