INSURANCE RISKS

Timaru Herald, Volume CXXXVII, Issue 19802, 18 May 1934, Page 14

INSURANCE RISKS

POLICIES BEING REVISED FALL IN BUILDING VALUES It is understood that fire insurance soon will have entered a new era by the revision of risks. It was learned by a representative of “The Timaru Herald” yesterday that contrary to common belief, fire insurance companies do not wish to collect premiums upon inflated insurances. Many insurance policies are out of date as far as the sum insured and premium are concerned. To reconcile old policies with up-to-date values, insurance companies actually are seeking to reduce risks, although that means reducing revenue. The fall in building values by at least 30 per cent, during the past six years has led most insurance companies to take that prudent if paradoxical action. Circulars to Clients. Circulars are being sent to clients by most companies seeking co-operation. One circular states: “As we wish to review all the risks upon our books to bring them up to date in view of the depreciation in values, we shall be pleased if yoq will make any alterations to the attached proposal, sign, and return as soon as possible.” Refunds of premiums are being made j by most companies in respect to the i unexpired term upon the amount of 1 inflated insurance admitted or reduced. ‘‘We only wish to collect premiums on the amount of insurable value,” said one flro insurance manager. Only an Indemnity. ‘‘Some of the lending institutions are prone to force insurances up by requiring cover for the full amount — even up to the amount of their mortgages—which enhances the sale of properties,” said a manager. “But insurance companies are working against that. It is only ignorance that brings about such a state of affairs. Insurance contract is only one of indemnity. One will often see advertisements offering dwellings for sale, at, say, £6OO and stating ‘insurance’ to be, say. £7OO. The public should realise that insur- ! ance companies cannot pay out more ! than the cost of replacement or indemnity.” “We would all sooner have argu- ; ments with men about insurance values before a fire than after a fire,” said an insurance executive. “From now on insurance companies are attaching to renewal notices and policies a note emphasising that the contract is for indemnity only. “There is £40(y)00.000 of fire insurance cover current in New Zealand today. The companies do their utmost to inspect every risk to ensure a margin between the value and the amount of insurance granted, with the object of the insured taking a portion of the risk. Values have depreciated owing to the abnormal times. Reinspect ions of risks have been made, necessarily, but without increased premiums.” It was also pointed out that statistics revealed that the fire loss in New Zealand was about £1 a head of the whole population, and that this country had the notorious distinction of suffering the highest fire loss a head in the world. Building Costs. A builder approached confirmed that building costs had fallen, “generally j speaking, at least 30 per cent.” It depended largely upon the class of building, whether of the steel-framed reinforced concrete building or the wooden bungalow. “It is the fault of insurers if they’ spend more on insurance than would be recoverable after a fire,” said an official. “It’s only an indemnity con- j tract. It would cost almost the ! amount of the premium to make an j inspection of most farmers’ dwellings. | To a lesser extent the same principle applies in the towns. That is one reason it is not practicable to have anything but an indemnity contract.”

Attention was also drawn to a statement issued in September, 1932, by the Allied Building Industries of Otago, representing architects, master builders, painters, etc., as follows:—“Exhaustive analysis shows that prices today are 25 per cent, lower than the average of prices for similar work for the years 1920-27, and approximately about 35 per cent, lower than the peak prices of 1929. In many cases to-day prices are obtainable which compare with those ruling just prior to the war.”