GOVERNMENT INSURANCE DEPARTMENT.

Inangahua Times, Volume II, Issue II, 19 August 1881, Page 2

GOVERNMENT INSURANCE DEPARTMENT.

# (Wellington correspondent Cbristcburcb Press.) Wellington, August 5. Tbe "report of Mr Godfrey Knight, Government actuary, on'lbe Government insurance department, was"presenled \o Parliament to-day by <he Colonial Treasurer. The following is 'a summary of its chief features. Ibe is dated June 20th last. It states that the funds of tbe insurance department had increased in ten years .318 per cent., and in fire years 113 per Tbe ex* penses of management absorb about 15 per cent of the income, being only half the cost of private offices of the same age, and less than some companies twenty years older. The large number of deaths arising, directly or indirectly, from intemperance, is alluded to. Many'deaths have occurred from consumption and other diseases which ought ;to have been detected at the time of the application for the policy, but in spite of all these drawbacks the office has done remarkably well. Tbe largest number of policies are for £500, the next for £200, then for £100 ; for £300 and smallsr sums there are 4949 policies; for £100 to £200, 5265 : for £200 to £500, 1253 ; for £3000, tbe maximum for which any single life is insured, there are only 22 policies. The department has been urged to increase this maximum to £4000, but has not deemed it advisable, The balance-sheet shows a net surplus on June 30th, 1881. of £73,670. Of this sum it is recommended that £56,000 be distributed as bonus to policy holders, leaving £17 670 as a reserve fund to provide for unforseen contingencies and to equalise future bonuses. There are several different methods by which the division of. profits may be mide, but Mr Eni»ht announces »bat based on the proportion of 'loading.' Jhat is tbe difference between the ' net ' premium and tlje ' osce ' premiums accumulated at interest. Tbe other methods are condemned as unduly favor* ing older policy holder?, and as being in more or less degree inequitable. He recommends that all holders of life and endowment policies, who ha»e paid two years' full premiums and whose policies are still in force, should participate in the bonus about to be declared. He strongly deprecated the idea of stipulating, as some offices do, that policy holders shall not be entitled to any bonus until the policies are five years old, as this is liable to cause disappointment and dissatisfaction, which it is desirable to avoid. He advises that each share of the profits should be converted into its rever* sionary equivalent, allowing this to be exchanged at any timo for any of the other forms to be explained directly. As this priyilege may be exercised prejudicially to tbe office, he recommends the calculation to be framed so as to neutralise possible adverse selection by using higher rates of interest in the computation than have been employed in the valuation. He proposes to allow policy holders the option of taking their bonus in a reversionary shape as an ad* dition to the sum payable at death, this, however, to be at any time convertable into (1) a cash bonus, or (2) a permanent reduction of premiums. He argues that it would not be equitable to charge tbe whole cost of new business against the ; 'loading' contributed by new policy ( holders, and advises a fair apportionment, but policy holders not in any case to participate in the profits until they had ' paid two years' full premiums. In the case of new policy holders be would de« duct one and a-half jears' 'loading' ' from the accumulated loading contributed by such new insurers who have entered during tbe last qumquenium. "Where a policy has been purchased by the pay- ! ment of a single premium, or by a limited number of premiums, tbe calculation ] should be apportioned so as to equalise it over the whole duration of the policy, and then take in account onty tbe loading ' so equalised. Thus only a fair pro- ' portion of the loading, tbat belonging to £ the past period, would |be taken intoac- l count, and each share would be equitably ( determined according to tbe actual con- \

dilution towards the profit. Mr Knight observes that a very low siaudard of valuation ba3 been used by the department in making a reserve for lia» bilit'es. Had the 'Carlisle' instead of the ' H.M. standard been adopted, il would have shown £100,000 as available for distribution as bonus. Mr Knight knows o r no office which has attained so high a standard of valuation in ten years, BDd very f ew old office* are able to make such strong reserves as he now recommends. He proposed that the Government shall consider the claims of the working class to be supplied with a system of inscrance adnpfei fo their requirements, and that die industrial branch be re-opened, that being needed more urgently by the poorer classes tlmn the ordinary branch by wealthier people Mr Knight indicates the following; as the shape the division of profits would take under this scheme : — A polioy of £100 taken at the age of thirty and of five years' duration would be entitled to £4 13< reversionary bonus at death, or £1 2s 31 cash bonus, or to a reduction of premiums by 4* lid for five years, or by ls4Jper annum for life; and 9 £100 po'icy tak^n at the age of thirty nn lof ten years' duration, : H would receive £8 6reversionary bonus, or £2 11s 81 cash bonus, or a reduction of premiums by 11s 5d for five years, or by 3< 2 1 during life. In this way a £1000 policy ten years old and taken out at the age of thirty, would be entitled to a reversionary addition of £83, or a cash bonus of £25 76s Bd, or a reduction of prenvuna by £5 14s 2d for five years, or by £1 11s 8J for life. It must be also remembered that the lower premiums charged by the Government would be tqoul to a further bonus of £200 if calculated in tbe usual way. Mr Knight concludes by expressing his gratification at the marked success achieved by the department.