OVER-INSURANCE

Observer, Volume XXIX, Issue 27, 20 March 1909, Page 2

OVER-INSURANCE

It is, or should be, the business of an insurance company to see that it does not assume a greater degree of responsibility with respect to insurable properties than is warranted by their value. Even without aaiy improper intent, an owner, when hefeels he can afford to pay the premium, will naturally obtain the largest amount of " cover " available to him. If the company does its duty to itself and the public, it will take care, by a rigid system of inspection, to protect itself against over-valuation. But to what extent is this precaution, observed ? It is all very well to say, as has been said, that it is difficult to arrive at proper valuations. In too many cases thevaluations are made in the most perfunctory way, or reliance is placed in the owner's honour. It is the commonest thing to hear insurers protest that their risks were accepted with only the merest pretence at verification at values.

If then, the insurance offices fail to take proper steps for their own protection, they must not complain if once in a while they are overreached. But to denounce theaction of the over-insuring propertyowner as necessarily a crime is surely an abuse of language. The system suggested by Superintendent Hugo of holding an. official inquiry into every fire, big or little, would probably have some salutary effect. It would tend to make both insurers and underwriters careful in making their estimates of value, for fear of the pillory of publicity. An equally good result, however, could be obtained by the companies themselves if they were more strict as to the proportions of risk they undertake. Moreover, that precaution could be applied without fe expense, and often needless official interference, which would attend a system of universal inquiry.

Who Is Responsible ?

PROBABLY Fire Superintendent Hugo would disclaim any sug-

gestion that he is a sensationmonger. Yet in one of his addresses to the Fire Brigades Conference last week he made an assertion which savours more of the sensational filagree of the melodraniatist than of the pronouncement of a responsible Government official. " Over-insur-ance," the Superintendent is reported to have said, " was one of the greatest crimes of the century." And to this great crime of over-insurance, with the incentives to incendiarism and carelessness winch it gives to the property-owners, he attributed the unenviable reputation for excessive fire loss wliich ISew Zealand has undoubtedly achieved.

That large numbers of properties in the Dominion are insured in undue proportion to their value will hardly be disputed. But the Superintendent's words, if they are to be taken literally, and not as a mere rhetorical flourish, seem to convey an imputation that insurance is commonly undertaken with a view to unlawful gain at the expense of the _ underwriters, rather than for its legitimate purpose, security against accidental loss through fire. How otherwise can it be in any sense a crime ? It is on this point that his exaggerated use of language calls for protest.

Even granting that cases of deliberate over-insurance with a view to incendiarism do occur occasionally, it must be admitted that the instances are few and far between. Much more frequently, when incendiarism does happen, it must arise from temptation to the fire-raiser though the concurrence of business misfortune and high insurance, effected in the ordinary course of affairs'. To assume- that many men propose for large -insurance policies otherwise than for self-protection is to brand human nature with a greater degree of perfidy than the average person will venture to suggest. In any case, the underwriters cannot divest themselves of a large share of the responsibility in the matter. The carelessness in Mr Hugo's indictment applies more properly to them than to the insurers.