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The Pamphlet Collection of Sir Robert Stout: Volume 74

Fire Insurance by the State or by the Municipalities

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Fire Insurance by the State or by the Municipalities.

Printed By the Southland Times Company, Limited Invercargill


Fire Insurance by the State or by the Municipalities.

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The following interesting paper, read by Mr Joan Kingsland before the Municipal Council and the Municipal Fire Insurance League of Invercargill; is published for the information of the members of the various Fire insurance Protection associations throughout New Zealand, by

The Insurers' Union of New Zealand.

Henry Wright, Secretary.


It is hardly necessary that I should apologise for offering you this paper on Fire Insurance. It is due to the Municipal Council, and the Municipal Fire Insurance League, who appointee me to represent them at the conference of the insurance protection associations of the principal towns in N.Z., held in Wellington, on 14th Feb., that I should report on what has been done, and what it is proposed to do, to obtain relief from the excessive premiums we have had to pay in the past to the insurance companies, and from their recent com hi nation to make those rates still higher. I take this manner of reporting in order that it may be done more fully and deliberately, and that any information I have to give may be equally available to both bodies, and through them to the public they represent.

At a meeting held in this ball the following resolution was carried, viz.:—"That in view of the excessive rates now levied by insurance companies for this town, the large general increase of rates in New Zealand, and the excessive proportion of the premiums received that is expended by the companies in other ways than in paying losses, it is desirable that some other mode of five insurance be adopted."

This fairly states our position with regard to insurance companies. We are prepared to pay each others losses by fire, and a reasonable cost of working the insurance machinery; but we are not satisfied that so large a proportion of the premiums we pay should be spent in administrative cost, and in payments to shareholders, as dividends, on the inflated value of their contributed capital. There has been no necessity through ordinary or extraordinary losses for the increase of rates forced on us by the companies. The London correspondent of the Otago Daily Times, under date Jan. 10, 1896, says: "A good impression has been produced in the city by the cable message restive to the excellent results shown by the New Zealand Insurance Company and by the handsome dividend declared." Still, in the face of this and similar results with the other companies, there has been such an increase of rates all round, that one commercial firm we know of controlling a considerable number and variety of risks, has experienced an ad vanee in rates of 90 per cent, and probably this will represent to a large extent the average increase. This statement of our case was recognised by the confervence and after discussing the proposal made at a public meeting in Dunedin, to promote insurance through two or three companies only, it was clearly seen that this would only play into the companies1 hands and give us no relief. Any two companies would take all the risks they could get, but would immediately reinsure with the other companies, securing a 10 per cent profit to themselves on the transaction. The formation of another company on a mutual basis was also discussed, but was rejected, as it was plainly shown that though page 2 a respectable capital to begin with would be subscribed at once, there was no certainty of success, as we should have to fight for business on the same expensive lines as the companies are working upon, and in the end fall into the ring, as other companies have done who first started on a colonial basis and with colonial sympathies. Another proposal was considered—viz., to make overtures and give a guarantee of business to a company not already doing business in New Zealand. The same difficulty presented itself here—heavy administrative costs, and big dividends to be paid out of our premiums, would make insurance no cheaper to us. Again, it was suggested to treat with the underwriters' association with a view to procuring lower rates; and the conference communicated with the associations then sitting in Wellington, offering to consider any communication they might make; but a "stand off" reply was the only result. This might have been expected, as with the provision the companies have to make for cost of administration (about 30 per cent on the total premiums received), and the further provision for dividends on the inflated value of their shares, and for carrying large amounts to reserve, they must continue to increase the premiums, so that they may pay dividends on the constantly increasing value of their shares, rather than give the insured relief by lower premiums.

The present position of some of the companies with reference to dividends paid on the increased value of their shares, and on the increased value of the aliares themselves, is shown in the following tables, and the list could lie very much extended. They are from a circular, as will be seen, issued to induce the public to subscribe to a new insurance company.

Issued with the Prospectus of the Machinery Insurance Company. Ltd.

