The Akaroa Mail. TUESDAY, MAY 13.

Akaroa Mail and Banks Peninsula Advertiser, Volume 3, Issue 294, 13 May 1879, Page 2

The Akaroa Mail. TUESDAY, MAY 13.

The great importance of the subject of Life Assurance to the well-being of the community, and the fact that a considerable number of our readers are members of the Australian Mutual Provident Society, of Sydney, must excuse for again referring to a pamphlet, the publi* cation of which we briefly noticed in a former issue. The brochure is entitled "The Progressive Policy of the Australian Mutual Provident Society reviewed, byMorrice A. Black, F.1.A., Actuary to the Society.—Sydney, Geo. Robertson." The causes which have led to the publication are thus stated in the introduction . —

"At every Annual Meeting for the last five or six years the question as to whether the expenses of conducting the business of the Society are excessive or not, has been a subject for adverse criticism. Some members complain that the total expenses are so much higher than they were in the early years of the Society; othere call attention to particular items of expenditure, and consider them high, absolutely or relatively, as compared with former years ; at another time it is pointed outthat the ratio of the expenses to the premium income, for a particular year, exceeds that of some previous year; while, another favorite method of criticism is to constrast the ratio of this Society's expenditure with that of some of the oldest Assurance Societies in England, who transact only a small amount of new business as compared with that effected by this Society. .Then again it has been argued that the expenses incurred in procuring new business are so much deducted from the profits of the older members, that it is in fact a waste of the Society's funds to prosecute the business for which the Mutual Provident was founded. But the cliamax of erroneous and unwarrantable criticism was reached when,-at the last anntfal meeting it was boldly asserted * that it was an axiom laid down by all actuaries, that anything in the shape of expenses over 10 per cent, was unsafe.'"

In reply to these and similar criticisms, Mr Black sets himself to answer the following questions :—■ " How much do the Assured contribute for expenses of management ? What have been the actuarial expressions of opinions on minimum and maximum rates of expenditure ? Comparative expenditure between different Societies—what are the causes that operate to its increase or decrease ? Are the expenses of the Mutual Provident high or low as compared with Assurance institutions in England, America and Australia ? Has the ratio of expenses to the Premium income exhibited a continuously increasing or decreasing tendency ? Are the expenses incurred in acquiring New Business excessive, or calculated to dimmish the profits of the Society ? Would it be to the advantage of the Members who have already participated in the profits if the Society transacted a less amount of New Business annually, i.e., admitted fewer Members to share the profits ? " With regard to the first question, the . author gives a table showing the annual premium charged at age 35 by 71 Engglish offices, together with the N. Z. Government and six Australian offices. In this table is shown the portion of the whole premium which has been added to the " net" or mathematical premium to cover expenses of management. This addition ranges from 41.2 per cent in the highest case to 16.2 in the lowest. The mean is about 30 per cent. The A. M. P. Society comes slightly under this, its loading amounting to 28.7 per cent on the total premium. Now if an office charges 28 per cent to cover expenses, and only spends 14. it follows that the remaining 14 goes, to swell the surplus which is available for distribution as bonus. So far as this part of his subject goes therefore, we consider Mr Black has made out his case, and shown that the rate of expenditure is by no means excessive. In the next chapter the. author gives a list of twelve' offices whose ratio of expenditure is less* than 10 per cent on premium .ineotne. These are all old established cddtjpanibs, their average age being 09 years, and average ratio of expenditiire .73. Whether these economically tfianag'ed offices are "models worthy bfimitatiion maybe judged from

the.facb that, while several of them show a decrease lit the amount of business done, the average increase in the guin r quennial period under review is only 8.1 per cent, while that of the Australian Society is 85 per cent for the same period. Taking the first and last years of the period, the comparison is still more unfavorable to. the cheaply conducted offices, for whereas their increase is 12.1 per cent, that of the A. M. I. is no less than 126.9, Mr Black truthfully remarks that " offices in that condition are not to be congratulated on their economical management, even although their expenses are less than 10 per cent, for their parsimony may outwit their frugality." Space will not permit of us going fully into the other questions raised by Mr Blade. Suffice it to say, we consider he has fairly made out two points, viz., that the expenditure of the society of which he is actuary is not ex-

cessive, and that an office may be conducted on a more economical basis and yet not be so profitable to its members. As to the lasf question, we think that the old members who could hold the i opinion that it would be to their advantage that fewer new members should be , admitted to share in the profits betray a, lamentable, igriorancejof assurance business, and the necessity that exists for a constant stream of new assurers to ensure the prosperity, of' an office. If it bd ( an advantage |to; a society to ■ receive "one hundred members, in -'that aVertam amount - ' of profit may I reasonably be expected to be derived from them, a fortiori, must it be advantageous if.tYi'.ah.undcedjoin under the same conditions/, fof cbuf se are assuming ! that the profits are divided , in an equitable manner, i.e., that the new members do not participate in profits that have .accrued without their [assistance. •■■> We ' are aware that some new assurers in the society in question have been under the impression that they were going at once to have a slice out of the accumulations realized by those "who had borne the burden and heat of the day before they joined. This, of course, is absurd, but, given equitable distribution of profits, and no old members can possibly be injured by the introduction of fresh blood, inasmuch as these latter will ;help to reduce the share of the expenses.of management which; will fall' on each individual. We recommend all who take an interest in this subject, members of the society especially > to procure the pamphlet of which we have' given this necessarily brief notice.