STATE FIRE OFICE

Rotorua Morning Post, Volume 3, Issue 665, 18 October 1933, Page 2

STATE FIRE OFICE

(Special .to "Post.")

ANNUAL REPORT . PRESENTED TO PARLIAMENTBY GENERAL MANAGER. SOUND POSITIQN SHOWN. 3 i. \ - .. >•

In the annual report of the State Fire Insurance Office for -the year ended December 31, 1932, presented to memibers of the House of Representatives and the Legislative Coun- ' cil, the general manager-, Mr. S 1L Jerram states inter alia: — The fall in premium income during the year" was accomplished by a more than proportionate fall in claims, with the -result that the underwriting was more profitable than for "the last seven- years. Some of the improvement in the hazard is accounted for probably by economic conditions, but a' most helpful factor is the recently instituted system of inquirles into all suspicious fires by the Police Department working in co-operation with the Inspecfor of Fire Brigades and Insurance representatives. Administrative expenses, always ' very much lower than th'e average for all offices, have been reduced slightly, despite lower income.- - Income-tax (£28,210) constitutes a record, and is also a much larger sum than puhlished records show as having been paid byany other fire-insurance' of- ' fice! in any one year during th'e last ten years. In addition, the office con- ' trihuted £3484 to the Treasury under section 5 of the Finance Act, 1931.

Proposed BrOach of Faith. The final report of the National Expenditure Commission, which was published during the year, makes not uncomplimentary reference to the office, but I feel it m.y duty to dissent most emphatically from the recommendation which was made for an amendment of the State Fire Act to provide ' for payment of a part of the annual profits into' the Consolidated Fund. An amendment having the effect suggested would constitute an arbitrary abrogation of the existing constitution, which makes provision for the return of--surplu's profits to policyholders by way of rebates, and which was given hy the Legislature freely as an in- ' ducement to people to insure with the office. That inducement has been instrumental in attracting and consolidating a large income and 'no part of ' th'e return due to policyholders could 'now be diverted without a breach of [ faith, if nOt of contract. Good faith is the essence of an insurance contract, and the effect of an amendment as suggested by the Commission might be more serious on the prestige of the office. It is not to be implied from the foregoing that policyholders of the office have been or are the only beneficiaries, for in practice the declaration of rebates under the provisions of the State Fire Act reduces all rates. The insurance companies have always followed the State Fire Office, and all payOrs of premiums, irrespective of whether insured with the State Office or not, receive consequential benefit from its operations. Also the Consolidated Fund derives' ' a peculiar advantage through the par'ticularly high proportion of incometax which' the office pays, and the fund is assisted further from time to timo, at some financial disadvantage to the office, through investments in current issues at par, while private companies — tnutual or otherwise — purchase stock in the open market. Thus, apart from the rate reductions effected in earlier years, the ■State Fire Office by. (a) rebates, which .since the first declaration have reduced premiums in the aggregate by £2,500,000, (b) income-tax payments totalling £274,000 in sixteen years, (c) investments, and (d) -payments under section 5, Finance Act, 1931, has returned solid service to the community The total revenue derived for the period is shown in an accompanying statement as £255,242 4s (premiums £208,492 19s 9d, other receipts £46,749 4s 3d). The main items of expenditure were £70,433 18s 8d, losses on fire and earthquake risks; £25,293 '17s 9d, bonus rebates to policyholders; contributions to fire boards, £7834 11s ld; and working expenses £47,967. During the year £38,400 was written off buildings. The ratio of working expenses (exeluding income-tax) to premium income is shown as having decreased by .37 per cent. since 1931.