The following particulars, compiled from official sources, will, in the opinion of the directors, fully Justify the statement in the Prospectus that "The History of Insurance Companies as a Means of Investment maybe considered unique, and that they occupy an unrivalled position not only for the high rates of Dividends which they pay but for the exceptionally high market prices commanded by their Shares

AmountNAME OF COMPANY. Called up perDividendsPresentPremiumsShareMarket PricePer Cent£ a. d.h£ 3. d.Accident Insurance Co., Limited1lup.c2 & 105Alliance Insurance Co ..2 416 p, a10480Alliance Marine and General, Limited264lhj G130Atlas Life Insurance Co 6 £l 2s23385Boiler Insurance and Steam Power Co, Ltd221) p.a9350British and Foreign Mari Tie Insurance Co420p.c.2 10500Caledonian Insurance Co5£1 4s30500City of Glasgow Insurance Co ..2 10lflp.a o p.c. £11 p.c p.c of a11 103rClerical, Medical and General Insurance Co,.2 10 17 10itEagle Insurance CoC m hi Edinburgh Life Assurance 20£1 18s49Employers Liability Insurance Corporationa10p350Engine, Boiler, and Employer's Liability Insurance Co. Ltd.300320 p.c9300English, Scottish and Law Life Insurance Association3 10s11 10220Gresham Life Office1Guardian Fire and Life Assurance Co56Imperial Insurance Co., Ltd Indemnity Mutual Marine Insurance Co.'27 104f10 3VISIO180Imperial Life Assurance Co1027250Lancashire Insurance Co 212 p.c.6 15ISOLaw Life Assurance Society2£4 5s on J£inpan]241100LAW Union and Crown Fire and Life Assurance Society125/6 o Is.6 51000Legal and General Life Assurance Society314s13 10170Life Association of ScotlandS 1515 p.n, o 6s40 101900Liverpool and London and Globe Insurance Society ..fully paid75 p.c.472400

I present herewith the minutes of the conference, by which it "will he seen that although the proposals for municipal insurance formulated by the Invercargill League were not accept eel under the name we gave it, its basis and some of the details have been favourably considered. It is not a matter of vital importance to the insured whether insurance is done through the State solely or more or less under municipal con- page 3 trol, both must certainly have an intimate connection with it. The State mast control the safety of the funds, Municipalities; most control the safety of property. Any legislation on this matter must recognise these principles. But it is a matter of vital importance to the insured that the cost of conducting the business shall be kept within such limits that the premiums paid shall be mainly applied to meeting losses, and not to the exploiting of our necessities. That there is this objection to the present form of insurance will be seen by the following from the balance sheet of one company that last year received in premiums £958,898 and paid in losses only £485,440; or losses 50.57 per cent on premiums received, independent of income from investments which would be & considerable amount, as their general reserve is £1,125,000, Their cost of management was 32 per cent, and all this was done on a paid-up capital of £120,000.

Our conference, as will be seen by the following resolution, recognised the main points we proposed—Mutual and Compulsory, so far as buildings are concerned, but optional for stock and effects. Resolution:

"State Insurance.—Resolved: That at a meeting of delegates representing the Fire Insurance Protection Associations of Auckland, Wellington, Hew Plymouth, Wanganui, Christchurch, Invercargill, Gisborne and Napier, it was resolved : That fire insurance for the protection of buildings, stock and effects is a necessity of private and commercial life; that the business of fire insurance in the past has been profitable to the companies trading in New Zealand; that insurance, from the powerful combination of the insurance companies, has become a monopoly, and that the insured are expected to accept whatever tariff the combined companies choose to impose; that life insurance by the State has been a success, and the delegates present representing large interests, are unanimously of opinion that the time has arrived for the establishment of a State Fire Insurance Department; that it should be on the mutual principle, and should be compulsory so far as all buildings are concerned, and optional for stock and effects; that the Government be requested to at once give its earnest consideration to the promotion of such a scheme."

But the conference considered it could be Jone better entirely under State control. In the course of an interview by the conference with the Premier, the Hon, R. J. Seddon, he said, "Seeing that the local bodies were by law given the control of water supply and the regulation of building construction within their bounds, the local authorities should not be altogether ignored with respect to this matter of fire insurance."

Municipalities and public bodies must be connected with insurance, as with them lies the carrying out of bylaws defining the areas to which risky buildings must be confined, and where specially risky occupations must be carried on, as well as the supervision of plans for proposed new buildings, controlling their construction so as to prevent the spread of fire, as well as—the most important factor in dealing with fire-the provision of an adequate water supply.

