NEW ZEALAND GOVERNMENT LIFE ASSURANCE.

Wellington Independent, Volume XXVIII, Issue 3928, 16 October 1873, Page 3

NEW ZEALAND GOVERNMENT LIFE ASSURANCE.

(From the Melbourne " Argus," Sept. 20.)

An experiment of a meritorious and interesting character was some time ago initiated by the Government of New Zealand, and already reasonably encouraging results have been achieved. In the year 1809 an Act was passed providing for the purchase of Government annuities. This Act was supplemented and amended by another in September, 1870, the latter providing more specifically for the undertaking by the State of the business of life assurance. The propounders of the measure argued that instead of hedging life assurance companies round with complicated restrictions, or of compelling them to invest their funds in Government or other sound securities, it would be at once simpler and more attractive that each policy should have the force of a Government security, for the discharge of which the consolidated revenue of the colony would be directly liable. In fact, it was determined that the Government should enter into' active competition with the different insurance companies. Whilst the latter, as an inducement to assurers, offer bonus additions and profit distributions, the New Zealand Government Annuities Commissioner relies for success on low premiums and the absolute security he offers. The terms on which assurances are taken are of a liberal character, and the Government tables have been framed by Mr Black, the actuary, who has x brought about the recent amendment of the system of the Australian Mutual Provident Society. It is said that since the commencemenl of direct Government assurance in New Zealand, the business of proprietary companies there established has diminished. The mutual companies have not suffered so much, and one of them, we believe, has actually progressed. The idea of Government life assurance was probably suggested by Mr Gladstone passing into law a similar measure some years ago. But in England each individual assur ance was, if we remember aright, limited to £100, whereas in the New Zealand system there is no restriction of amount.

It may be of interest to note some of the more important conditions under which New Zealand life policies &vc issued. Some of these agree closely with those in use by first-class offices, but others bear marks of novelty. On the whole, they are liberally and intelligently conceived. Contracts for assurance are only entered into on the lives of persons between sixteen and sixty. To administer the business a Gofernment Annuities Commissioner is appointed, upon whom power is conferred to enter into contracts in accordance with tables and regulations from time to time to be approved by the Governor in Council. All sums received for annuities or life assurance premiums, it is provided, shall be paid to the credit of the'public trust fund ; distinct accounts of such being kept, and " the accumulation of money so received shall be dealt with as the General Assembly shall determine." In case of the public trust fund not sufficing to meet the demands upon it, any required deficiencies are to be paid nut of the consolidated revenue of the colony. It is arranged that where other agents are not specially appointed the postmasters act in that capacity, thus providing a broadly based system of agency. The examining medical practitioners are appointed by the Government. The tables apply to firstclass lives only, and none are accepted at a less rate than that fixed for such a life at the age of 20. Some concession is made to ministers of religion and persons permanently in the service of the Government, but this seems to be merely tentative, as the special privilege does not extend beyond the end of this year. Premiums may be paid twenty- I one days after due date, and if then permitted to lapse, policies may be revived within six months, on proof being given of unimpaired health, the payment of premiums in arrear, and^a fine not exceeding a half per cent of the sum assured. Surrender value may be claimed after three years' duration of a policy. If an assurance has existed for one year or over, and payment of premium be then discontinued, the surrender value is estimated, and such is dealt with as a net single premium of temporary assurance, the term of which it will insure being determined according to age and other conditions. An insurer unable to continue his payments can* demand a paid-up policy for such [ amount as the surrender value justifies. 'Policies are void in case of death' by suicide, duelling, or at the hands of justice, unless such policies were duly registered as transferred to third parties a month before the catastrophe. In any case, although the policy be void, the Government agrees to pay the surrender value at the date of the day before an occurrence of this kind. The net values of policies to be ascertained according to the rate of mortality of either of the tables known as " The Combined Experience" and " The Institute of Actuaries." An important condition is the partial protection of assurances effected for the benefit of wife or children from the operations of the Bankruptcy Act and from executions for debt — this protection to commence when a policy has been in force for two years, and then to the extent of £200 ; after an endurance of live years to extent of £500 ; after seven years, £1000 ; after ten years, £2000. The New Zealand Government has issued a guide to its system of life insurance, and enters minutely into its advantages. It is argued :— "The low premium plan is definite and certain in its character, and least liable to misrepresentation or misunderstanding, being divested of all

uncertainties and complications in regard to dividends, being just and equitable to all, approaching nearest to the essential principles of life insurance, and 'providing perfect security with least possible cost;" and it is urged with considerable force that " the representations by. agents of marvellous results to be expected of policies in their companies, should be carefully scrutinised before acceptance. There is no power in any ' special feature,' or ' dividend system,' or 'surrender value rule,' to produce any extraordinary results. No great advantage is obtained under any special plan, except at a great expense in money or the sacrifice of some other advantage. No company has any magic power of making money. The premiums which are paid by the assured, and the interest upon them, are the sources from which expenses, losses, and dividends are paid. As a rule, the larger the premium the greater the expenses of the company, and, consequently, the greater tiie cost of insurance to the policy-holder."

In the third annual report of the Government Annuities Commissioner (30th July, 1873), he announces the continued satisfactory progress of the department. In the insurance branch there were in the twelve months 1440 applications, of which 1131 were completed, assuring £427,050, producing £13,858 of tiew annual premiums. The claims from the death of nine persons amounted to £2800. The balance in favor of the department is now. £36,801 . The entire insurances granted up to date amount to £1,085,649, covering S9OI lives. Last year and its predecessor show but little difference in amount, but that difference is in favor of the earlier period. Until the business considerably increases, it may be questioned whether the State may not be a loser by the operation of the system. To arrive at something like conclusions, we place income and outgo in juxtaposition. In the former, we include premiums, new and renewed, fines, and interest from investments ; in the latter, commissions, travelling expenses, medical fees, advertising, salaries, printing, and general expenses. The net result of the last year is that, as against £21,490 received, £'6529 was expended, or about 30 ,per cent of receipts. However, the Commissioner reports " that the cost of management in proportion to income is rapidly decreasing, and will in a short time, when exceptional and temporary causes of disproportion', inevitable in the infancy of institutions of this kind, have passed away, bear a very small ratio to the income."

[VYe find on reference to the report itself that a very material error has been made by the transposition of the figures 2 and 3 in the amount of receipts and the percentage. The former should be £31,490, and the latter 20. The paragraph should read thus: "The net result of the last year is that x as against £31,490 received, £6529 was expended, or about '20 per cent of receipts. — Ed. W.l.]