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Thursday, 14 April 1904


That, in the opinion of this House, there should be established a Commonwealth Life and Accident Assurance Department, under the control, management, and guarantee of the Federal Government:.

When, some months ago, I submitted a motion somewhat similar to this, its consideration was rather complicated by the fact that it had to be taken in connexion with the consideration of the Public Service Bill, and there, consequently, was not a clean-cut issue before honorable members. On this occasion, the matter referred to in the motion can be dealt with on its merits, and it is on its merits alone that I ask for its determination. I may take somewhat longer than I desire in addressing myself to the question, for the reason, perhaps, that I have been somewhat overburdened with material supplied to me by the kindness of some honorable members who are interested in the subject, and of some persons outside who have been good enough to assist me. At the outset, I wish to express my obligation to Mr. Thodey, the editor of the Insurance and Banking Record, for his kindness in lending me certain books of reference, and his assistance in directing my attention to others which have proved valuable. On this occasion, the issue raised is clean cut, and the motion covers the whole ground. It is not a proposal to start an establishment to include State servants only, but one which can be extended to include all other classes in the community. What I propose is the creation of a State Department of Mutual Assurance, and the beginning of what, in my judgment, ought to prove an Industrial Life Assurance Department conducted and managed by the Commonwealth. I lay some emphasis upon the word industrial, because

I hope to prove that that class of business requires to be catered for more fully and on some better basis, so far as the assured are concerned, than is at present the case. It will no doubt be urged, and perhaps properly urged, that the other class of business, though important, is satisfactorily provided for by the ordinary assurance offices, and that there is no great need to start a State establishment to come into competition with them for that business. I do not propose to devote myself very much to that aspect of the question, though, of course, I do propose to include ordinary assurance business in the work of such a State Department as I have in my mind's eye. I am especially desirous and particularly anxious, that the class of business which shall be done by the State Department, if inaugurated, shall be that which will meet the requirements of the great middle and poorer classes of the community, who cannot, under existing conditions, enter into life insurance upon a basis satisfactory to themselves, either from the point of view of the stability of the offices or from their own financial position. The idea of State life assurance is not by any means new. In putting forward proposals of this kind, we are sometimes met with the objection that the legislation sought has not been tried, that it is a vast experiment, a hugeundertaking, or something of that kind, and other sentences are very often uttered containing a number of awful adjectives calculated to frighten the timid and unthinking.

Mr Fowler - This is also State socialism, which is a bad term in Victoria at the present time.

Mr HUME COOK (BOURKE, VICTORIA) - I shall leave the honorable member to answer the question put to him the other day as to what State socialism is. I am not to be frightened by big words, nor by strange phrases, and I shall strive to do the right thing, so far as I know it.

Mr Wilks - And the wise thing.

Mr HUME COOK (BOURKE, VICTORIA) - And the wise thing, which is always the right thing. I point out, however, that so far as State life assurance is concerned, this is not altogether a new proposition. We have examples before us of the British Annuity System, about which something was said on a former occasion, and into the merits of which I need not enter at this juncture. In South Australia, I understand that there are two systems in operation; one which has relation to the Superannuation Fund of the Education Department, and another having special relation to the railway servants of that State and their life assurance business. Not very long ago a proposal was put forward in Victoria for the establishment of a Life Assurance Fund in connexion with its Education Department. Whether that proposal has yet reached fruition I am not at present in a position to say, but it is certain that the State authorities have given the matter consideration, and I believe that a sche e has actually been proposed. In Germany, where we have the most striking example of industrial life assurance, the system is perhaps more complete than anywhere else.

Mr O'Malley - That is socialism.

Mr HUME COOK (BOURKE, VICTORIA) - There, I understand, the system is largely, if not wholly, compulsory. So far as we. can gather from the official reports on the subject, it has given a great deal of satisfaction, and is not likely to be discontinued. In New Zealand there is a State Life Assurance Department, which, according to the best authority, has also proved satisfactory. Regarding this system we know something more than of other cases, and it is largely upon the New Zealand model that I propose that the Commonwealth Life and Accident Assurance Department should be established. That model is a safe one to follow. It has been proved sound, safe, and certain, is exceedingly popular, and is transacting a large amount of business which, so far as the general public are concerned,' is likely to be extended..

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Has the honorable member any figures to give us in support of his statement?