These provisions could not be made by the State, but the efficiency of them would be recognised by the State in classification of the towns, and classification of the risks in towns when the schedules of premiums to be paid by the insured were under consideration. If is of little consequence whether the name be "State Insurance" or "Municipal Insurance" if the necessary connection with municipalities for its safety and success is maintained. Municipalities must have control of the appliances and cost of preventing and extinguishing fires, and the corporation valuation of properties for general rating purposes must have a relation to valuation for insurance purposes. The property they generally protect should be considered in the classification of risks, and the surplus of premiums over losses should be returned to each municipality or local body in proportion to the success they have achieved in preventing losses by the completeness of their building regulations and fire service.

The Conference supported the mutual principle, in preference to the surplus profits on premiums being retained by the State or local bodies. Municipal revenue is mainly derived from rateable property. Goods, stock, and furniture are not rateable property, and it would not be equitable that the surplus profits of premiums paid in insuring these should be retained either by the State; or by public bodies, but it should be returned, pro rata to those who had contributed it, The mutual principle has been successful in life insurance, when the premiums charged have been in accordance with accurately ascertained mortality tables, and the surplus, when the average mortality has not been reached, returned in cash bonuses, or a larger amount than the cash bonus added to the policy. Of course every life policy must sooner or later become a claim, but every fire page 4 policy does not necessarily become a claim. Every year the profit and loss in that year is ascertained, so that in fire insurance less intricate calculations are required than in life insurance. A sum comparatively small as compared with the premiums would be sufficient as a reserve to provide for any extraordinary loss, and should that sum by any improbable contingency be absorbed, still, by virtue of the mutual principle, the whole of the insurable value of the country stands at the back of the improbable contingency as security to the insured. The Conference also supported the principle of compulsory insurance, so far as buildings are concerned. On the adoption of this principle hangs the success of State Insurance. This means that in every Borough, County, and Land District a valuation is made of the insurable value of all buildings, and a compulsory rate is made up to a certain proportion of the value of each insurable building, Then, in accordance with the schedule of risks—with certain provisions for appeal against over or under insurance, and the right of the owner to declare to insure for half the insurable value only, with the rate chargeable on the property the same as under the Municipal Act—the State will have secured something like half the insurable value of the country.

Compulsory insurance is no hardship or injustice, but is perfectly equitable, as all should insure, because out of premiums provision should be made for the protection of all, and those who pay premiums should not contribute to protect those who do not. If provision is made for the voluntary insurance of goods, stock, and furniture through the State, and the insured find that, even under the old rates—leaving out of consideration the extra imposition lately made by the insurance ring—they can get a return of 25 per cent, of their premiums as paid through the compulsory rate on their buildings, they will not be slow to see that the State is the most advantageous medium of insurance for all risks outside the compulsory rate We know that the very sound of the word "compulsion" with many, is very irritating, but all the laws of God and man are compulsory—you must and you must not—and the mild foam of compulsion we purpose would certainly be as beneficial as many other compulsory laws, No prudent man having Capital in house, ship or goods, on land or at sea, should neglect to protect them from wave and flame. No prudent man who has taken on himself the responsibilities of wife and family should chance the scant mercies of the world to them should death over take him. Life insurance is his plain duty. No prudent wage-earner who depends for his daily bread on his strong right arm should neglect health insurance; one of the many Benefit Societies is his safety. By each of these means a man can claim as a right—mutual help from others-which, if he neglects the means, will only be doled out to him by the cold hand of charity. Compulsion saves the man from the stigma of improvidence and neglect. The success and advantages of Mutual and compulsory fire insurance secured and demonstrated the same principles might be well applied to health and life. The late Sir Harry Atkinson held some very pronounced opinions on this last question, and ha4 he lived it is very probable he would have promoted legislation in that direction. Municipalities must be closely connected with s ate insurance, for on them must fall the responsibility of fire prevention and extinction. There must be no repetition of the cry we have heard, "Let it burn, the insurance companies will pay," This must not be transposed to, "Let it burn the Government will pay." Premium-payers and ratepayers must learn that a fire is a public calamity and a public loss, and that they will have to pay for it in increased rates and less bonuses, and that every individual hag a direct interest in preventing and extinguishing fire. The object of municipalities should be to make fires impossible, or at any rate to reduce the number to a minimum."

