'QUAKE INSURANCE

Stratford Evening Post, Volume I, Issue 56, 13 February 1931, Page 3

'QUAKE INSURANCE

THE COMPANIES' VIEWS GOVERNMENT'S ATTITUDE DESCRIBED AS "NARROW" SPECIAL POLICY NECESSARY WELLINGTON,-Feb. 12. At u mooting of the controlling officers of the associated insurance companies operating in the Dominion, it was unanimously decided that no payment could be made in respect, of losses arising out of the recent disaster in Hawke's Bay, except to those policy holders who had insured against loss as si result of an earthquake. A report issued states that the Prime Minister announced that the Government had decided that the State, Fire Office make ex gratia payments, at the discretion of the general manager, to policy holders whose insured property suffered damage, the payments not in any case to exceed the amount of fire damage, and not in any circumstances to extend to purely earthquake damage. The meeting expressed the hope that on reflection, the Government, as representatives of the whole community, will realise that such u hasty proposal indicates a narrow view of the problem confronting them and the means to be taken to solve it." Lead to Companies The statement continues: "The Prime Minister's proposal is to make m gift to a limited number of State Fire Office policy holders. The Prime Minis ter is reported to have said that the Government's proposal was intended to be a lead to the insurance companies. This implied that the State Fire Office and other insurance companies were on a parity, but beyond the fact of being competitors, there is no resemblance between them. The State I'ire Office has no capital and confines its operations to New Zealand- What becomes of its funds, concern only the people of New Zealanu.

"Insurance companies operate on capital provided by private individuals only a small portion of whom reside in the Dominion. Their capital and reserves are the security of policy holders,, not mere*,' in New Zealand, hut other countries, some of which are liable to earthquake tisk. To establish a precedent of paying losses from the result of an earthquake, which is specially excluded from the contract, would strike at the very root of that security and sound practice upon which insurance is founded. Reference is froauontly made to the San Francisco insurance companies. They were liable for fire, but not for shock damage, which was very slight. Out of Hie San Francisco disaster came the realisation that the companies were operating in a manner which might, create a liability that would firstly .jeopardise the security of policies issued all over the world, and, secondly, place the shareholders' capital at the risk of total extinction. To remove thesu hazardr was imperative, and a clause was framed eliminating all losses in any way attributable to an earthquake. At the same time provision Mas made whereby property owners could obtain protection. Mr A. Parlaue, secretary of the tarity Unjustified "Until now the rate at Napier would have been five shillings per cent, to cover both fire and shock damage. By making this form of insurance the subject of a special contract, the demand Was limited and could be provided for. Companies are faced with losses in respect of interests which were protected by such special contracts. The extent 'of these losses is not yet. assessable, but must be considerable. Companies have no justification for placing on a parity the policy holder who had not availed himself of protection, with one who paid a premium for earthquake cover for years. The fact, that insurance companies policies, as now worded, do not cover losses ; attributable to, or in consequence of an earthquake, was definitely established after the disaster in Japan by the highest Courts, which in every case ruled that the policies did not extend to such losses."