Mr HUME COOK (BOURKE, VICTORIA) - I shall supply those later on. Finally, upon this head, we have an example in the action of our own Federal Government. A few months ago the Treasurer determined that the fidelity guarantee business, in connexion with the public servants of the Commonwealth, should be conducted through his Department, and under his control. That was a beginning in the right direction, which, I am sure, will have the full approval of this House, and I desire now to see an extension of that principle to life assurance generally. The trend of legislation to-day is in the direction of interfering, from the State point of view, more and more with the business of life assurance. There is scarcely any country in the world to-day in which life assurance business is not governed to a large extent by statute law, and the more advanced the character and extent of its business, the greater are the restrictions applied. In America and Germany, in particular, where the volume of business is really enormous, life assurance is carried on under restrictions of a far more rigid character than many honorable members probably, suppose. In the United States, notwithstanding the restrictive character of the legislation in force there, three great companies have assured some 9.000,000 persons for something like £750,000,000. These figures are obtained from the Insurance and Banking Record of last year, and were contained in an article entitled " The leviathans of the United States." When we consider the enormous life assurance business transacted in a country like the United States, we begin to see the necessity of doing something to conserve the public interests. Coghlan asserts that the total sum for which the lives of residents of the Commonwealth are assured is something like £125,000,000, and it is satisfactory to note that of this amount £112,000,000 is assured with local offices. However, I propose at this stage to speak more particularly of the trend of legislation rather than of the amount of the assurances. The figures merely point to the necessity for legislation, more especially in view of the great . public interests involved. I have mentioned that in almost every country statute law governs the business of life assurance ; but in Germany and America, where legislation has been passed recently, the restrictions placedon the assuring companies are surprising. In 1891 the German Parliament dealt with this question, and to a very large extent, consolidated the law. The legislation then passed secured for the German offices a very much larger share of the business than they formerly enjoyed. The object aimed at was twofold, and in both respects success appears to have attended the efforts of the legislature. First of all, it was intended to place life assurance under stricter control so far as the State was concerned, and to give better guarantees to the public, and, secondly, an attempt was made to secure for the German offices a monopoly of the business, it being insisted that investments should be made in German securities. I propose to quote from the Economic Journal of December, 1902, which makes specific reference to the Act to which I have alluded. The first feature of the measure, to which I desire to direct attention is that which constitutes what is called an " Imperial authority " for the supervising and conduct of life assurance business. This consists of a board of nine persons, five of whom are directly appointed by the Crown, while four others are assistant members. These persons supervise all private assurances in Germany, and they are charged with powers which, in a British community, would be looked upon as savouring of tyranny, .although they do not appear to have been cavilled at in Germany. Their first business is to interest themselves in the articles of association of any company which proposes to carry on life assurance business. Next they have to examine its financial position and to make the strictest inquiry as to what it proposes to do, and the methods upon which it proposes to conduct its business. At page 567 of the Economic Journal it is stated : -

Any company applying for permission to carry on insurance business must submit its scheme of operations to the Supervising Board. The scheme of operations must include the company's articles of association, the general insurance con,ditions, and the technical rules on which the business is conducted, in so far as the class of business to be transacted renders such rules necessary. In the case of a life insurance company, particulars must be given on the following points : Table of premiums, mode of calculating premiums, and proportion to be retained for the insurance fund (premium reserve), rate of interest forming basis of calculation, and principles as to " loading." The tables of probabilities as to duration of life, and the danger of illness and incapacity must be appended to the scheme of operations, as well as the mathematical formulas used 'for the calculation of premiums, which must be illustrated by examples with figures.

That is a very large order, and includes a very strict and searching inquiry into the plan of operations to be followed. The article goes on to say : -

In order to counteract an obvious method of evasion, it is provided that any subsequent alteration of the scheme of operations must be submitted for the approval of the Board, and cannot be carried out until such sanction has been obtained.

So that they do not provide merely for a preliminary investigation. They take care that there shall be no underhand work on the part of the company, but that the scheme of operations, the tables of premiums, and all other matters shall receive sanction before anything is done, and that any proposed alteration must be subject to sanction. It will thus be seen that life assurance business in Germany is merely permissive, and that it is under very strict supervision. In order that honorable members may understand how close the supervision is it is necessary to quote further : -

An insurance company having satisfied the Board of the correct nature of its constitution, the soundness of its scheme of operations, and the healthy state of its financial condition, is allowed to start business; but it continues to be controlled as to the conduct of its affairs. It is the duty of the Supervising Board to watch the conduct of the business of all insurance companies subject to its jurisdiction, and more particularly to see that the provisions of the law and the rules laid down by the scheme of operations are properly carried out, and it may at any time examine the accounts and balance-sheets, send representatives for the purpose of taking part in board meetings, or general meetings, cause meetings to be convened, or, in case of default, convene and announce them at the cost of the company whom they concern.