A great deal has been done by the United Fire Brigades Association of New Zealand towards efficiently and expeditiously fighting their enemy, and in distributing valuable information on their work. In 1894 there were 80 fire brigades in New Zealand, with a strength of 1473 officers and men; 61 of these were connected with the Association. With a more liberal recognition under State insurance than they have hitherto had—with no one in particular to own them, sometimes only tolerated by municipalities, and with less consideration still shown them by insurance companies—their efficiency and usefulness would be materially increased. There has hitherto been a game of tennis played between fire brigades and municipal council and insurance companies, each to some extent ignoring liability. It is not equitable now that corporations should pay the whole cost of fire protection, inasmuch as corporation revenue is derived from the rateable value of land and buildings only, and not from the value of goods, stocks, and furniture; page 5 yet the latter is equally proteced by the corporation's expenditure on five appliances. Now corporations are contributing to the protection of value in stock, &c., that contributes nothing, on its part, to corporation revenue, There is a serious difficulty And probably an injustice here, as curporations are protecting, without being paid for it, something like one-half the insurable value within their limits. Still, the work of maintaining an efficient fire brigade must fall on municipalities, as it is impossible to give insurance companies the immediate control of this organisations, and equally impracticable to allocate the charges for their maintenance in equitable proportion amongst all the companies; and even if this were possible it would not be desirable, as the companies, with this increased cost of their administrative expenses, would meet the case with increased premiums, and following their present policy, would collect two pounds from the premium-payer for every pound they spent in protection and prevention.

It is not the business or policy of insurance companies, as such, to put out or prevent fires. They make profits because there are fires. The more money they spend in reducing the risk of fire the fewer customers they would get. Their business is to calculate the risk and charge accordingly. The tables herewith show that they have succeeded in doing this very fairly. Our complaints do not refer to New Zealand alone, but are universal.

The following is an extract from a paper read before the Business Men's Association of Newport, R. I., by Charles Acton Ives:—
Table I.
Stock Insurance Companies
Received for Premiums
Paid for Losses
Cash dividends to Stockholders and policy holders.
Brokerage, Fees, Salaries, Office Charges, and other running expenses.
dols. dols c dols c dols c dols c
E. Fire & Marine Ins. Co. of Providence 300,000 257,482 74 190,792 81 8652 00 90,566 58
Merchants Ins. Co. of Prov 200,000 285,589 79 198,348 20 6000 00 94,931 67
Prov Washington Ins Co of Providence 400,000 559,204 31 530,491 03 263,853 79
Ætns Insurance Co of Hartford 4,000,000 3,855,585 66 2,350,586 86 720,000 00 1,173,487 64
Agricultural of Watert'n, N.Y. 500,000 965,011 09 592,621 87 49,950 00 390,481 19
American of Boston 300,000 327,052 22 235,127 56 8,907 00 128,428 08
American of Newark 600,000 573,176 13 333,785 96 62,493 50 196,761 92
American of New New York 400,000 1,461,076 29 1,100,239 85 42,093 36 505,942 81
American of Philadelphia 500,000 1,811,341 09 1,769,294 75 25,460 00 636,337 80
Boylston of Boston 557,200 299,393 72 224,320 10 16,757 10 116,766 89
Buffalo German Insurance Co. 200,000 456,219 87 259,144 35 40,000 00 154,802 84
Citizens Fire Insurance Co of N. Y. 300,000 580,369 20 549,085 08 15,721 15 276,460 82
Columbian of Louisville 200,000 870,088 02 310,347 01 448,296 88
Commerce of Albany 200,000 143,938 20 125,385 45 12,000 00 48,952 04

Mr Ives says : "The important figures in the above table uve in the sixth column. These show that more than five-sixths of the enormous difference between income and losses goes, not to the stockholders, but to the numerous expenses of running the business. This, to borrow a word from the scientists, is friction, and therefore dead loss It reminds one of the annual salary of 10,000 dollars said to be paid the president of a prominent life insurance com puny, and for which it is difficult to believe that officer returns an equivalent in value of services rendered. The figures of the above column six show exactly how the statement sometimes made that fire insurance is not profitable is to be taken. It is not more profitable than it is, not on account of the lire losses incurred and paid, but because of the way the business is managed. It is also clear that the waste of the amount represented by column six is unnecessary, and may be almost wholly saved to the people, as shown by the following figures taken from the insurance commissioner's report. The total amount of risks taken at Rhode Island by the companies doing business on the mutual plan in 1803 was 380,354,770 dols.

