Untitled

New Zealand Herald, Volume XXII, Issue 7341, 30 May 1885, Page 4

While the management of the Government insurance is at present attracting considerable attention it may be interesting, to the policy-holders and the community generally to know what is thought of the scheme by experts in the United Kingdom. Under this impression we deem it fitting to make some comments on a paper (a copy of which has been sent us), which was read before the Actuarial Society of Edinburgh in March last by Mr. J. Moody Stewart, fellow of the Faculty of Actuaries of that citjr and also of the Institute of Actuaries, London. This gentleman, it may be mentioned, has had the privilege of personally observing the working of the Government Insurance Department, and not only wan his intention of making it the subject of a paper approved by those in charge of that Department, bcr, taller and more recent information than he was possessed, was also courteously supplied to him. These circumstances manifestly lend greater value to the author's opinions. As a general rule, actuaries are considered not to be favourably disposed towards Government action in regard to life insurance, on the alleged ground that it is better for society that this business should be left to united or mutual private enterprise, and that the entrance of Government into the field subjects voluntary organisations to unfair competition. The disadvantage thus implied is, moreover, held to be greatly increased when, as in the case of New Zealand,, the Legislature requires all other associations or companies to lodge a considerable deposit with the Government as security for the insured, besides paying an annual license fee of one hundred and fifty pounds. The. advantage, however, which, in these respects, a Government insurance scheme is supposed to have, is prone to be overestimated. This Mr. Stuart feels constrained to admit, and in support of this view, points out how the apprehension of Dr. Smith, President of the Australian Mutual Provident Society,' expressed on the occasion of the New Zealand Insurance Department being established, has proved to be unfounded. "A Government echeme," said this gentleman, " which has the revenues of the country to fall back upon for security, must extinguish all others"; but, to show

how this prediction has been falsified, it is unnecessary, says Mr. Stuart, to do more than adduce the fact that the Australian Mutual Provident Society now transacts a business in New Zealand half as great as that df ! the Government Department. The entrance in fact of the New Zealand j Government into the insurance field only served to excite competition, and hence, so far from stifling private enterprise, may be said to have induced a healthy rivalry. At the same time, as ■ indicating how the professional objection to a Government Insurance scheme is insensibly cherished even by Mr. Stuart, it is sufficient to refer to the apologetical way in which he accounts for the adoption of such a scheme in New Zealand. He seems to attribute its origin on the one hand to the 'fact that, at the time it was propounded by Sir Julius Vogel, no life office had a branch in the colony, and the great trouble'and delay which in consequence occcurred in the obtaining of a policy, and on the other to the superior climate of the colony, which naturally induced the desire to establish an office free from the disadvantages of the less salubrious country of Australia. The inference is thus suggested that had it not been for these circumstances, the Legislature would not have consented to establish an institution under guarantee of the colony and under Government control. We are, however, inclined to think that the reasons which prevailed more than any other at the time were, the encouraging of provident habits among the colonists to a greater extent than then existed, to the retaining in the colony the money thus accumulated, and, to some considerable extent, the enabling the Government to expend the money on public works. All these measures have since gradually disappeared, through the growing disposition of the people to make provision for the future, the practise of the Australian offices in investing within the colony the funds raised therein, and the recognised necessity for finding securities other than Government debentures for the funds of the local institution. Still the society has, since the time it was floated, taken firm root in the country, and this, coupled with the unprecedented success which has attended its operations, has enabled it permanently to take its place as one of the national institutions of the country. It is important to have the testimony of Mr. Stuart to the effect that the business of the Department, or association as it is now termed, is conducted at a moderate cost. Recently it has been alleged that the management was unusually expensive; but this was possibly due to the impression created on the public mind by certain objectionable arrangements for the working of its agencies, which excited at the time considerable surprise. Naturally enough the people, judging from one instance, in which the business done realised a large personal commission, concluded that the management of the whole Department was extravagant. Mr. Stuart, however, vouches for the contrary. The ratio of expenses to premium income last year was 18 per cent., and this, he says, compares favourably, not only with that of the other Australian offices, but also -with that of the best life companies of Britain. He also speaks highly of the facilities which are afforded in many instances to policy-holders for relieving themselves of: trouble or anxiety con- , riected with the payment of their premiums. By arrangement with the Treasury, for example, premiums may be statedly deducted from the salaries of civil servants, and from the wages of railway and other Government employes, which is found a great convenience by those who avail themselves of it, as most of them do. Similarly, a policy-holder may, by giving an order once for all on a savings or other bank, have his premiums afterwards collected without any further trouble to himself, provided, of course, that he has a balance to his credit. The non-forfeiture system, or the issuing the surrender value of the policy to meet over-due premiums, prevents, of course, the policy from lapsing, at least for a time, and hence a man's interests would not suffer much from mere inadvertence. But, at the same time, the arrangement in question proves very advantageous to sea-faring men, or to those whose occupation takes them much from home. Another good feature in the working of the Department which Mr. Stuart specialises, is the adoption of a contingent debt plan. This is intended to meet the case of those who might be deterred from insuring by the necessity of paying an additional premium in consequence of some personal or family weakness. In such a case the assurant is under the contingent debt plan, allowed the option of being exempt from paying an increased premium, by consenting to an equivalent deduction being made from his policy only in the event of his not attaining the expectation of life. One of the most interesting portions of Mr. Stuart's paper is that in which he remarks on the salubriousness of the New Zealand climate as marking out a sphere specially favourabe for life insurance business. The large influx of young, and generally select, lives into the colony must, he thinks, to some extent account for its low death rate, and prevent a reliable comparison being made between it and that of old countries; but, as it enjoys no special advantage, as respects immigration, over the other colonies, it may, he thinks, fairly bo compared with them. In the proceedings of the Faculty of Actuaries the average mortality in this colony for ten years from, 1864 was declared to be 12.7 per 1000 ; but in the Journal of the Institute of Actuaries it is, for nine, years from 1871, brought out slightly lower, 12.3 per 1000; while that of the other Australian colonies for the same period ranged from 15,1 to 18. per 1000. This fact has, he says, led the leading Australian offices to value their New Zealand even more than their Australian business, though tha latter be more extensive. It will, moreover, lead to a growing competition on the part of these offices, not only with each other, but also—and specially, perhaps—with the as this important factor becomes more fully recognised. In view of this competition it is therefore very questionable whether the decision of the Central Board, reported to us from Wellington, to increase the rate of premiums on new policy-holders, is a wise one. One thing, however, is certain, namely, that ifc will demonstrate the expediency of establishing local Boards at the several main centres of popula-.

tion, for the purpose of bringing the claims and advantages of the Govern, ment scheme more prominently before the notice of intending insurers. It must certainly be gratifying to all parties engaged in or connected with the life insurance business, to learn on so high authority as that of Mr. Stuart that they have in New Zealand bo promising a field for their operations • but ifc must not be forgotten that the advantage to be reaped from this very important circumstance will te chiefly reaped by the institution thai, knows how best to turn it to account.