I do not know that anything so forward as that has ever been attempted in any other country. As the quotation shows, the Imperial authority in Germany has power under the statute law to send representatives to any meeting of a company, whether it be a meeting of the board or a general meeting ; and if it is not satisfied with the conduct of such meeting, it may convene one upon its own account at the expense of the company. In short, it can do anything it pleases in order to safeguard the interests of those who assure. I may add that so strict is the law that if a company fails to obey . the directions given by the Imperial authorities it may be subjected to penalties which go so far as suspension - the actual prohibition of its operations - unless it will agree to what is suggested by this board. As I indicated in my earlier remarks, the investments made by these companies must be in approved German securities, in order that their solvency and stability mav be guaranteed. With respect to the non-German companies, it is now almost impossible for them to carry on operations. That, however, does not concern us much in this connexion. What does concern us is that in the Act of 1901 it was thought necessary and advisable, in an autocratic country like Germany, to take steps which practically guarantee to the policy-holders everything that the companies undertake to give them for the premiums which they pay. In effect the German system is only just one step short of an Imperial assurance company. When -we look at that system in the light of experience, it will probably be found to be equal, if not superior, to such an assurance company. It is equal in the sense that the guarantee which is provided by the Government, in the form pf a supervising board, is as good as if the business were conducted by the State itself, and it is possibly superior to a State institution in that the Government compels the companies to do all the work, thereby avoiding the expense that would be involved, at the same time guaranteeing to the public a safe and solvent institution. Of course that method of business might not suit the Australian or the English public. If the business is to be guaranteed we would prefer that it should be carried on by the State authorities. That is the method which I desire to see adopted. I think it would be infinitely preferable to establish our own assurance company, carry it on under our own management, and do the business in our own way, rather than intrust it to others. This sort of legislation clearly points the way to the initiation of a State Department of Assurance, and when we consider the general restrictions which are imposed upon life assurance companies the world over, there does not seem to be very much left in the argument that we ought not to embark upon this business, simply because no other Government has done so. I hold that life assurance is in some measure a principle of political economy, and also a 'matter of very grave State concern. If we study the figures' relating to the expenditure in Australia upon benevolent asylums, hospitals, and institutions of a kindred character, we shall be astonished to find that the sum aggregates millions sterling. If there .were a larger system of life assurance, and by consequence a greater amount of thrift in connexion with the large industrial public of Australia, in my judgment the present heavy demands for charity would not be made upon the general public, nor upon the States themselves as such. I find, from Coghlan, that the amount voted by the several Governments of Australia for benevolent and destitute purposes, represents £306,000 annually. If we add to that the sums voted for the conduct of hospitals, the expenditure totals £l>347,°°°- Though, perhaps, it -would not be quite fair to add the pension list to that sum, still, it is interesting to know1 that if we did so, the amount' expended in this direction would aggregate nearly £2,250,000. If we can avoid even an appreciable portion of that expenditure by establishing a system of State life assurance, we shall be doing a very good work. In any case we are face to face with the problem that men an-1 women are not able, owing to existing industrial conditions to make sufficient provision for their old age; and unless we can devise for them a cheap, sound, and safemethod of life assurance, we are naturally bound to institute to a greaterextent than would otherwise be necessary a system of pensions. It is absurd tothink that the old men and women of Australia can be allowed to go down to thegrave in destitution and want. We ought to adopt every reasonable safeguard against that state of things. One of the best steps along the lines of self-help, it seems to me, is to give to the general public, whose rate of pay will not permit of their saving sufficient money to provide for their old age, an opportunity to invest a portion of their earnings in such a way as will safeguard those who are left behind. But this cannot very well be done at present, for, notwithstanding the large number of life assurance offices in Australia, and, in many cases, their economic soundness, if the general public were consulted it would probably be found that they are somewhat suspicious of them, even where thev are not absolutely shy.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Some of those institutions are conducted upon the mutual principle.

Mr Mahon - That does not make them any better.