The total amount of premiums paid was 3,358,207
The total amount of losses was 1,019,123
The total amount of cash premiums returned during the year as profits on terminated policies was 2,577,705

State fire Insurance is already in successful operation in one of the Swiss Cantons, with page 6 a population of only 73,000 people. The insurance is compulsory, and the buildings insured by the State are not allowed to carry any additional insurance. Some buildings of an extra hazardous nature are not insurable, and the owners have to carry their own risk. Government commissioners value the buildings, and the value is determined by the amount which, at the time of valuation, the buildings in their then existing constructions would cost for material and labour, with deductions for age, use, poor state of repair, etc. There is also provision for appeal against caluation, and the owner is entitled to revaluation on improvements, and reclassification under varying conditions of the risk.

The town council of Toronto also saw reason to complain of the high premiums charged by insurance companies and the tyranny of an insurance "ring"; all the companies in the city having combined to increase the premiums. The owners of property considered the premiums were 25 per cent too high., as the insurance companies doing business in the city were earning dividends ranging from 10 to 75 per cent, besides paying exhorbitant costs for administration. It was shown that the average losses during eight years was 227,334dols., and that after meeting these looses the insurance companies had a profit of 717,309 dols. Toronto has promoted a Bill to deal with these grievances, but the bill is in some respects different tie rent to the lines we think would be successful, and that have been indicated in this paper, inasmuch as though the compulsory principle has been accepted, the mutual appears to have been left out. I give below a few extracts from reports presented by Mr J. Lamb, Chairman of Committees of the Municipal Bureau, City of Toronto.

"A conference was held with the fire underwriters, twenty-five gentlemen being present, representing forty insurance companies doing business in the City of Toronto. It was explained to the underwriters that by public expression of opinion the rates of insurance were far in excess of what they should be, considering the advantages they (the City) had of coping with a fire, with a supply of high pressure water, Ac, Under these circo instances the premium rates charged were fully 25 per cent, too high, and the profits made "by the Insurance Companies of the City risks were used to pay off losses in other parts of the country, which was not fair to the City of Toronto."

"The Executive Committee then communicated with the chief of the fire brigade (Mr Ardagh) for information regarding the losses by fire, &c. He reported as follows—

Losses by fire, buildings and contents included:—
Year. Losses. Premiums
1886 dols. 280,902 dols. 1,164,163
1887 74,785 638,149
1888 215,192 967,979
1889 134,760 1,016,138
1890, University fire 487,186 1,184,473
The separate loases on buildings and contents for 1891, 1892, and 1893 were:—
Year Loss on Building Insurance Loss on Contents Insurance Total Loss
dols dols dols dols dols
1891 40,723 432,649 169,392 717,557 210,115
1892 67,048 541,568 153,460 569,543 220,509
1893 60,617 426,545 134,788 594,535 195,403
"It will be seen that the amount of lasurance in the City of Toronto, after de ducting losses, are as follows :—
1886 883,201
1887 564,364
1888 752,787
1889 882,378
1890 697,287
1891 940,191
1892 891,597
1893 825,678
Average loss for 8 years dols 227,334 per annum.
Amount received by Insurance Companies, after paying all losses dols 717,309

"There has unquestionably been paid, since the incorporation of the City .an amount in premiums in excess of fire losses which, with interest, would more than pay the whole of the present debenture debt, general and local improvement.

Robert Donald, in the Contemporary Review, Dec., 1895, has grasped the weakness of the proposal, when he says, "The Bill violates the fundamental basis upon which the fire insurance business i a conducted. Fire insurance is a question of averages, of distribution of risks, not alone in variety hut in area. The large fire insurance companies are world-wide in their operations. A mutual scheme, confining insurance to one city, flies in the face of recognised experience and scientific principles. It concentrates instead of distributes the risk. In the case of a big fire now the loss is distributed over a number of companies, and the effect is not severely felt. A great fire in a town where there was only one company would involve a very heavy strain."

