VALUE OF INSURANCE.

New Zealand Herald, Volume LXII, Issue 19156, 23 October 1925, Page 12

VALUE OF INSURANCE.

POPULAR MISCONCEPTIONS. PRINCIPLE OF PROTECTION. A REPLY TO CRITICISM. Some interesting points in relation to the business of insurance were made at the meeting of shareholders of the South British Insurance Company yesterday by the chairman, Mr. W. R. Wilson. Distribution of risks was a fundamental principle of insurance, he said. The circle of the brandies of the company was world-wide, and therein lay their strength. Misfortune at one point was compensated for by good fortune at other points, so that no one was hurt. That was the function of insurance. Without such protection not only trade, but social order aj> they knew it, would be impossible. It was well sometimes to bo reminded of these things. Those fortunate enough to have escaped loss were too prone to look upon their immunity as absence of danger. It was easy then to think that the premiums they had paid should have been less, or might have been saved altogether. This led to the thought of "doing our own insurance," as it was queerly expressed. What this amounted to really was gambling on the chance of an accident not happening to them. Curiously enough, this line of thought was most readily followed by people whose own property was not at stake. Councils and boards of management seemed to be the most prone to succumb to the temptation of this, gamble. As individuals they would be prudent enough to insure, when at the same time, as trustees for the people they represented, they would take upon their own shoulders a liability on one risk far beyond any amount that the greatest insurance companies, with their wide distribution of risks, would carry. Underwriting Surpluses. The earning of excessive profits was sometimes charged against insurance companies, lie continued. Generally this criticism was by people who had failed to give the matter adequate thought. They did not realise that any balance of premiums, after paying losses and expenses, could not by any means be regarded as profit nor distributable as such. Over a period the average percentage of such balances was not large. Indeed it could scarcely with safety be less. In the accumulation of these balances lay impregnability, the first essential of insurance. He then quoted the Economist, which, in referring to underwriting surpluses, said: "They provide the slowly-accumulat-ing reserves for contingencies upon which security rests and without which insurance from the public point of view would be little better than a gamble. In order to achieve security of the highest class these annual surpluses, when they are earned, are always treated as funds held in trust for the public rather than as cake to be cut up and divided among shareholders. This sound system of insurance finance has boen taught to the world by the British companies, and no other system' will give that endurance and impeccable security , which is of the essence of insurance, and without which insurance is a mockery." Government Insurance. "Another thing periodically advocated." added Mr. Wilson, "is Government monopoly of insurance. "Every thinking person will agree with the slogan of more business in government and less government in business. In this Dominion the State competes with companies in life, fire and workmen's compensation business. Such competition is sufficient guarantee against excessive premiums. Furthermore, the large number of companies operating ensures the best possible service. A moment's reflection should convince any employer or employee that in the case of workmen's compensation, for example, their interests will be served better by many competing for their favour than by one, even the Government."