GOVERNMENT LIFE ASSURANCE.

Otago Daily Times, Issue 3367, 20 November 1872, Page 5

GOVERNMENT LIFE ASSURANCE.

We KHve been requested to publish the following observations upon " Master Humphrey's" letter upon the Government Assurance Scheme, which are taken from a private letter from Captain Baldwin, Travelling Sub-Commissioner, Government Life Assurance, to a friend in Dnnedin : — " Master Humphrey" commences by showing that last year the expenses of the department amounted to 37 \ per cent, of its revenue ; but I do not think I need say much upon this head, seeing that he himself in the following sentence explains the matter by admitting that the expenses will decrease as the oflico grows older. All large undertakings are expensive just at the beginning, and this is specially so in the case of Life Insurance. Professor I)e Morgan goes so far as to say, speaking of one Insurance Office, that "in the first year of its ■existence it would not be surprising if all the premiums paid were swallowed up by the expenses." But as far aa this item of expense is concerned the Government Office contrasts favourably with most of the larger private offices. Take the Australian Mutual Provident, for instance. During the past two years of its existence the total receipts of that Company were £918, and the expense of management £300,, being at the rate of 40 per cent, very nearly. During the first two years of its existence the Government Office obtained £20,< 00, at An expense of management of, not as your correspondent says of £10,500, but of £9000. In his £10,1500 ho. includes £1200 paid for policies, and £326 for annuities— sums which everyone must see at once have nothing whatever to do with management. Now this makes the expense of management of the Government OfSce 36 per cent, during the past two years, againot 39 or 40 per cent.

on the part of the Mutual Provident in the same time. . The next portion of his letter requiring refutation, or rather explanation, is this. He says the Colony has £15,000 odd, lam quoting the amounte roughly, in bands, whilst ita liabilities are £600,000. I don't suppose for an instant "Master Humphrey meant willingly to deceive people, but this portion of his letter is apt to leave an erroneous impression behind. The real position is this : The Government Annuities Departpart tnent has invested £15,000 as a reserve fund, and has entered into contracts with assurers to the extent of £G6o> 00. How much of a reserve fund should it have over on hands, if in a healthy position, if in a position at this very moment to meet all its liabilities without calling upon tne taxpayers of the Colony 'i Of course nobody but an actuary can tell this; at least, it could not be accurately stated without an actuarial investigation, which investigation, I may say, will he made on the department entering ite fifth year. But though no such statement can be made accurately, it can be made approximately. A company that has been two, live, ten, or twenty years in existence say, ought to have as a reserve fund two, five, ten, or twenty per cent, of the amount of its liabilities in hand as a reserve fnnd. j Apply this rule to the private Companies, I and you will find that it is accurate enough for all practical purposes. Well then, according to thia rule, the Government Annuities Department should have £13,200 on hand, being 2 per cent, of iU liabilities. " Master Humphrey " says the Act has been in operation three years, but this ia not so, seeing that though passed in 1809 it was not put into force until 1870. Possibly up to the 30th of June last, the end of the year, it may have been 2 years ami a month or two in force, but for all practical purposes it baa only been two years. I have thus shown you that the £15,000 on hand ia miflkient, and more than sufficient, for a reserve fund ; and if now, at it* first starting, it has thus been carried on without a loaa, how great must be the profit by and bye. Supposing, for instance, no increase whatsoever in the business of the last year, the department seven years hence will have an income of between £140,000 and £150,000 a year, whilst the expanse of management will not be one whit larger than at present, reducing it thus to about 4i per cent. Again, " Master Humphrey " says the premiums charged are less than those charged by private "Companies. This is not a fact. For instance, the Scottish Provident is a cheaper office titan the Government, and where is there a more prosperous ofKce than the Scottish Provident t