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Wednesday, 9 March 1932

Mr HOLMAN (Martin) .- I propose to support the measure; but I rise merely to direct the attention of the right honorable gentleman in charge of the bill to clauses in connexion with which it might be w-ise to say something further when we reach the committee stage; I refer to those which relate to the investment of funds that are to be lodged with the Treasurer. The depositor may choose from certain prescribed forms; of investment; if he fails to do so, the-, choice will be made for him by the Treasurer. In the definitions clause, among: other forms of approved security which appear perfectly unobjectionable, there is specified in paragraph f -

Unencumbered titles to freehold lands in the Commonwealth and first mortgages of freehold lamia in which the sum secured does not exceed two-thirds, or such other proportion as the Treasurer determines, of the improved value of the lands;

My attention has been called to that paragraph, which has caused some concern among managers of exceedingly stable insurance companies, particularly one that has its head-quarters in Great Britain, and is operating on a large scale in the Commonwealth. It is conceivable that, in ' certain circumstances, companies might find themselves with their securities invested in first mortgages on properties the actual value of which was rapidly depreciating, and that this might be a cause of great embarrassment to them, because clause 20 provides that -

1.   If the Treasurer is satisfied that by reason of depreciation in the value of securities or other cause the value of money and approved securities deposited by any person with the Treasurer falls short of the value required by this act, he may, by notice in writing, require the person to deposit with the Treasurer money or approved securities or both to a value deemed by the Treasurer to be sufficient to bring the amount of the deposit to the value required by this act.

The fear is expressed that a company might make the necessary deposit, which might be invested in an approved security of a depreciating character, and at a later date might be called upon to make a further deposit to bring its deposit up to the original value, although the direction of the investment had been determined by the Treasurer himself. Naturally, while the present Treasurer and Assistant Treasurer are in office that fear has very little substance, and the companies to which I refer have every confidence in the present Administration. However, as this legislation is to be permanent, I suggest that paragraph / of clause 3 might be further considered.

Clause 6 provides that, within three months after notice is given by th?

Treasurer, insurance companies shall make a return embodying certain information. It has been represented to me that in the case of concerns which have their head-quarters abroad, there may be mechanical difficulties in the constitution of the company itself, preventing it from supplying such a return within three months, and that a somewhat longer period, say, six months, would be a safer provision. That alteration, wouldbe a convenience to companies I have in mind, supposing there is to be no objection to it from the point of view of the Treasurer.

If my present understanding of the measure is correct, those two small weaknesses might repay further consideration, and I beg to recommend their revision to the right honorable gentleman in charge of the measure.

Mr.ROSEVEAR (Dalley) [5.56].- In my opinion, next to banking, insurance is, perhaps, the most vital activity that affects the people of Australia. Because of that reason, if a national government intends to deal with the problem of insurance it should do so in an effective manner. In the past, policy-holders have been exploited unmercifully by bogus companies promoted by swindlers, and it is essential that any scheme sponsored by this Government should adequately protect the interests of the public. This is not a national insurance scheme. It merely tinkers with State activities with the definite object of harassing the Government of New SouthWales.

I am indebted to the honorable member for Wentworth (Mr. E. J. Harrison) for stating so frankly thathe would support this bill, if only because it provided the Commonwealth Government with effective means to deal with the Government of New South Wales. He rather intimated that there is a fear that, with the permission of the Nationalist majority in the New South . Wales Legislative Council, Mr. Lang may pass certain insurance legislation which will frustrate the efforts of this Government. The honorable member appears to be afraid that Mr. Lang will misuse the deposits lodged by insurance companies under the proposed State enactment. I may as well be equally frank and tell him that some of the Nationalist State Governments of Aus tralia have already used deposits lodged by insurance companies in order to pay the salaries of their public servants. This bill provides a special getaway for such administrations, by enabling them to retain existing deposits and employ them as they see fit.

We are assured that the Commonwealth Parliament has had power since federation to deal with insurance legislation. Royal commissions have exhaustively reviewed this problem, and have recommended that uniform insurance laws should be introduced. This is not uniform insurance legislation. It seeks to bring about uniformity only with regard to deposits. It does not deal with national insurance generally. Why, then, has this Government failed in its duty? Why, too, does it insist that one State should hand over the deposits which it has received from insurance companies, and exclude other States from similar action, merely because they happen to have passed prior legislation dealing with the subject? If uniformity is to be effective at all, it should have general application. The deposits should be lodged at one centre. No preference should be shown to any State, and no discrimination exercised. The Senate has at different times passed two measures dealing with insurance. They were sponsored by senators, not of the Labour party, but of the party which the Government and its supporters represent in this House. Why did it not previously occur to them that there was dire necessity for demanding deposits from insurance companies to ensure their good faith ? Is the lodging of deposits with the Commonwealth Treasury likely to prevent wealthy insurance companies from defaulting? The other night the Assistant Treasurer (Mr. Bruce), referring to a company called, I think, the Albert Company, said that it was so large that it had absorbed 25 other companies, and that the fact that it was immense and wealthy did not prevent it from defaulting. If a similar company were to spring up in Australia, would the fact that it had lodged deposits with the Commonwealth Treasurer prevent it from defaulting? I think not. On the other band, the lodging of deposits with the Commonwealth Treasurer would be an effective bar against any new competition entering the insurance market to the detriment of the wealthy companies controlling insurance operations in Australia. It would hobble and prevent private enterprise from entering this sphere of business, but* would not in any way prevent a w?ealthy company from defaulting. If a national scheme of insurance were adopted, the Government would be able, not only to give substantial guarantees to the people who insure under the scheme, but also to assist those who, through circumstances over which they had no control, could not continue their payments. In this respect it is interesting to study the statistics published in the Year-Book for 1929, under the heading, "Ordinary life assurance ". The policies discontinued in Australia in 1929 were - by death and maturity, 17,280, covering an amount of £3,933,620; policies surrendered, 15,823, covering an amount of £4,409,649. I understand that in some cases of surrender the companies did give financial consideration to the people concerned. In 1929 there were 42,538 policies forfeited, representing the sum of £11,461,656. Under a scheme of national insurance, policy-holders who were financially embarrassed for the time being, would be able to suspend their payments until they were in a position to meet them. The Year-Booh for 1931 contains a fairly complete table setting out ordinary and industrial life insurances and Australian liabilities for the year 1929. The paid-up capital of shareholders amounted to £1,729,408. The companies possessing that capital are, I presume, the companies referred to in the Year-Book. Their liabilities are shown as £106,641,600, and their assets as £134,598,978. They, therefore, have surplus assets of £27,957,000 on a paid-up capital of £1,729,408, arid an annual dividend and cash bonus to shareholders of £750,837. It is no wonder that these wealthy insurance companies are so anxious to keep competition out of this field. As a means of keeping out genuine competition nothing Could be more acceptable to these companies than the demand under this legislation to lodge cash deposits with the Commonwealth Treasury. They realize that the lodging of deposits, in itself, would not be an effective safeguard against default on their part. Insurance, next to banking, is perhaps the most vital problem confronting the people of Australia.

Mr E J HARRISON (WENTWORTH, NEW SOUTH WALES) - Did the honorable member -support the Lang scheme in New South Wales?

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