CHURCH INSURANCE FROM WITHIN

New Zealand Tablet, 25 September 1913, Page 15

CHURCH INSURANCE FROM WITHIN

RESULTS IN IRELAND AND AUSTRALIA (From the Austral Light.) The cost of insuring his property against damage or destruction by fire does not, as a rule, give the ordinary householder much concern. In any case, he is bo unversed in the technicalities of fir© underwriting as to be quite unable to determine whether his premium is or is not a fair one. The position of owners or'trustees of valuable buildings which are graded as first-class risks is somewhat different. The annual outlay involved in obtaining adequate protection for theii properties has compelled them to go more minutely into the matter than the ordinary policy-holder, and they have come to the conclusion that the premiums on first-class risks are excessive. Hence, State Governments, City Corporations, merchants operating on a large scale, as ell 'as religious denominations, have gradually withdrawn from the existing companies and established funds out of which losses through fire might be made good. ' The wisdom, or otherwise, of this new departure can be determined only by results in each case.

But the experiment appears to have attained success in Great Britain, where these private insurance funds have had sufficient duration to enable a reliable opinion to be formed. The multitude of religious bodies were not the last to perceive the apparent advantages of 'Church Insurance from Within,' and their properties are now mostly covered by policies of denominational companies. The fire insurance, companies do not appear to have in the past made due allowance for the special immunity from fire of properties vested in religious and other corporate bodies. Given two buildings of similar construction, with external and internal conditions practically identical as regards liability to fire, the fact that one was used as a church and the other for business or residential purposes made no difference in the rate of premium. There was not any adequate abatement for the absence of * moral hazard in the risk on the church, although costly experience with property in the same grade (in which ' moral hazard ' did exist) should have dictated a discrimination.*

* 'The "moral hazard,"' says a writer in the Annals of the American Academy of Political and Social Science, ' is frequently found among persons of means and of high social standing.' This hazard is direct and indirect. The direct moral hazard is ' where a property is fired by the owner for gain. The indirect moral hazard is where the owner may not be prospering,

Early in 1902 the movement attracted attention in Catholic circles in Ireland, and after some consideration it was decided to take action. Later on in that year a company was registered in Dublin with a paidup capital of £IO,OOO, and having as directors some gentlemen of the highest commercial standing in the Irish capital. Ecclesiastical approval was given to the company, and the Church authorities were represented on the board of management by the Very-Rev. Dr, Donnell an. Bursar of St. Patrick’s College, Maynooth. Although there were some initial difficulties, and a rather onerous expenditure attended its inception, the company soon demonstrated by its profits that the cost of Church property insurance could be materially reduced. In 1907 the company began to make a donation to the Irish Archbishops and Bishops of £IOOO per annum; and by 1910 had distributed in this way £4OOO for religious and charitable purposes. In the meantime, the company had gained great financial strength. By . the end of 1909 its paid-up capital had increased to £20,000, while the net premium income was £4373, and the accumulated reserves £11,545. The lesson derived from the conspicuous success of the Irish company could not be lost on observers in Australia. It was recognised that in this country we had an even more spacious field for such an institution. Climatic conditions alone enforced the adoption of even wider measures for protection of Church property from fire than were required in Ireland. Bush fires and other causes of disaster, familiar enough to Australians, are quite unknown in the motherland. Then there is the position of the Catholic community here, carrying the burden of two educational systems per cent, of the cost of State education and the whole cost of their own schools. Any reduction in the outlay in protecting Church property throughout Australia would, therefore. be a welcome relief'. These considerations suggested an inquiry during 1910 to ascertain the views of the Archbishops and Bishops of Australia, whose individual approval was at once given to the project. Subsequently it was officially considered at Conferences of the, Bishops of Sydney and Melbourne provinces, and formal authority given to the formation of a company exclusively for the insurance of Catholic Church property. Finally, on November 22, 1911, under the law of New South Wales, the Catholic Church Property Insurance Co of Australia, Ltd., was duly registered, and on January 1, 1912, the company commenced the transaction of business. The first directors were: Michael Meagher, Esq., of Bathurst; Thomas Count O’Loughlin, K.S.G., of Ballarat; and the Hon. Hugh Mahon, M.P. In 1913 the directorate was enlarged, when J. J. Carroll, Esq., solicitor, of Sydney, and Vincent Nolan, Esq, LL.B., of Melbourne, accepted seats on the board. As happened in the case of the Irish company, the initiation of a new enterprise generally involves considerable expense, chiefly in remunerating • brokers and agents for the disposal of shares. The promoters of the Australian Catholic Church Property Insurance Co., broke new ground in this respect. The intervention of brokers for the sale of shares was not sought. It was determined that shares should first of all be offered to the bishops, clergy, and members of religious communities, and this was done by circular. Later on, applications were received from the Catholic laity. In this inexpensive way nearly 30,000 shares have been allotted to subscribers throughout the Commonwealth and New Zealand, so that the entire proceeds from the sale of shares have passed to the company’s credit without any deduction whatever. The company has also left the beaten track in avoiding the bulk of the heavy outlay entailed on other companies in the pursuit and retention of business. It employs no agents. It deals direct with its clients. To be of maximum benefit to the Catholic community, the company recognises that it must eliminate the middleman. The character of the business to which