Mr HUME COOK (BOURKE, VICTORIA) - If we examine the figures relating to these institutions, we shall find that some of them are not as sound as they appear to be. Indeed, in some cases the suspicions entertained by the public are quite justified. It has always been my object to discourage proprietary companies, and to encourage mutual companies. But in any case I prefer, speaking as a public man, that a Life Assurance Department should be established by the State, which would be beyond all suspicion, which would attract business from the class of persons who cannot now deal with large life assurance institutions, and which might also obtain some of the business which at present falls to companies that are not worthy of receiving it - companies # whose methods and management warrant the suspicion to which I have already referred. I repeat that in my opinion we should follow the lines adopted by 'the New Zealand Department. The history of that institution is very interesting, and perhaps I may be permitted very briefly to recite it foi the information of honorable members. It was founded in 1870 as an ordinary life assurance office. Since then it has added accident assurance to its business, just as I propose . that that branch of business should be worked in conjunction with the office which I have in contemplation. I understand that the New Zealand Government intend to still further enlarge the functions of the Department by establishing a State system of fire assurance. It was not until 1893 that the civil servants of New Zealand were brought under the operation of the statute dealing with this particular Department. Previously they had the right to assure with any office they chose. Consequently the State Life Assurance Department of New Zealand had to begin operations without a business nucleus of any kind whatever. It had to forge its way against the competition of strong companies such as the A.M. P. Society and the National Mutual Society, not to mention British and other companies. It has also had fo work during the whole period of its existence under the disability imposed by the restriction of its operations to New Zealand. Further .than that, its investments are limited, in a very wise way, I think, to municipal and national securities. Consequently ithas not the same opportunities to attract business as have other companies whose operations are not so restricted. But, despite these disadvantages, and notwithstanding that it had to commence operations in competition with very strong companies, it began with a scale of premiums somewhat lower than those fixed by ordinary companies. The natural corollary to that was that it offered slightly lower returns than those of other companies. Its aim, however, was to establish a kind of industrial assurance department, and that is what I desire the Commonwealth 'to do. I have said that it fixed its rate of premiums below that of outside companies, and the reduction made by it in that direction has been more than justified. The profits were naturally lower, because the premiums were lower, and also because in New Zealand direct taxation, which is the only kind of taxation that can, and does, hit life assurance companies very hard, is in greater evidence than in any other part of Australasia. The New Zealand department, laboured under that special disability, but, nevertheless, the figures, relating to its progress form very interesting reading. At the outset it was unable to draw upon the civil servants to form the nucleus of its policy holders. It had to compete, as I have mentioned, with powerful companies, and for twenty-two years it faced a struggle which is perhaps unprecedented in the history of any Life Assurance Department. At the end of that period it was ninth on the list of Australian life assurance offices. That was in 1892, but in 1902 - after the lapse of another ten years - it had advanced to the position of second on the list. The Public Service had been brought in, and the public had begun to realize the advantages which the Department offered, with the result that it was second only to the very strong A.M. P. Society. This, I think, speaks volumes for the wonderful success achieved by the Department, as the result of the adoption of a consistent and reliable policy. The figures relating to the business transacted by life assurance offices in New Zealand up to the year 1901 are of considerable interest. I find, from a reference to Coghlan, supported by the Insurance and Banking Record, and other financial newspapers, that the progress of the New Zealand Department has been along the line of industrial assurance. It has developed in the number of its policy holders rather than in the amount assured. The total number of policies issued in New Zealand up to 1901 was 94,429,- representing a sum of £23>567>427- The A.M.P. Society had issued 28,196 policies, while the New Zealand Life Assurance Department had issued no less than 41,291. In other words, nearly half of the total number of policies taken out in New Zealand up to 1901 were issued by the New Zealand Life Assurance Department. Then I find that, the 28,196 policies issued by the A.M.P. Society represented a sum assured of .£7,769.232, whilst the 41,291 policies issued by the New Zealand Life Assurance Department represented only £2,000,000 in excess of that amount. These sets of figures support my statement that the New Zealand Life Assurance Department is inducing a greater number of persons to assure - because of the more at- tractive scale of premiums wHich it offers and also because of its solvency - and' that the volume of its business, from the standpoint of pounds, shillings and pence, does not show the same ratio of increase as that of the A.M. P. Society. It is satisfactory to note, however, that judged from the number of persons assured, the volume of its business is greater than that of any other life assurance office in Australasia. The same statement applies to the business transacted in New Zealand during 1903. When Sir Edmund Barton was Prime Minister he was good enough to forward me an extract from the Mutual Provident Messenger, which was rather a laudation of the society's own business. The quotation, which is dated 1st June, 1903, reads as follows : -

