CITY CORPORATION INSURANCES.

Dominion, Volume 6, Issue 1785, 25 June 1913, Page 8

CITY CORPORATION INSURANCES.

(To tho Editor.) S' r i~ln tho course of tho discussion of tho offer submitted to the City Council by this firm, to tako over tho whole of tho corporation lira insurances, the posii "ii i s ' K ' CO P 10 rather involved, and wo bo glad if you will allow us to make it a little clearer as tho impression to bo gathered from tho remarks of some councillors is that we were seeking to induce tho council to make a leap in the dark. 1. On May 28 wo wroto to the Town Clerk asking whether the council followed tho practice adopted by some, public bodies in New Zealand, of calling for public tenders for their insurance business, and, if so, that we might bo afiorded an opportunity of tendering. i. Un Juno i wo wrote stating that wo had boen carefully through th» schedule forming the basis of tho contract and icund that we could materially improve upon it, so as to give greater scope to the insurance cover, and asking for an early decision as to whether tho council approved of our suggestion in regard to tho question of . inviting tenders. The reply of tho Town Clerk was to the effect that if wo could quoto a sufficiently low rato to tempt the council to make a change and could also offer the removal of the "average clause" and other restrictions which ho had unsuccessfully fought against year after year, tho offer would lie considered by the Finance Comniittee. Tho Town Clerk added that tho idea of calling for tenders was not regarded with favour and if wo were prepared to submit an offer upon tho lines suggested by us we had bettor do so at onco as tho existing insurances wcro maturing on Juno 24.

3. On Juno 7 we wroto making the offer recently dealt with, in which wo stated that the insurances, if placed with us, would be taken up partly by a New Zenland company and partly by a London company (which we named), and that tho London company had accumulated funds amounting to half <u million pounds and had upon its Board of Directors a gentleman (named) wlio is on the executive of Lloyd's and who stands second to none in insurance circles. We further pointed out that tho Ixindon company would bo directly liable to the corporation for tho whole of the face valuo of tho policy) that the policy would bo endorsed by the best of the underwriters at Lloyd's, and that the endorsers would bo directly liable to the corporation for their respective proportions of the amount reinsured with them, and that wo thus offered a policy giving double direct security for tho amount so reinsured. We also furnished other particulars a.s to the standing and business, connections of this firm and offered any further information that tho council might require; : 4;. Oil Juno 9 we wrote answering an inquiry in regard to tho London company whoso policy wo offered (in conjunction with tho local company's), and later on we were asked whether, if tho council should require it, wo were prepared to give a single policy, either of a company domiciled in New Zealand or a» London company, and we replied that wo would procure either. ,

5. On June 12 wo were informed that our offer had been favourably entertained by the Finance Committee, but that after tho resolution to' recommend acceptanco by the council had been passed, tho ir.sura.nco companies requested tho Mayor to receivo a deputation from them tho same afternoon, before tho council (to meet in tho evening) dealt with c!w Finance Committee's recommendation. 6. Tlio Finance Committee's recommendation that our offer be accepted camo before tho council on Juno 12 and was referred back to tho committeo pending tho outcomo of tho deputation of underwriters which (for somp reason unknown to us) -waa postponed fill tho day after tho council meeting. Tho effect of this was a delay of one week.

7. At the council'"meeting on June 12 there was no suggestion, so far as wo can gather, that inquiries should be mado as to tho bona fides of this firm or of tho soundness of the insurance companies whoso policies wo offered, although tho Mayor is reported to have informed tho council that wo offered a policy of a London company reinsuring with Lloyd's. Councillors eeern to have been satisfied (at that time at any rate) that the Finance Committee's recommendation that our offer bn accepted presumed the fact that . we - had ; satisfied tnem that the corporation would be in safe hands. Theso aro tho facts of the case, and wo have only to add:— ■(a) That we. have "been ready to satisfy tno council on all points, and (so far as we knew) had done so. In our opinion tno lunance Committee's recommendation to the council was strong evidence of this. (b)Tliat wo liavo complied with all tho requirements of tho Jaw of this countrv; r a i? our annual license foo of ,£2OO to the Government, and hold their license to carry on business; (c) That a company carrying on fire sud marine business only is not required to make any deposit with the Now Zealand Government, or make any payment beyond tho ,£2OO annual license fee. The deposit of .£IO,OOO referred to by certain councillors as not having bean iiiado by us _ or our London company is only -required from companies carrying on lifo or accident business; (d) That this firm do not como into the question of security, as we are not the insurers, but merely brokers or agents, for procuring the insurance; nevertheless, as innuendoes (such as wo "might tie eomewihero else" when a fire loss settlement was wanted) were spoken in committeo, wo offered to deposit iiIOOO cash, to bo held during the currency of the contract, as an earnest of good faith, such amount to bo invested in tho joint names of tho Town Clerk on tlio city's behalf and Mr. Braund oil behalf of this firm, and the interest thereon to belong to tho city. This meant a further discount of at least .£SO, or nearly 20 per cent, in all; (e) That the London company whoso policy we offered to tho council carried forward as reserve against unexpired liabilities in 1911 over G4 per oent. of its premiums received for that year, and last year it carried forward over 69 per cent., which is much moro than local companies carry forward. This is tho vital point in an insurance company's monagemeiit.

(f) That wo not only offered 10 per cent, discount on premiums and better contract conditions in important respects, but nlso our constant expert supervision of tho insurances during tho currency of our contract with tlio corporation, thus relieving the Town Clerk and -his staff of somo labour and responsibility. (g) That all insurance companies carryins on business in Now Zealand send premiums out of tho country, to pay for tho reinsurances with Lloyd's under . their "treaty" arrangements with that timehonoured institution; (h) That all losses iinder tlie policies wo procuro for clients aro payable iii New; Zealand. If, therefore, wo send money out of the country in premiums, we cannot hope to avoid having to bring the bulk of it back—if not to meet corporation losses, to meet other losses. This is the experience (according to their own showing) of local insurance companies who maintain that they carry on business liero at a loss; (i) Tliat a councillor's statement that if this' firm srourcd tho corporation's business, other business would follow it, and then wo sliould put up the rates, is doubtless true as to the first portion of the statement, but not as to the last, as wo aTe merely brokers, and cannot control tlio insurance companies rotas (which follow tlio tariff), and so far as tho discount we allow is concerned wo wore prepared to contract with the council for three years if desired; (j) That a councillor's statement that rates in New Zealand will compare favourably with rates in England is not correct, neither was ho warranted in statins that wo are prepared to take tlio corporation's business "at any price." It wpuld have been correct, however, to slate that we are desirous of securing the business of the corporation at any pay. oble price. (k) That a councillor's argument (when opposing the amendment in favour of ill is firm's offer being conditionally accepted), namely, that it would be better for tlie council to call for public tenders (as they might secure still liettor terms) is no doubt unanswerable, but tho fact remains that tlie advantage to the council is at tlio expense of this firm, for it must be borne in mind tlmt our terms liavo been published (and our chance of success at public tender thereby prejudiced), although the letter submitting thorn requested that they bo treated as confidential. Apologising for (he length of this letter, Wo aro, etc., SEAD-GOWTNG & CRAVEN, LTD., Incorporated Insurance Brokers. It Bank of Australasia Chambers Wellington,