and has little or no incentive to safeguard his property. To these may be added the demented "firebug," the tramp, and the small boy who likes to see the fire brigade turn out.':

it is confined ; relieves the Catholic Church Property Insurance Co. from the necessity of resorting to the competitive methods of other .iinstitutions, as well as from copying their elaborate internal management. The working expenses and losses of other fire companies operating in Australia range from 76 to 100 per cent, of their net annual premium income. The working expenses and losses of the Catholic Church Property Insurance Co., during its first year's existence, despite the fact that the outgo embraced much non-recurring expenditure, were under 15 per cent, of its net premium income for 1912.

.: These figures do not require emphasis. They reveal a disparity which he who runs may read and grasp without difficulty. The position is to be explained by the economical methods just noticed; and, for the rest, by the special immunity of the property insured. Church buildings are rarely concentrated in a limited area where a single fire might result in a disastrous loss. They are widely scattered, almost invariably detached from privately-owned tenements, generally constructed of stone or brick, and carefully looked after by the- occupants or trustees, who" are vitally interested in their preservation from fire, which is not always „ the case with those in charge of buildings used for business or residence.

Persons dealing in a large way with fire insurance companies require to be satisfied, and very properly so, in respect to two essentials. The first. is, that the contracting company is strong enough to meet all claims likely to be made on its funds; and next, that its premium rates are fair and reasonable. The limitation implied in the words ' all claims likely to be made ' is employed advisedly. Because, if such an unthinkable situation arose as that every policy became concurrently a claim, no fire insurance company now in existence could meet its obligations. The liquid assets of the strongest companies are only an infinitesimal moiety of their total contingent liabilities. The utmost insurance managers expect to do is to provide that no single disaster, or series of disasters, shall involve such losses as will financially cripple their companies. The precautions adopted by the Catholic Church Property Insurance Co. are even more stringent. While the properties covered by its policies are. the safest extant from an insurance point of view, the company reinsures largely with other underwriters, retaining only such amounts as, in the event of fire, it can pay without the slightest embarrassment. •

In regard to its main purpose— a reduction in the cost of insuring Church property, the company has already been successful. Five years elapsed from its inception before the Irish company was in a position to donate any of its profits to religious or charitable purposes. But our Australian company has been able, at the end of its first year's operations, to allot its policy-holders bonuses approaching 50 per cent, of the amount of gross premium. In addition to the ordinary 10 per cent, rebate given on the issue of a policy, the Australian company pays a cash bonus of 40 per cent, on the policy's maturity. In other words, a policyholder in the Catholic Church Property Insurance Co. pays only 12s for what costs him 20s elsewhere. It is estimated that, by the end of the year rebates and bonuses amounting to some £ISOO will have been received by its policy-holders throughout Australia. This is an achievement which should arrest attention, yet it may be accepted as falling far short of what could be accomplished by universal co-operation of trustees of Catholic Church property in the company's activities. Without materially increasing its working expenses, the company could handle a much larger volume of business, and it may reasonably be expected that this business, now bestowed in other directions, will gravitate in the immediate future to this institution, owned and controlled by Catholics exclusively. For over half a century Catholics have been making huge contributions to the treasuries of outside companies without any appreciable return. This Catholic company enables us to stop this waste. That it has already rescued for Church purposes a substantial sum, which, but for its intervention, would have been lost, justifies its existence, arid indicates that within it lies the power of

great practical utility td the Catholic Church in Australasia, '■ The progress of the company, as shown by its accounts, is most gratifying. The net profit on its operations for 1912 (including provision for unexpired premiums) amounted to- £2172 Bs. From this sum it paid to its shareholders the modest dividend of 5 per cent. Considering that the shoreholders’ funds earn over 4 per cent., the ""premium income was scarcely affected by the dividend. There is no doubt that the shareholders are entitled to look for a higher return in these times of dear money; and under ordinary circumstances the company should be able to pay it without difficulty. The funds of the company are all invested in Australian Government Stock, and its assets at date are over £30,000. Although the Catholic Church Property Insurance Co. issues policies in all the Australian States, it has so far opened offices in New South Wales and Victoria only. The former is -situated at 28 Elizabeth street, Sydney, and the Victorian office is at 481 Bourke street, Melbourne.