New Zealand Branch. - As disclosed by the society's annual report, its business in New Zealand continues to show very satisfactory progress. This. is the more gratifying when it is remembered that in that colony the competition of the Government Life Insurance Department has to be faced. The returns of that department just published for the past year enable us to furnish the following comparative results as regards the net increase of business in New Zealand : - Net Increase : A.M. P. Society, year 1902 (N.Z. branch), policies, 1,248; sums assured, ^306,008; annual premiums, ^10,504 is. 4d. ; N.Z. Government Life Insurance Department, policies, 1,115; sums assured, ^154,470; annual premiums, ^6,856 os. rod.

The average policy taken out in the A.M. P. office was equal to a sum of £227, while the average policy issued by the New Zealand Life Assurance Department was for £137 - a difference of £90. It will thus be seen that the statements which I have made with respect to the business of the Department for 1901 are also true of the business transacted bv it in 1902. The poorer sections of the middle classes are availing themselves of the system of Government life assurance, and the number, of the policyholders in the Government office is continually increasing. That is the best test of the business. To put the matter briefly, the ordinary societies are the rich men's companies, while the Government Department is the poor man's office, and it is for the poorer classes that I am urging legislation in this direction. I may add that I believe New Zealand is per unit the most heavily assured country in the world. The volume df industrial business is growing in ali parts of the world, and it is for that class of business that we have more particularly to cater. In America this branch of life assurance represents thousands of millions of pounds.; in Germany it is also very extensive; whilst in Australia the industrial life assurance business represents a sum assured of something like £7,000,000 with pre miums amounting to about £300,000 per annum The average policy taken out in this branch of life assurance, however, is only, £21 while the average premium is but £1 per annum. There is a great gap between the class of persons doing business with' industrial life assurance offices in Australia, and those doing business with the mutual and proprietary companies* Those who take out policies in the industrial offices belong, as will be seen from the average amount of the policies, to the very poorest sections of the community, while those doing business in the ordinary life assurance offices belong to what may be termed, for the purposes of this argument, the middle classes. The middle classes and those of the working classes generally offer a great field of enterprise to a department such as would be established if my proposal were carried out. There must be hundreds of thousands of persons in Australia who, although not assured, desire to make that provision, but cannot because of the high premiums charged take advantage of the mutual and proprietary companies as they are at present conducted. They do not desire to avail themselves of the industrial offices as they at present exist, because they do not care for their business methods,. - because they are suspicious of them or have some other objection to doing business with them.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The honorable member says that the rates charged by the New Zealand Life Assurance Department are the same as those charged by ordinary companies ?

Mr HUME COOK (BOURKE, VICTORIA) - No; they are lower,

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - They are lower, but the Government Department offers less advantages.

Mr HUME COOK (BOURKE, VICTORIA) - The premiums are certainly lower in the Government office, and the advantages' in the shape of profits must necessarily be lower. But what persons of the class to which I refer require is not so much a large profit in the way of bonuses as the certainty that by availing themselves of the system they will make safe provision for their old age, or for those they leave behind.

Mr O'malley - The profits depend on the cost of the business.

Mr HUME COOK (BOURKE, VICTORIA) - Quite so. But if the premiums charged by one office are lower than those of other offices, its interest earnings must likewise be lower. This is a proposition which does not need 2 k 2 to be demonstrated. What the public want is an assurance which is cheap, because they cannot afford to pay high premiums ; and which is sound, because they are not so deeply interested in obtaining large profits as in making certain that, if anything happens to them, their widows or children, or other persons for whose benefit they are assured, will receive the money due to them. They ask that the business of the companies or offices with which they assure shall be conducted upon sound lines, so that failure would be impossible. Cheapness, soundness, and certainty in connexion with the life asurance business are, it seems to me, the three essentials which are desirable in the interests of our great industrial population. I believe that at the present time none of the insurance offices or companies offer those advantages, and hence there is an urgent need for a Commonwealth Life Assurance Office.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Can the honorable member give us a comparison of the rates of the New Zealand Government office with those of the mutual offices?

Mr HUME COOK (BOURKE, VICTORIA) - I have not such a comparison to hand, but the information can be obtained.

Mr McColl - There is very little difference between them.

Mr O'Malley - From 5 to 15 per cent.

Mr McColl - Not so much.

