INSURANCE RATES

Evening Post, Volume CXI, Issue 35, 11 February 1931, Page 10

INSURANCE RATES

PROBLEM OF LOSS RATIO

Earthquake insurance and some of tho factors governing tho rates were dealt with in an interesting manner by a Wellington insurance manager today. After mentioning that there was certain information in connection with the wholo matter which ho thought should bo mado generally known, he said that most people regarded earthquake rates as being high in comparisiu with what they considered was the risk. "In assessing tho rate for fire insurance," ho went on, "one of the main factors which is taken as a basis is the estimated loss ratio of tho interest involved. Naturally certain interests aro subject to a higher loss ratio than others, and the ratio is also affected by the proximity of other buildings and the proximity of other trades and oecu-> pations. The Underwriters' Council has tabulated the results over a number of years in New Zealand and the actual loss ratios have been worked out in connection with occupations and trades. So far as earthquakes are concerned no one can estimate the loss ratio. For instance, a comparatively severe shock is experienced in Wellington which does certain damage to plate glass windows, brick facades, etc. In Napier there is a complete loss of the interest' involved. Looking at the question from that point of view, earthquake insurance should be based on a ratio of total loss, but it does not seem to bo realised' by the insuring public, that a rate of 4s per cent. (4s per £100, not £4 per £100, as stated yesterday) means payment of premiums over 500 years to pay a total loss. . "The insurance companies regard earthquake insurance as a rather desirable type of business from one aspect, that is, the moral hazard of the insured, since no man can start an earthquake. One ray of comfort is that there is no need to inquire into a man's financial standing or the moral hazard."