This is a correct view of the position—it is a question of number, area, and variety of risks, and our contention is that New Zealand supplies those conditions favourable page 7 to the adoption of State Pire Insurance. From the same authority we learn that at a recent meeting of the Birmingham and Midland Counties Printers5 Association, the following resolution was passed—"That in view of the large increase in the rates of fire insurance, and of the fact that fire insurance has now virtually become a private monopoly, this meeting of master printers considers it desirable for municipalities to undertake fire insurance. To punish town councils and other public authorities for moving in the direction of securing lower rates the com panics have in many cases doubled the premiums. Every quotation received from a company in the "ring" has been the same. There is no question of losses from fire or increase of risk; it is simply the case of a monopoly using its power against the public interest. The same author quotes actual caces in support of this position This unreasonable action on the part of the compaines is ruining New Zealand as well as the older corporations in England, Canada, and Australia. The article from which the above information is obtained concludes : "It is the unwarrantable action of the insurance companies, acting in concert, which is leading municipalities to consider the possibilities of Municipal Insurance, at least as far as their own property is concerned. The Manchester Corporation is just now making an investigation to ascertain how it stands with the insurance companies. The tariff office sprang an advance of 100 per cent on the corporation without warning, which that powerful body reseated. It is now finding out how much it has paid the insurance companies in premiums during the last twenty years, and the amounts received from the companies for damage by fire in the same period. The object is being enquired into by other municipalities, including the Glasgow Corporation, which owns a large amount of property in dwelling houses, shops, and warehouses. This leads to another phase of muncipalities Insurance, If municipalities are act yet capable of undertaking a general insurance business, they are equal to act as their own insurance authority. In every reasonably sized town public property presents a sufficient variety, mainly of a nonhazardous kind, to make it a safe risk. We have a good example in the London School Board, It insures all its own schools itself, except one or two situated near dangerous building. It began this policy ma partial my in 1878 by taking part of the risk Since 1888 it has effected the whole of the insurance itself, Instead of paying premiums to an insurance company it pays them into an insurance fund. That fund now amounts to £30,000 and earns £1000 a year interest. This is the amount which the Board has saved in about eleven years by being its own insurance authority. The total amount drawn from the fund to repair damage caused by fire is less than £2,000. Board schools are not safer than other classes of public property. Other authorities owning a large amount of proper y could insure themselves with equal success, and after the recent arbitrary action of the insurance companies we may expect before long to see some of our leading municipalities following the example of the London School Board."

An experiment in insurance by which each local body insured buildings, goods, stock and furniture in its own district, classified risks, regulated amounts to take on risks, placed the proceeds to credit of general account, and attempted to control, by ordinary resolution, the somewhat intricate business of fire insurance, would certainly in many cases end in failure. Councillor C. C. Shoppee, of the Municipal Council, Bailarat, has taken up vigorously the question of Municipal Insurance, and in a paper read before the council has contributed some valuable information. His present idea appears to be, (1) that the profits derived from insurance should be applied to municipal purposes; (2) that fire insurance should be a self-contained organisation confined to the borough working it. Whether the second proposition could be successfully worked has been previously discussed. With reference to the allocation of the profits it may be said that the revenue raised for municipal purposes should be derived from property rateable by the municipality, and which would be benefited by the expenditure of the rate derived from the property so rated. As goods, stock, and furniture are not rated, and would not be benefited by the profits derived from insurance, the question arises—should not the profits on insurance go back to the insured, rather than to municipal improvements? The profits derived from water, gas, tramways, electric lighting, etc., when the management of these is in the hands of municipalities, legitimately belongs to the municipalities, as they contribute to the increase of the value of municipal property. Councillor C. C. Shoppee, in searching for a better plan of insurance, while closely connecting it with municipalities, will possibly review his proposal to make municipalities page 8 the recipients of the pro tita of all kinds of fire insurance. The following appears in the paper he read:—

"What would a Municipal Fire Bureau do for "The London Metropolitan District"? I have a sheet, issued by one Company, giving the names of 38 offices, with the amounts insured on property in the above mentioned district for the year 1893, The figures are as follow :—
Thirty-eight Offices £826,302,823
Other Offices not named 12,661,084
Total £838,963,907
This amount at la per cent would equal £419,481
This amount at 1s 6d per cent would equal £629,222
This amount at 2s per cent would equal 838,962

The latter i a about the price charged in London.

