The Opunake Times. FRIDAY, OCTOBER 12, 1894. LIFE INSURANCE.

Opunake Times, Volume I, Issue 30, 12 October 1894, Page 2

The Opunake Times. FRIDAY, OCTOBER 12, 1894. LIFE INSURANCE.

There bas been a good deal written on tbis subject since the Government brought in the proposal that foreign insurance companies should be compelled to deposit certain sums with the Public Trustee for tbe security of the policyholders, in such companies, who were resident in New Zealand. As usual an onslaught has been ma-Je on the Government office to show that it is not the office in which the people should insure, and that therefore the other offices arc a necessity for the benefit of those who wish to avail themselves of this form of investment. From this premise it is argued that, being a necessity, no restriction should be placed on their operations by the Government, which is supposed to be directly interested in the advancement of the Government office from other reasons than the benefit and protection of the policyholders. In the first place these foreign offices collect a large sum annually in the colony in the shape of premiums, and this amount tlivy a'*e ft liberty lo with-

draw from New Zealand and invest in the colonies where .-.their principal Boards of Directors are resident. Snch witndrawal of capital from the colony would undoubtedly be detrimental to the prosperity of the country, and therefore it is the bounden duty of the Government to try and protect our interests. This they have done by establishing a State insurance where the people of the colony can obtaiu the same advantages as arc offered by foreign offices, and at the same time get absolute security for the ultimate payment of their insurance contract, whilst their money being invested in the colony adds to its wealth and prosperity, from which they indirectly reap a, further benefit. It is argued by some again that it is not the business of the State to enter into competition with private com--panies. Those who make such a charge must do so without thinking, or, laok a knowledge of the subject. Were these foreign companies proprietary ones, that is, companies guaranteed by the capital of shareholders who would reap a benefit from the investment of such capital, and whose capital was used as security fur the fulfilment of their policy contracts, such a charge might be sustaiued, and it would then become a question for the consideration of investors whether State competition with private enterprise was .desirable or not. As a matter of fact, however, there are no such companies doing business in New Zealand. They are all, on the contrary, mutual offices, This brings us to the consideration of what a mutual office is. A mutual office is one in which there are no shareholders, and therefore no subscribed capital, One in which the reserve fund consists of the accumulated premiums of the policyholders, and in which the total profits, derived from the conduct of the business, are divided amongst the policyholders in proportion to their respective interests. The Government office is exactly on the same footing. The Government put no capital into the business and do not participate in any of the profits, they being all divided amongst policyholders in exactly the same way as they are alleged to be in what are called private offices. An intending insurer has then to consider before making his investment, three things. Firstly, security; secondly, profit; and thirdly, the Welfare of the community in which his interests lie. If he should choose a private office he pays in his premiums, which are invested by an irresponsible Board of Directors, who may so invest the funds that a repetition of the late financial crashes which took place in Australia may occur. On the other hand he can pay them into the Government office, in which case he gets the guarantee of the State that they will be forthcoming when wanted. From a mutual office he is to receive whatever profits are made. From the Government office he gets exactly the same concession. So that in reality the question of choice of office is narrowed down to whether he prefers absolute security, which is guaranteed in the Government office, or takes his chance that heads will turn up when he planks it down in a private office. The private office invests the accumulated funds, and out of the proceeds pays the profits, with the difference that all the Government office funds are invested in the colony. The office, whichever it may be, is therefore only acting as broker to the investor, but the question of competition does not crop up. Advocates of private offices then attack the management of the Government" office, and either not understanding or purposely misrepresenting its position, misquote the cost of management, which is admittedly a vital point. The expenses are divided into two parts, viz.: The cost of procuring new business, and the cost of conducting renewal business. In the former case the most eminent actuarial authorities admit that the whole of the first year's premium may be expended in procuring new business, in which case the cost would be cent. In the statement of expenditure, this cost of procuring new business is included in the cost of management, which is in reality a misnomer, as generally understood. The statement of tb<3 Government Office shows that there was a sum of £40,596 provided by way of loading for expenses, whereas the amount disbursed under the heading of expenses for 1898 was £'54,071, and from this it is argued that £13,475 were drawn from capital account. From the sum shown (£54,071) may reasonably be deducted the first year's premimums on account of new business issued, viz., £22,G01, which would then leave £31,479 for the ordinary expenses. That this deduction is not excessive, may be judged from the facts that the commission on new business araounted4o £13,286 ; medical fees, £4891 ; advertising, £988; travelling expenses, £1420, which are nearly all on account of new business, and to this has to be added the proportionate share of salaries incurred for preparation and* issue of policies, &c. It will then be seen that the permanent provision for expenses is greatly in excess of the actual expenditure, leaving a handsome surplus for distribution amongst policyholders.