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Thursday, 9 August 1906


Mr GROOM - (Darling Downs; - Minister of Home Affairs) [6.14!.- I think that the honorable member for Kalgoorlie is deserving of credit for having initiated a debate upon the very important question of fire insurance. It is a matter of very grave moment, and is one which, so far as legislation is concerned, should not be entered upon lightly. The principles of law relating to fire insurance have been more developed in the United States than iri any other country. But the Commonwealth is in even a better position to deal with this matter than is the United States. There, the question is a matter for State law. But the central Government have felt the necessity for dealing with it from a national stand-point. These fire insurance companies extend their ramifications through the whole of the United States. The Commonwealth has full power under the Constitution to deal with this matter. The honorable member for Kalgoorlie has put before the House many important considerations relating to fire insurance, and has also referred to questions that do not affect the principle enunciated by him, that a person who has sustained total loss by fire should receive the full amount for which he has insured. That is practically the principle of the Bill itself. There appears to be a certain element of unfairness in the case which he cited. A firm insures its stock for a very large amount, and annually pays large' premiums, but when a fire takes place on its premises, the amount which it receives is based only upon the actual losses, although the insurance company itself has been receiving annually large, sums of money on the basis of a larger amount.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - But the firm was fully covered at the same time.


Mr GROOM - Quite so. It is worthy of consideration whether, when a company is carrying a very heavy policy, and knows that that policy is in excess of the fair valuation of the property to which it relates, it might not be advisable to have a refund of a certain amount.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - That proposal is too complicated.


Mr GROOM - I am not suggesting that it should be adopted. I am merely dealing, as the honorable member for Kalgoorlie has done, with the equities of the question. But I do not think it advisable simply because of inequity to strike at the very foundation of the law relating to fire insurance. The whole structure of fire insurance is based upon the principle of indemnity. The insurer agrees to pay to the insured the loss that he sustains - he agrees to indemnify him against that' loss, and in return premiums are to be regularly paid. I think that the honorable member for Kalgoorlie made his position very clear.

He said that he did not desire to do an injustice to the insurance companies, but he emphasized the point that a person who had insured against loss by fire should be indemnified against any loss so sustained. He said, in effect, " Here are two parties to an agreement. On the one hand, we ha.ve powerful insurance companies, with a big organization behind them, laying down the terms of a policy. On the other hand, we have the person desiring to be insured, who accepts that policv in good faith, and expects to be indemnified under it. I wish to make sure that that person shall be indemnified the loss he sustains." He emphasized the point that the difficulties in the way of the person seeking compensation should be reduced, and I think that the House will sympathize with that view.


Mr Fisher - The honorable member went somewhat .further.


Mr GROOM - That is so. He pointed out that there was a difficulty in securing adjustments.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The Bill does riot deal with that question. '


Mr GROOM - I have already mentioned that it does not. The honorable member for Kalgoorlie also referred to the arbitration clauses in these contracts, and, in doing so, touched upon a very important question. Those who have a, knowledge of insurance conditions are aware that some of them are highly technical, and give rise to much difficulty.' ,


Mr Kelly - Will the Minister tell us whether the Government are in favour of the Bill ?.


Mr GROOM - They sympathize with the honorable member for Kalgoorlie to the extent that they realize that the question should be taken into early consideration, but they think that it should be dealt with in one comprehensive law relating to fire insurance.


Mr Wilson - And life assurance.


Mr GROOM - We hope that the House will have an opportunity to deal this session with a Bill relating to life assurance. My own opinion is that, in pass- ing a -comprehensive measure relating to fire insurance', it might be advisable to adopt the suggestion made by the honor-, able member, and1 approved bv the honorable member for North Sydney, that there should be a standard policy for the whole of Australia. That is practically the principle which the honorable member for Kalgoorlie has been emphasizing.


Mr Kelly - No.


Mr GROOM - I think that it is, although the condition which he desires to enforce is one with which some honorable members cannot agree. If we decided to have a standard insurance policy, we might consider the -precedent of the United States. Great difficulty was experienced there owing to the different insurance laws of the different States. At page 182 of The American Academy of Political and Social Science it is pointed out that-


Mr Fisher - Is the quotation designed to illustrate the scope of the Bill ?


Mr GROOM - It will show that some of the States of America were forced to adopt the standard policy. The writer states that -

The progressive and aggressive companies sought to make an attractive form of policy, while some others issued 'forms which apparently afforded an opportunity for contests in case of loss.

The various steps that were taken are traced by the writer, who proceeds to point out that -

Five years later the Massachusetts legislature enacted a law providing for a standard form of policy, and in 1880 the use of this form of policy was made mandatory for all companies operating in . that State. In 1886, the legislature of New York adopted a standard form of policy, which became mandatory 15th January, 1887. This policy was devised by the superintendent of insurance -

This is. the point that I desire to emphasize - after consultation with insurance officials and organizations.

It was not dictated by the companies -

It was carefully prepared, and while not entirely ideal, is the best and most satisfactory fire insurance contract yet brought into anything like general use. It has been made mandatory by seven other States, and is used generally in all the States where the statutes do not forbid.

The writer then proceeds to name the States that have adopted the standard policy. I repeat that the Government do not think that it is desirable to deal with this question in the form proposed by the honorable member for Kalgoorlie. We consider that, when we deal with, the question of fire insurance, we should do so in a comprehensive measure, so that the Commonwealth law on the subject may be found in ' the one statute. It is a matter that requires careful investigation and comparison. The Government are prepared to take it into immediate consideration, and at the earliest possible date to prepare and present a comprehensive measure dealing with insurance legislation. That will not prevent the honorable member from again bringing forward the proposals that he has submitted to-day, and he certainly deserves credit for having brought this very important question under the consideration of the House.







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