If the resulta can be obtained enumerated in the earlier part of this paper, what is to prevent Councils from i tic Lulling other undertakings which are known to result in large profits, and which would be a benefit to the ratepayers to secure to the Corporation, by which the general rates could be lowered, and greater improvements made in cities and towns?"

Shareholder s in Tinned in have had something to say recently about one manager of one insurance company receiving £1500 a year for his services. They have perhaps a right to complain of the largeness of this amount from a shareholders' point of view, but from the premium payers' point of view we have the most cause to complain, as we have to provide the money. It is certainly an anomaly that the managers of the insurance business in New Zealand as a whole, should receive more pay than the whole of the Cabinet Ministers who manage the business of the whole country, when the Cabinet Ministers themselves, under a good State system, would find one good commissioner niter who could conduct the business of insurance more to the satisfaction of those chiefly interested—the insured—at something less than : the Premier's salary, which would be a fair; amount—if the pay of each were compared with the work and responsibility of each.

We are constantly reminded of the intricate character of tire insurance, and the talent required to conduct it; but it appears to us that the principle talent of the companies is employed in fighting customers for premiums and in finding profitable investments for the surplus when they have paid losses.

After the classification of towns, with relation to water supply, building regulations, and fire brigades, and the classification of risks in town and country with reference to the probability of the risk becoming a claim, and fixing the premium to be paid, when all buildings in town and country have been valued at their insurable value, and rated accordingly, and when the insurable value of all goods, stock, and furniture offered for insurance have been satisfactorily ascertained the remainder of the work could be done by a sixth standard boy.

Fire insurance by the State should be done at 10 per cent, on the premiums received, and subsidies made to public bodies in pro-proportion to population and premiums received, paid out of that amount. The life insurance business of the A.M.P. Society is done at 8 per cent., and the N.Z. Government's at 15 per cent. The Government could probably connect the machinery of fire insurance, without much cost, to the life insurance business. There is no necessity for the costly machinery of the 20 or 30 offices now doing business in every considerable town in New Zealand-A very little addition to the cost of one office would do all the business in any town. The cost of fire insurance by the State won hi be less in contrast with life, as the cost of procuring business that is incurred in connection with life insurance would be avoided, as would the 10 to 20 per cent, com minion at present paid to agents for collecting premiums. The business would come to the office instead of the office running after the business.

Under a State ay state the losses would probably be considerably reduced. Those who profess to know fix the responsibility of large percentage of fires on the insurance companies. Instances of over insurances are constantly coming to light, and have probably in the past led to many realising fires. If there has been the superior talent amongst the insurance people claimed by them, demanding the high rate of par they have rece i vet!, it certainly has not been visible to the naked eye, but it has been plainly seen that all sorts of risks have been taken unseen and unvalued, even insurance being effected on buildings that have had no existence, with results that are pretty well known.

We are reminded frequently of the large capital required to carry on insurance business; that corporations would break down under the losses, and that the State would page 9 become bankrupt. If the State received the aggregate premiums as the 40 companies now doing business in New Zealand they could pay the aggregate losses the companies now pay.

The losses are now paid out of premiums, and the balances not required for losses have accumulated in the hands of the companies, it is said, to the sum of £42,000,000. That the Urge capital is not required is shown by we company claiming that during their existence they have taken risks to the amount of £750,000,000 and paid £7,000,000 in losses, on a capital of £150,000.

