THE OTAGO DAILY TIMES TUESDAY, AUGUST 11, 1903. STATE FIRE INSURANCE.

Otago Daily Times, Issue 12738, 11 August 1903, Page 4

THE OTAGO DAILY TIMES TUESDAY, AUGUST 11, 1903. STATE FIRE INSURANCE.

The.proposals of the Government this session for the establishment of a State. department •of fire insurance omit the more mischievous features of the project that were embodied in the Bill submitted >to the last Parliament.' The provisions for the compulsory insurance of buildings in districts in which the scheme should bo brought <m,to force have been abandoned. With them have also been omitted the proposals for the maintenance, of fire; brigades, but these present .themselves in another shape this session, a separate Bill, which contemplates the addition to oiir already overgrown list of local governing bodies of & number of boards that shall undertake the duty of fire prevention, having been laid by the Government before the Legislature,, Granted, however that .the Government's State fire insurance proposals, as we now have them' before lis, are stripped of the most objectionable features of forma* proposals, it dd>3 not follow- that they are not in their modified form, open to serious objection. On the contrary, a close examination of them brings into relief various points against which criticism may forcibly be-directed. The first and most vital objection to the Bill consists in the very grave element of risk which would attend the manage-, ment by the State- of a department oHnsuranco upon the lines that are proposed. The measure is condemned by the Qoyernment expert who was called before; the parliamentary committee last session to give evidence upon the Bill that then represented Hie Ministerial,intentions. The provision for compulsory insurance which was contained in that measure was, Mr Richardson, the 'Government Insurance Commissioner, informed the committee, " the backbone of tho scheme." • This conclusion be based on the experience of the authorities iu Switzerland, who" found, owing to the friction .with the insurance companies, that the scheme wa9 not workable except on a compulsory basis." Arguing from this premise, Mr Bichardsou expressed his inability to see hqw a scheme, such as that proposed by the Government could be made Workable unless there is " some such solid basis "as, lie believes, the enactment of the' compulsory insurance proposals would give it. But the committee had the evidence also of other, expert witnesses—managers of insiirance companies that are doing business in the colony—who, in the course of much interesting evidence, showed that if the State, by making insvu-ance compulsory in the Government office, secured a monopoly of tho business it would be absolutely impossible for it to obtain the reinsurance cover without which it could not safely carry on. And this eyidenco so impressed the committee that it reported to the House that, in its opinion, compulsory insurance was ail undesirable. feature of the proposals. While tho Government, in deference to _ that opinion, has dropped .the compulsory insurance provisions, we have it that the scheme as now presented is, from the point of view-of the Government Insurance Commissioner, an unsound one. And that brings U3-to-what is really the

crux of the whole question—namely, . that the business of fire insurance is one of such.a speculative character, as well as one of a highly, expert character, that it is very much better that the State should leave it severely ; alone. It is argued in some quarters that, since the Government can successfully manage a department of life insurance, there is no reason at all why it should not as successfully conduct a department of fire insurance. .-: But those who hold this opinion overlook the fact that there is an essential difference between life insurance and fire insurance. Mr Richardson explained this fully to last year's committee.' In life insurance there is a • dominant factor—the factor of age—on which everything primarily, depends, and the business, conducted on the basis of tables that have been definitely fixed a 9 the result of-long and patient research, lias been reduced almost to an exact science. No so'with-fire insurance. " There are," Mr Richardson pointed out, "many different points to" consider. Inter alia, there are the different classes of trades, the con-; , struction of buildings and their: contiguity to other buildings, the prosperity or otherwise of districts, as well as the possibility of conflagrations. There is, also, the question of moral hazard, which, of course, does not come into play in life insurance at all, or, at all events, to an immaterial extent." But we are frequently being told the insurance; companies now oprv:,ting in the colony are r making handsome profits, and we are asked ; to believe that, these profits: surely leave a margin for- a reduction ' of rates. That is, indeed, the[foundation of what little agitation there hag ever been for the establishment of a*, State department of fire insurance. Rates are too high and the profits of insurance companies are excessive! If that were really the case, it would be thought that private enterprise would speedily .provide.the remedy. The' bank are choked with money for which investment cannot be obtained in the, colony, and if an insurance company can lis started upon-a capital of being the amount to which,, under the. State Fire Insurance Bill, \ the Government '. would be empowered to borrow in order to establish the' State department—it is an indication of singular obtuseness •on the part of' persons possessing idle capital, in the colony that they have neglected the bppor-* tunity for securing the sound investment for their money that the formation of a fire insurance company would. furnish. The fact is, however, that it is the sheerest nonsense to represent underwriting in the colony as being a highly profitable -business. The general manager' of one New Zealand company — the company which claims to have been, the most ! successful in its underwriting operations of all the Australian and New' Zealand companies in recent years — ' stated in his evidence before the parliamentary committee that, during the previous twelve years, its underwriting profit on the New Zealand fire business was 4.22 per cent. As the Government would have to pay nearly 4 per cent, for its money, it is plain that, upon this basis, the business of fire insurance would she an exceedingly hazardous one for the State, with less experienced management, to embark upon.