7

I.—B.

J. H. RICHARDSON.

Thuesday, 14th August, 1902. J. H. Eichakdson, Government Insurance Commissioner, examined. (No. 2.) 1. Mr. G. J, Smith.] Have you gone into the question of the likelihood of this scheme proving a paying one or otherwise ?—I have not gone into the matter, because it is hardly in my Department. My functions are confined to life and accident insurance. 2. You have not gone into the question at all; you have simply looked through and revised the Bill ?—I have made suggestions in relation to the Bill, mainly in connection with the forms of account, and that sort of thing. I have, however, considered some of the main principles of the Bill, and if you desire to ask me any questions I shall answer them to the best of my ability. 3. Have you had any experience of fire insurance ?—Nothing to speak of. My experience has been almost entirely confined to life insurance. 4. From your experience in connection with the Government Life Insurance Department, do you consider there is a good opening for a payable fire-insurance business on the part of the Government ?—Any legislation of this kind must be purely experimental. I could not say definitely whether such a scheme would pay or not. It seems to me that it would depend a good deal upon the lines upon which the business was conducted. One can only form an idea as to how the scheme would succeed by what has taken place in other countries. So far as I can ascertain, the only country in which a scheme of this kind is in active work is Switzerland —that is to say, a scheme on an extensive basis. There the cantons insure buildings and contents. I believe, though I have not read up the matter lately, that in most of the cantons the insurance of the buildings is compulsory under the scheme. The authorities, owing to the friction with the insurance companies, found the scheme was not workable except on a compulsory basis; and in some of the cantons friction with the companies was so acute that the authorities were obliged to make the insurance of the contents of buildings compulsory also. So that, judging by the experience in Switzerland, it seems to me that the part of the Bill which makes the insurance of the buildings compulsory is necessary. Ido not see how a scheme like this will be workable unless there is some such solid basis. 5. You think that the compulsory part of the Bill is a necessary one ?—I think that is the backbone of the scheme. 6. Then, if the compulsory part goes by the board, the whole scheme will too ? —I would not like to say that. A great deal would then depend upon the manner in which it was determined the business was to be conducted—that is to say, upon the view the Government took of the matter. A great deal, to my mind, would depend upon whether some compromise were arrived at at some stage with the other companies. I would not be prepared to say that if a compromise were arrived at some workable scheme might not be evolved ; but if the State Department were continually fighting the other companies you can imagine what a state of chaos there would be so long as the struggle continued. That is my feeling about the matter. If the State Department were established on a voluntary basis, it seems to me that at some stage or other there must be a compromise ; otherwise if the State Department and the companies were " cutting " one another's throats indefinitely they would all come to grief, so far, of course, as the business in the colony was concerned. Of course, the persons insured would benefit in the meantime, but where would the State Department get to ? My feeling in the matter is that there must be some bed-rock of payable rates which every one must reach sooner or later; every one would have to conform to that. Otherwise there would simply be chaos, so far as I can see. 7. You have not a compulsory side to your Life Insurance Department?—No; but the bases of the two systems are entirely different. In life insurance there is a dominant factor—age—on which everything primarily depends. The premiums depend upon the age of the lives insured, and all life-insurance businesses are conducted on the basis of a mortality table. For instance, the experience of the British life-insurance companies has been collected and tabulated by the British Institute of Actuaries and a definite mortality table has been the result, and from that the premiums are deduced. All life companies have to depend on such a mortality table as a basis. Some companies put more loading on the premiums for expenses than others, and some adopt a different rate of interest from others in calculating the premiums. I should have mentioned that in life insurance the premiums depend first of all on the mortality table adopted, then on the rate of interest assumed as being likely to be realised on the funds during the currency of the contracts, and finally on the amount of the loading added to the pure premiums to cover expenses and contingencies. In such circumstances there is something definite to act upon. There is a mortality table which all the companies adopt. If they did not conform to some scheme of that.kind disaster would be inevitable. That is perfectly clear. If a life company were to conduct its business on a basis that did not depend upon a sound mortality table it would sooner or later come to grief. The first actuarial valuation, if properly conducted, would show a deficit. Then, again, the contract of life insurance is for the whole of a man's life, or for a definite portion of it. It is not a contract for a year, as in fire insurance. Therefore there is all the more necessity that the premium should be calculated on a stable basis. In fire insurance the contract is a yearly one; it is renewable annually at the option of either party, whereas in life insurance the contract is renewable at the option of the insured only, the insuring company having to carry it on to the end of its term if the insured so wishes. There is, therefore, a great difference. Unless, therefore, some compromise is arrived at at some stage with the other companies, you can imagine that "cutting" of the rates would be taking place that would be ruinous to everybody. There must be some stage below which matters cannot go. 8. So far as life insurance is concerned, you have got it down to almost an exact science?— Yes. 9. And so far as fire insurance is concerned, it is practically an unknown quantity ?—lt is more or less hypothetical, mainly because there are so many different points to consider. Inter alia, there are the different classes of trades, the construction of buildings and their contiguity to