GOVEENMENT INSURANCE DEPART. MENT.

Nelson Evening Mail, Volume XVI, Issue 186, 6 August 1881, Page 3

GOVEENMENT INSURANCE DEPART. MENT.

THE ACTUARY'S REPORT. (From our own correspondent.) £By Telegraph.] Weilikgtok, Friday II p.m. The long expected and eagerly looked for report of Mr Godfrey Enigbt, the Government Actaary, on the Government Insurance Department was presented to Parliament today by the Colonial Treasurer, who had refused to circulate the report until that of the London Actuaries was received, and the whole thing was then complete. There was a great rush of members and others to see the report, and I managed with some difficulty to obtain the opportunity of making a summary of its chief features. The report i 3 dated 20th Juue lasf. It states that the funds of the Insurance Department had increased in ten years 318 per cent, and in five years 113 per cent. The expenses of management absorb about 15 per cent of the income, being only half the coat of private offices of the same age, and less than some offices 20 years old. The large nnmber of deaths arising directly or indirectly from intemperance ia alluded to. Many de&tbß have occurred from consumption and other diseases which ought to have been detected at the time of application for policy, but in spite of a l .! these drawbacks the Office has done remarkably well. The largest number of policies is for £500, next for £200, and then for £100, JE3OO, and smaller sums. Thereare 4949 policies for £100 to £200; ' 5265 for £200 to £500; 1263 for £500 to ) £3000, the maximum for which any single life is insured. There are only 22 policies j for tbis maximum sum. Tbe Department bas been urged to increase this maximum to £4000, but it was not deemed advisable unless five for that sum could be depended upon annually, which ia improbable. The balance sheet shows a net surplus on the 30th June, 1880, of £73,670. Of this sum it is recommended, that £56,000 be distributed as a bonua to policy holders, leaving £17,670 as a reserve fund for unforeseen contingencies, and to equalise fnture bonuses. There are several different methods by which a division of profits may be made, but Mr Knight advocates that based on the proportion of " loading," that is, the difference between j " net" premiums and the " office" premiums ; accumulated interests. The other methods j are condemned as unduly favoring the older policy holders, snd as being in a more or less degree irrequitable. He recommends tbat all holders of life and endowment policies who have paid two years full premiums and -whose policies are still in force should participate in the bonus now to be declared. He strongly deprecates the idea of stipulating, as some offices do, that policy holders shall not be entitled to any bonuses until their policies are five yeara old, aB tbis is liable to cause disappointment and dissatisfaction, which it is desirable to avoid. He advises that each share of the profits shouid be converted into its reversionary equivalent, allowing this to be exchanged at any time for any of the other forms to be explained directly. As this privilege may be exercised prejudicially to the office he recommends that the calculation be framed so as to neutralise a possible adverse selection by using higher rates of interest in the computation than have been employed in tbe valuation. He proposes to allow policy holders the option of taking their bonus in reversionary shape as au addition to the sum payable at death. This, however, is to be at any time commuteable into (1) or cash bonus, or (2) a permanent reduction of premium, or (3) a temporary reduction of the premium. He argues it would not be equitable to charge the wholecost of the new business against the " loading " contributed by the new policy holders, and advises a fair apportionment, but policy holders not in any Cisc to participate in profits until they have paid two years full premium. In the case of new policy holders he would deduct lj years " loading" from the accumulated loading contributed by such new insurers who bave entered during the last quinquennium, where a policy has been purchased by payment of a single premium, or by a limited uumber of premiums. The calcula tion should be apportioned so as to equalise it over tbe whole duration of the policy, and then take in account only the loading so equalised. Thus, only a fair proportion of ths loading that belonged to the last period would be taken into account, and each share ■would be eqaitably determined according to tbe actual contribution toward the profits. Mr Knight refers to the standard of valuation that has been used by the department in making reserves for liabilities. Had the " Carlisle " instead of the "H.M." standard been adopted it would have shown £100,000 aa available for distribution as bonus. Mr Knight knowß of no office which haa attained so high a standard of valuation in 10 years, and. very few old offices are able to make Bueh strong reserves as he now recommends. He proposes that the Government sball conaider the claims of the working classes to be supplied with a Bystem of insurance adapted to their requirements and that tbe Industrial Branch be re-opened, that being needed more urgently by the poorer classess than the ordinary branch by wealthier people. Mr Knight indicates the following as the shape the division of profits wonld take under his scheme :— A policy of £100 taken at the Bge 30 and of 5 years duration would be entitled to £4 Is 3d reversionary bonus at death or £2 2s 3d cash bonus, or to a reduction of premium by £4 11a for 5 years or by £1 4s per annum for life. A £100 policy taken at the age of 30, and of 10 years duration, would receive £8 6s reversionary bonus or £2 lis 8d cash bonus, or a reduction of premiums by £11 5 a for five years or by £3 2s during life. In this way a £1000 policy, 10 years and taken but at the age of 30 would be entitled to a reversionary addition of £83 or a cash bonus of £25 16s Bd, or a reduction of premium by £5 14s 2d for 5 years, or by £l lis 8d for life. It must alao be remembered that the lower premium charged by Government would be equal to a further bonus of £200 if calculated in the usual, way. Mr Knight concluded by expressing his gratification at the marked Buccess achieved by the department. ■il_l"*-1..M11 I v . n*,,