THE "COUNTIES' INSURANCE EMPOWERING ACT''

Bay of Plenty Beacon, Volume 4, Issue 152, 8 September 1941, Page 4

THE "COUNTIES' INSURANCE EMPOWERING ACT''

portant and opens the door to precedent in future legislation.

If co-operative effort aims at a reduction of insurance premiums, and believes it can be achieved, and is warranted, then a case presents itself for a critical examina-

tion into existing insurance rates and I personally believe that a good case can be presented for a reduction of fire insurance rates by at least 25 per cent.

I hold the view with a long experience as a Couniy and City Councillor that the counties would have been well advised to endeavour to arrange special rates either through the Government officer or through a reputable company. The business of insurance requires a special technique and expert management and necessarily involves considerable responsibility that is entirely outside the domain of local Government under the Counties Act.

My purpose in this letter is not t(. criticise the many good features of co-operative effort or to belittle the desire of the Counties' Association to obtain reduced rates of insurance for its ratepayers because I, am fully aware that the rates on many classes of risks appear unduly high,, but to take a strong exception to the constitutional dangers involved in passing an Empowering Act that so badly perpetuates the pernicuous system of legislation by "Order- in Council" or by Rules and Regulations aixJ abrogating important democratic principals. Each session we fi-)d Parliament being steadily divested of its legislative authority and inroads being made upon its constitutional prerogatives that call for the jealous and watchful protection of our representative, rights and privileges under the constitution. County ratepayers are already carrying a heavy! load in cost factors in this connection and any legislation that adds to these responsibilities should have the careful scrutiny of county councils. Yours etc., C, H. BURNETT. Jfauranga, 1/9/41.

Sir, —In. their zeal to please the Counties' Association on the one

hand and the principals of co-op-erative effort on the other—the respective parties in Parliament have

almost without discussion, and certainly without amendment, thrown . to the winds vital democratic and constitutional principals. The "Coun ties Insurance Act" will go dQwn in our legislative history as a*farther" instance of a law that gave author-, ity to a Minister and his departmental officers to make or enlarge a further legal enactment that willhave the authority or ratification of Parliament. In other words this Act is famous not for what it contains, but for what it leaves out, and is deliberately designed to em* power the Miinister to enact many Important clauses in the Counties* Insurance Scheme, that will be duly found in those unwritten statutes of our country known as Rules and Regulations. This unconstitutional practice is not peculiar to our own Parliament —it obtains in the mother of parliament and elsewhere. Lord Hewart (recently Lord Chief Justice) drew public attention to the danger in his able book entitled "The New Despotism." If an insurance Company applies for a charter and registration, under the "Companies AcL" it lias to file its Memorandum and Articles of Association to not only protect its shareholders but to protect the insurers and in fact the generaL public. But under this Act the Minister and the provincial directors (personnel unknown) have the power to enact, and gazette the Memorandum and Articles of Association largely, if* their own terms. The proper coursd? to adopt was to embody the Menitorandum in the Act itself. If! an Insurance Company desires t> amend its articles it is bound to call its shareholders together, and! In the same manner any alteration of the articles of the Counties Insurance Act should be carried onfc by an amendment in Parliament ond should not devolve upon the Minister as a final authority., The Minister stated that the scheme was co-operative and dici hot aim at profits, but profits must surely be made to pay directors salaries and sxpenses, staff, rent, advertising and

general expenses. It is quite uncler-» stood that in co-operative effort the profits over and above expenses would go hack to the respective Counties either by way of reduce«l premiums or a reduction of capitals But what provision is jmade for a Reserve Fund? Until the business develops it must necessarily lean [ npon borrowed money to carry on. [t must not be overlooked that the Act operates over a field that is necessarily limited to the county areas and that one of the most important aspects of insurance business is to spread the risks asi far a<s possible. Another aspect is the danger of competitive action outside the areas. The Act states that the' capital is limited to £100,000 but does that sum limit the liability of the Counties? Are not the shareholders (ratepayers) the ones who will carry the responsibility of any losses in the final analysis? The profits made hy Insurance Companies

appear alluring but 111 the background are heavy It is easy: to say there will be no urge to make profits, but profits must necessarily be made to mail* adequate provision for losses aftd to safeguard the loan capital apart Altogether from the costs of management. The clause permitting councils to raise .their shares of loan capital without the consent or ref-» erence to the ratepayers on thescore of the expense involved in another flagrant interference with . a democratic and constitutional principal that was .designed to protect the ratepayer from having his property pledged for loans without his consent at a Poll. I submit thai? it never pays to part with prim— cipal on economic grounds. Broker-. « age and advertising costs will have to be paid in any case and the expense will be infinitesimal, but the principal involved is extremely im-

(Continued in previous column)