The following will show the position of some of the companies with relation to capital stock and invested assets:—
Capital Stock. Invested Asset.
Dols. Dols.
I Company— 200,000 1,612,167 00
I Company— 205,000 1,078,512 00
I Company— 286,000 1,575,871 00
I Company— 200,000 2,023,193 00
I Company— 200,000 656,288 00
I Company— 300,000 6,772,305 85
I Company— 290,000 2,185,730 00
I Company— 448,275 1,774,000 00
I Company— 200,000 1,751,612 00
I Company— 200,000 2,832,045 00
I Company— 435,000 6,023,602 00

We are told that much of the pro lita of the companies is derived from investments. Just so; and these investments are but the accumulated premiums received in excess of loases paid, and which, under a mutual system, would go back to those who contributed it instead of into the pockets of shareholders. The proportion between the invested capital derived from paid-up shares and capital derived from excess of premiums over losses paid may be judged from the fact that one company has a paid-up capital of £64,000, and its accumulated premiums added make a reserve fund of £146,000. Another company has a paid-up capital of £375,000, and a reserve fund on fire account of £3,000,000, and an annual revenue on fire account of £2,000,000 on the above comparatively limited paid-up capital of Another company with £50,000 subscribed shares of £50 each, £5 per share paid up, has a reserve fund of £339,000, and a revenue from premiums of £1,127,000. This list could be considerably extended, and show similar results. The large capital of these companies is derived from the insured, and is not contributed by the shareholders.

An exceedingly useful volume, entitled "Municipalities at work," has recently been published by Mr Dolmain, and some of the information he gives bears directly on the question now under discussion. He says:—

"It is not a startling proposal that municipalities and public bodies, or the State in connection with these bodies, should undertake fire insurance. What has already been accomplished in the municipalization of several enterprises that were formerly in the hands of private individuals is a matter of history, in 1874 the Corporation of Birmingham bought out the interest of two gas companies which hail previously supplied that city with gas. In the first year they made a profit of £34,000. In 1889, or 14 years after the purchase, the sur lus on the year's working amounted to £70,337. In the 17 years since the purchase the average profit per year has been £42,000; and whilst this profit has been made, the public lighting has been improved and increased, the cost of gas to the consumer has been lowered, lowered the hours of labour to the workmen have been decreased without any diminution of pay, In the same city in 1874 the supply if water was in the hands of a private company; these rights were acquired by the city it a coat equal to £1,350,000. Since the date of the above purchase the waterworks committee have formed a reserve fund of £50,000; made an annual contribution to the rates of C2000; the water rents have been reduced by £33,000 per annum, and there has been a capital expenditure of £57 2,000-The supply has also been increased from 830 million gallons daily to 1674 millions gallons. The supply has doubled and the income has increased from £93,527 in 1876 to £144,541 in 1893. Dolman says "Such a bold and statesmanlike plan could hardly have been conceived and carried out if the water supply had remained in private hands." The Manchester Corporation also purchased from a private company the rights they held to supply the city with water, Since 1847 they have increased the supply from 3½ millions gallons daily to a capacity to supply 50,000,000 for 150 days without a fall of rain. The supply of gas is also in the bands of the Corporation, and yields an annual profit of £60,000. The tramways are the property of the Corporation, which has received in rents and interest from the Tramway Companies about £275,000, and out of this amount it has been about to transfer about £60,000 in relief of rates. Of loans to the amount of about £160,000 contracted in respect of tramways, there has been a repayment of nearly £35,000, and a sinking fund of over £42,000 has been accumulated. As will be seen page 10 below other cities have al a achieved good results in the same direction by undertaking to manage municipal necessities that were formerly in the hands of priva-c companies:—
Gas Water Mrkts. Tl. Net Profit
Liverpool 4500 12,343 16,843
Glasgow 29,500 42,000 3300 74,800
Bradford 11,290 503 2185
Leeds 470 7429 12,287 19,245

"In reference to this table, it is to be remembered that in all casca profits are reckoned only after provision has been made for payment of interest on loans and re-payment of the principal.'

The Conference adopted a constitution and a name—"The Insurers Union of New Zealand," and are now in a better position than disconnected associations-could be to give and receive information, and can voice the wishes of the principal towns in the country. It only remains now for those centres that have not taken any action to enter into communication with the central "Union" in Wellington, and give weight to the action already taken Fire insurance by the State, in close connection with self-governing local bodies, must become anaccomplished fact in the near future if the commencement is made on sound lines. We shall watch with considerable interest the proposals of the Government in this direction. Failure will only be due to a misconception of the principles and details necessary to success, and if the success that inherently belongs to the proposals is achieved the new departure will assist to place New Zealand in the front rank of advanced legislation.


Southland Times Company, Limited, Printers, Invercargill.