GOVERNMENT ASSURANCES AND ANNUITIES.

New Zealand Mail, Issue 40, 28 October 1871, Page 3

GOVERNMENT ASSURANCES AND ANNUITIES.

(Prom the Canterbury Pbess.)

The report of the Annuities Commissioner, which has been laid before Parliament, is on the whole satisfactory. The number of proposals received shows that an increasing interest is being taken in the subject of life assurance, and that the undertaking of the business by the Government is beginning to be appreciated by the public at large. We are nevertheless of opinion that the system has not met with the encouragement it deserves. The successful conduct of the business of life assurance is so largely dependent upon activity and pushing management, that it is scarcely to be wondered at that, however- great the advantages of the Government assurance may be over those of assurance companies, the latter have succeeded in holding their own against it. We shall attempt to point out what advantages the Government office offers in comparison with those of companies.

In the first place, the most striking difference is on the particular of security. In the case of companies, this consists of the investments in which the premiums and reserve fund have been accumulated, such portion of the paid up and uncalled capital of the shares as may not have disappeared, and the unlimited liability of the shareholders.

In the case of the New Zealand Government assurance the security is simply the colony itself. Nothing short of the utter and irretrievible insolvency of the colony can by any possibility defeat the satisfaction of any claim. Judging fairly of both cases tlis balance of advantage in security seems to be obviously on the side of the Government office. Experience has repeatedly shown that the best conducted assurance companies may undergo, in a few years, a complete revolution in their management and condition. Half a century of the strictest care, of investments on abundant security, and with correspondingly moderate profits, may be succeeded by a period of speculation, in which the accumulation of years are dissipated, and a position of wealth and safety exchanged for a floating existence, dependent mainly upon the chapter of accidents, and the doing of fresh business to cover claims arising out of the old. It would be unjust to suggest that, in the case of many* companies, perhaps in most, such disasters are at all likely to happen, but we think it right to point out that the whole security which the assured has, generally speaking, rests upon assets and administration over which he can have no control or influence whatever, and which may be good or bad exactly according to whether the judgment and ability of the directors are good or bad. Life assurance, as hitherto conducted, has unquestionably been a great public benefit, but it is worth while to see whether its benefits cannot be made more sure and more general. When people insure their lives, unless for some temporary purpose of business, it is done once for all; they deposit their savings in the full confidence that there is no shadow of doubt as to their intension being fulfilled. It is therefore

startling every now and then to read of an old established company being wound up, and its policies becoming little better than waste paper. We believe that the New Zealand Government Assurance should be looked upon with thorough confidence in this respect. There may be some who affect to question the ability of the colony to provide a perfect security to the assured. The reply to these is the simplest. If New Zealand cannot make good its life policies to its own colonists, it is not a safe place to invest any savings or capital in, nor to settle in. Another point of comparison, and one of an importance secondary only to the question of security, is the difference on the rates of premium.

An examination of the rates charged by companies shows that in assurance without profits the lowest rate adopted by any company is considerably higher than the New Zealand Government rates. Of life assurance with profits we are not now treating, for it is of course out of the question for the Government to undertake business of this kind. We think, however, that it will not be difficult to see that the extra premium paid for assuring with profits would, if invested in shares in building societies and similar institutions, prove more profitable in the majority of cases than paying so much more than is necessary for assurance to the directors of the assurance company, to invest or speculate with on behalf of the assured. Indeed, it seems clear that if the profits are to be better than those which the assured could make out of his extra payments, the risk of the companies’ investments must be so considerable as to be quite incompatible with certainty that the policy will be paid when it falls in.

There are other reasons which should entitle the Government assurance to be warmly supported by the public Amongst others we will, without laying undue stress on it, mention that if the profits of life assurance can be made to flow into the Colonial Treasury, instead of into the pockets of foreign shareholders, the public gain will not be slight. Still better will it be, if the taking up of the business by the Government leads to the profits of assurance remaining in great part in the pocket of the provident colonist. Notwithstanding the advantages which, in our opinion, should make the Government assurance popular, we think that there are certain obstacles to speedy success. One of these is the habit of reference to Wellington before any policy is concluded. Surely a means might be devised of doing away with such a fertile cause of delay and expense. A very moderate annual outlay should suffice to make risks readily acceptable in the large towns throughout the colony. In the case of the most important places, it is probable that it might answer well to have an agency in the hands of an officer who should have enough of his time free to push the business. It is to be hoped that the Government will give an earnest attention to perfecting the system which they have wisely introduced, and which, we think, may be of the greatest permanent benefit.