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Wednesday, 7 July 1915

Senator MILLEN (NEW SOUTH WALES) . - The clause provides that, in the event of the amalgamation of two or more companies, notice of the proposed amalgamation shall be given to the Commissioner and to the shareholders, and, unless the Court otherwise directs, to each policy-holder of each company concerned. The provision is, to my mind, entirely necessary and wise in connexion with life offices, but a difficulty arises from dealing with life and fire insurance companies at the same time. It is obvious to any one that a policy-holder in a life insurance company has a distinct and permanent interest in its affairs ; but with the holder of a fire policy the position is entirely different. In the majority of life insurance offices, the principle observed is the mutual one, and, therefore, every policyholder is a shareholder in the sense that he has a definite and permanent interest in the company. But fire insurance companies invariably consist of proprietors who have put up a certain amount of capital, and the persons who do business with the companies have only a brief interest which rarely extends beyond a year, and which not infrequently is' for a shorter period. The holders of fire policies are in an entirely different position from the holders of life policies. A man cannot transfer his life policy to another office if he is dissatisfied, for he has become a part proprietor of the concern. But the holder of a fire policy can transfer his business to another office, because he has no proprietary interest at stake. That difficulty was foreseen by our own Royal Commission, which strongly recommended that life and fire insurance companies should not he dealt with in the same provision. It is interesting and instructive to note that, while the English Act contains a somewhat similar provision, it has this proviso -

The provisions of this Act with respect to ' the amalgamation of companies shall not apply where the only classes of assurance business carried on by both of the companies arc fire insurance business, or fire insurance business and accident insurance business; and the provisions of this Act with respect to the transfer of assurance business from one company to another shall not apply to fire insurance business.

The clause fs perfectly right with regard to life insurance companies; but in the case of fire insurance companies, while it is extremely desirable and necessary that the shareholders should get notice of a proposed amalgamation, I cannot see any reason or wisdom in notifying the policy-holders. For what purpose are they to be notified? Is it proposed to go further, and allow the policy-holders to appeal or object to a proposed amalgamation? They are merely the. customers who are doing business with the companies from day to day, and in no sense have a proprietary interest or share in the capital. There is no advantage in giving notice to the policy-holders, because no rights are given to them by any later clause. No companies can amalgamate to-day without some publicity. But I am unable to see any reason why every policy-holder in a fire insurance office should be notified of a proposed amalgamation. What would be said if two big mercantile houses in Melbourne proposed to amalgamate, and I was doing business with them? No one would dream that I should receive a notice of the proposed amalgamation. My course after the event would be clear. If I did not care to do business with the new firm, I would go elsewhere. In the case of a life insurance office the clause is entirely sound and necessary, but there is a distinct difference in the case of a fire insurance office.

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