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Wednesday, 9 March 1932

Dr EARLE PAGE (Cowper) .- I cordially support this bill. My only complaint against it is that it does not go far enough. It deals simply with deposits, when it should deal with every phase of insurance. The Commonwealth has power under section 51 paragraph xiv. of the Constitution, to deal with insurance, and the exercise of that power is long overdue. In fact, during the regime of the Bruce-Page Government, a bill dealing with life insurance was actually brought down. It passed the Senate, and had been introduced in this chamber. When the election took place, it unfortunately lapsed. During the next parliament Senator McLachlan introduced the. measure as a private bill. It was passed by the Senate with the concurrence of the government of the day, and brought down under my name to this chamber. Despite the enthusiasm of the honorable member for Darling (Mr. Blakeley),' who was Minister for Home Affairs in the Scullin Government, no day was set down for its discussion, and it suffered the fate of all unfinished projects at a general election. I urge this Government not to leave any stone Unturned to put this legislation on the statute-hook, not merely this partial measure, but a complete measure dealing with, not only life insurance, but also fire, marine, accident, and other forms of insurance. There is no more important subject on which the Commonwealth Parliament may legislate than insurance, particularly from a social point of view. Insurance, in effect, is simply a system of pooling losses, and is of special importance to the small man in the community, much more so than to the rich man. Insurance is practically the substitution of a social co-operative provision for an individual provision by a distribution of losses and elimination of risk. What it does in effect is to ensure that the man whose house remains undestroyed by fire, helps the man whose house has been destroyed by fire. [Quorum formed.] The man who has the good fortune to live to a ripe age contributes to the support of the dependants of those who have the unfortunate experience of dying early. The man whose motor car has not been stolen helps to replace the motor car that has been stolen from another man. The essence of insurance transactions is that the payments by the insurance companies are made at a time when the recipient is in financial distress. Therefore, no parliament can take too much care in safeguarding the funds of insurance societies, and in making certain that the manner of their investment is absolutely satisfactory and safe, that the funds at the disposal of the insurance companies, held practically for trust purposes, will be available when required, and that the overhead expenses of the companies are not such as to prevent full payments from being made at the proper time. There is a vital necessity in the public interest for the passing of legislation on a most comprehensive scale. The business is of a fiduciary character. It is in the nature of a trust for people who in many cases are not able to look after themselves. That applies particularly to life insurance, to almost every transaction in respect of which the date of the maturity of contract is remote. If a man insures his life and dies before his policy matures, his widow needs to be certain that the money for which her husband scraped and pinched during his life time, will be paid to her. The object of insurance is to benefit a policy-holder in time of dire necessity, or to enable his dependants to carry on after his death. The complexity of insurance business, particularly marine insurance, which is concerned with happenings in all parts of the world, makes necessary a great deal of supervision. Furthermore, cases arise of the mal-administration of insurance" funds which have a serious effect upon -the community. These factors make it imperative that there should be a general Commonwealth law covering the operations of insurance companies throughout Australia. We especially need a Commonwealth law to guard the investing and insuring public against possible injury from mushroom companies. In Australia there are several highly successful companies, such as the Australian Mutual Provident Company, the Mutual Life and Citizens Company, and the National Mutual Insurance Company, which have handled their business so satisfactorily that unscrupulous company promoters have been able to point to them as a reason why it would be profitable for the public to invest in other companies. Frequently. through lack of experience or insufficient capital, such new companies have failed, and loss has been sustained by the shareholders and policy-holders. Commonwealth rather tha* State supervision of insurance operations, is necessary, so that conditions may be uniform in all States, and because social life in this country is becoming increasingly Australian rather than merely State-wide in its outlook.

Greater stability is required in insurance business, and one method of obtaining this is by direct supervision of insurance funds under legislation passed by Parliament, while another is by providing that due publicity is given to the balance-sheet and transactions of insurance companies. Various methods have been suggested for ensuring security to shareholders and policy-holders. One of the least valuable, in my opinion, is that provided in this bill, namely, the lodging of deposits by companies. That may have the effect of preventing the growth of mushroom companies, but the amount of the deposit in the case of large companies is so insignificant compared with their liabilities that the security provided is negligible. Something more is necessary, and I hope that before the debate on this bill is concluded the Minister in charge will signify the intention of the Government to bring down another measure at a later stage dealing with all aspects of insurance. One method of obtaining greater security is to require that companies shall effect a proper separation of the various funds under their control. It should be possible for any one looking at the balance-sheet of a company to ascertain exactly what is its financial position, and where its funds are invested. I recognize that, in connexion with the measure now before us, there is need for haste. Were it not so I would suggest that this bill be enlarged to incorporate the provisions I suggested. My experience has taught me that if one does not take the opportunity of introducing amendments to a measure when it is before the House, one may have to wait a long time before a new and more comprehensive measure is introduced. I hope that the Government will, in future legislation, stipulate that proper financial statements shall be prepared by insurance companies, and also make provision for the investigation of accounts if necessary. It should also be provided that the policies issued are just from the point of view of the policy-holders. In the past, insurance canvassers have fre quently induced people to take out policies which have not provided the holders with the cover they thought they were receiving. Policy-holders sometimes do not read their policies until the time comes to make a claim, and then they find that they have all along been under a misapprehension. Definite provision should also be made in regard to the surrender of policies, and for a general audit of insurance accounts. Such matters as the assignment and mortgaging of policies should also be covered by Commonwealth legislation, so that all policy-holders will know exactly where they stand, and uniform practice obtain all over the Commonwealth.

This bill deals only with the matter of deposits. To that extent I am in favour of it, although I am disappointed that it does not go further. It aims to protect the funds of insurance companies from the rapacity of a particular State. That is necessary at the present time, because we must recognize that injury to any insurance company, large or small, must be felt also by large numbers among the general public. It is the first duty of this Parliament to obviate such danger. It is important also to protect the interests of shareholders and policy-holders from the directors of the companies themselves. Those who take out policies and pay premiums furnish most of the funds in the possession of insurance companies, and they should be protected by law against the machinations of fraudulent or foolish company directors. The public should also be protected from unscrupulous company promoters.

I trust that, at a later date, the Government will bring down a bill which will meet with general approval. I understand that the bill dealing with life insurance passed last session by the Senate met with hardly any opposition there, and I am sure that, were it brought before this chamber, it would meet with a good reception here. The State of New South Wales is at present hopelessly behind the rest of the Commonwealth with regard to insurance legislation. For many years it has been the happy hunting ground of unscrupulous company promoters, and for that reason I am glad that, this measure, if passed, will, to some extent, bring it into line. "When the insurance hill was submitted to the Senate last year, it contained some provisions which seemed to conflict with the direct interests of the States. The Senate is the chamber which is charged more particularly with the protection of State interests, and it amended the bill in such a way that it met with the approval of the State Governments. I intend to vote for the second reading of this bill, and to assist its speedy passage through this chamber.

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