LIFE INSURANCE

Manawatu Standard, Volume LVII, Issue 202, 27 July 1937, Page 5

LIFE INSURANCE

THE GOVERNMENT OFFICE. REPLY TO CRITICISM.. A categorical reply to certain points raised in a statement issued recently by the Associated Chambers of Commerce concerning the Government Life Insurance Department was made by the acting-Prime Minister (Hon. P. Fraser). “My attention has been drawn to a statement in the Press emanating from the Associated Chambers of Commerce of New Zealand, in the course of which an attack is made in general on the policy of the Government in encouraging State enterprise, and, in particular, on the operations of the Government Life Insurance Department,” said the Minister. “The general criticism will be dealt with at the proper time, but in the meantime, in view of possible damage to a well-established State institution which carries the full confidence of the people of this country, ami which -has done wonderful work in the cause of life insurance, I think it desirable to reply at once to the statement of the Associated Chambers. “The principal points raised are restated as published, and my replies follow: It is axiomatic that the State is not constituted to trade as efficiently as private enterprise. A fair example is provided by life insurance, since New Zealand occupies third place in the world on the basis of the sum assured per head of the popula- / tion. “The Government Insurance Department is then named and dealt with as the ‘fair’ example. This statement in untrue in substance and in fact. The department shares the honour with an English office of having the lowest expense rate of all offices transacting business in the Dominion. The average rate of the two offices is 14.02. The expense rates of the other offices I range from 14.32 to 46.61. It will be 6een that the Government office is definitely one of the most economically managed. In this connection it may be mentioned that the department enjoys no special privileges (excejit a small one in the matter of some rates, which is infinitesimal), it pays all the taxes that a private office pays, it has no directors nor shareholders to pay, and a less amount is expended on very high salaries for the principal officers. The Australian Insurance Journal, an independent publication, on July 30 of last year made the following statement: ‘Very few life insurance institutions in the world can claim to be more economically managed than the New Zealand Government Life Insurance Department. The department is a.ctuarially as sound as the'rock of Gibraltar.’

From 1897 to 1907, while the business of the Government office as measured by the amount of insurance in force increased by-20 per cent., the business of all the private companies taken together increased by 78 per cent. . . . The department needed to display the same energy, economy and "efficiency as private offices.

“This statement is apparently extracted from a book written by Professor Le Rossignol and Mr W. Downie Stewart in 1910. During the intervening 27 years great progress has been made by the Government Insurance Department, whose foundations were then being well and truly laid. lam not concerned with the position as it stood 27 years ago, but the present-day figures speak for themselves. The new business wiltten in the last five years is. as follows: —1932, £1,088,445; 1933, 295,656, an increase of 19 perteent. over 1932; 1934, £1,661,348. ah increase of 28 per cent. over 1933> 1935 £2,005,995. an increase or 20 per cent, over 1934; 1936, £2,863,801, an increase of 42 per cent, over 1935. “Present indications,” continued the Minister, “are that a further record will be established this year. These figures should indicate that energy is being displayed. As regards efficiency. it will be sufficient to quote the words of a chairman of the board of directors of a competitive office. In referring to the Government Insurance Department, lie stated that it was probably the best-managed State department of its kind in the world. The progressive decrease in the percentage of total policies, held, by the Government office m recent years is shown by the following fig ures, which bring the position up to date:—lß93, 49 per cent; 1907, 38 per cent; 1915, 32 per cent; 1920, 30 per cent; 1925, 28 per cent; 1930, 26 per cent; 1935, 23 per cent. “The best authorities upon life insurance,” commented Mr Fraser, say definitely that an office cannot solely be judged upon the size of its business nor upon the volume of its new business. The vital is the return it gives to the individual policy holder. The Government office gives a return which compares more than favourably with any private office. Reference to Stone and Cox bonus tables will prove this to be the case. “The statement concludes: It amounts to this, the taxpayer does not want State trading enterprises— -1 If they can give him advantages no greater than or only as great as those which private enterprise can give him. “The Government Life Insurance Department and the State Eire Insurance Office have given the taxpayer a measure of relief and a. sense of security which no private enterprise .ever provided or contemplated providing, said Mr Fraser. 2. ... if any unfair privileges are given to State concerns over private competitors. “There is none with the small exception already mentioned,” he continued. 3. .. if lie has to foot bills for State enterprise. “The taxpayer has never had to. foot any bill for the Government Insurance Department.” . 4. ... if the growth of State trading minimises his opportunities to earn an independent living or engage in a business. “The growth of this department has furnished employment for many of our own people. All nermianent officers

employed by the department are New Zealanders bred and born, qualified by examination for the positions they hold. Future positions are open to New Zealand’s sons and daughters who qualify in the usual manner.”

5. ... if by the exemption of State trading concerns from the same rates, taxes and other charges and cmiditions which are imposed on private enterprise, the taxpayer’s own ta.x load is increased through the nar-

rowing of the field of taxation. “There is no such exemption with the small exception already mentioned,” was the Minister’s comment.

“1 will now put to the Associated Chambers of Commerce, presumably representative of the business men of this country, this simple question,” he added ;«“Is is better or worse for them as individual business men, apa.rt from any question of loyalty, to encourage and support or to criticise unfairly an institution which is a proved success arid which has an income of over £1,000,000 per year, every penny of which is spent or invested in New Zealand ?”