Mr HUME COOK (BOURKE, VICTORIA) - There is a difference, the New Zealand Government rates being lower than those of the other mutual offices.

Mr O'Malley - The rates depend upon the age of the assured.

Sir George Turner - And upon his health.

Mr HUME COOK (BOURKE, VICTORIA) - They must depend in every country upon the age and health of the assured. The highest rate of interest earned by any mutual office doing business in Australia during 1901 was 4J per cent., and the lowest 3.9 per cent., but hotwithstanding the limitations placed upon its investments - the Department being confined practically to municipal and Government securities - the New Zealand Government Life Assurance Department yet earned something more than the minimum I have quoted. A rate of from 3 per cent, to 3J per cent, might well satisfy any reasonable person, because profits are neither the be-all nor the end-all of life assurance business. What the assured desires above ali is the certainty that his policy will be paid when it falls due or when death occurs. Those who assure have not that certainty to-day in connexion with proprietary assurance offices, and a great many are prevented from assuring in the mutual offices because of their methods of business and their high premiums. How is the soundness of assurance companies measured? We know, in spite of their protestations to the contrary, that in a great many cases the mutual companies are not as sound as they should be. Their soundness is measured by the soundness of their mortgages, and a drought or financial collapse upsets them to an extent which can hardly be calculated by the ordinary layman.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It would upset a Government Department too.

Mr HUME COOK (BOURKE, VICTORIA) - Yes ; but a Government can always put its business right by methods which are not open to ordinary life assurance offices. I hold that in the interests of the State itself the Government should, if the necessity arose, resort to those methods to secure the stability of its Assurance Department. The valuation of the assets of assurance companies is upon a basis which no layman can discover, and is of quite their own making. Moreover, there is no certificate as to their reserves, so that we do not know how- their money is invested, and there is no law governing the investment of it. In short, there is in Australia a very large field for legislative interference with life assurance companies, even if we do not deem it wise or necessary to start a Government Assurance Department. The public should be given guarantees in regard to the investment of reserves, and certificates of proper investment should be required from competent and f feariess examiners. At present we have no knowledge as to what the securities of the companies are, or of the checks upon their investments. Their expenses, too, are at the mercy of the boards of directors or of the management. We know nothing satisfactory with regard to the inner working of these offices. Their business is practically at the mercy of boards of management whose members may be competent or incompetent, honest or dishonest, earnest or indifferent.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Might not the same thing be said of Government management? Would not a Government Department be at the mercy of its managers'?

Mr HUME COOK (BOURKE, VICTORIA) - Yes; but Government managers would have no interest in obtaining large dividends, as the directors of proprietary companies have, nor would they be always trying to increase their fees, or to provide bonuses, or to help along various persons with whom they had business connexions, which is what sometimes happens in the case of mutual companies.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Does the honorable member suggest that the officers of a Government Department would be treated worse than the officers of private companies are treated?

Mr HUME COOK (BOURKE, VICTORIA) - No. What I say is that Government managers would not resort to favoritism in order to give business firms little pickings, nor would they indulge in other practices to which private companies are prone. As an instance of what may be done by an industrial company - and I am indebted to the honorable member for Brisbane for the following facts and figures - I might inform honorable members that one of them some time ago bought a property for £13,000. It expended £500 upon it, and those " in the know " were then surprised to find it appraised among the assets in the balance-sheet at £25,000. Next year the value was written up to £31,000. But, attention having been directed to the matter in the public press, the management, shame-facedly, I suppose, reduced the valuation to £25,000. All this was done in order to enable the proprietors to obtain and pay a 10 per cent, dividend. The particular company to which I ' allude is included in the list of offices in which the Government permit its servants to insure. But those who do insure with it will probably wake up some morning to find their investments lost for ever, owing to the insolvency of the company.

Mr Wilkinson - - The company to which the honorable member refers has £10,000 deposited with the Queensland Government.

Mr HUME COOK (BOURKE, VICTORIA) - Its liabilities are, I believe, something like £40,000, and, speaking from memory, I think it will be found that, even including the asset I have spoken of at the valuation to which it was written up, the company could not pay more than ninepence in the £ if called upon to pay up what they owe.

Mr McColl - It must be a mushroom company.

Mr HUME COOK (BOURKE, VICTORIA) - Of course it is only a mushroom company, brought into existence to put fat dividends into the pockets of a number of proprietors at the expense of the public. It is doing that work in most successful fashion, and I say that the Federal Government has been badly advised in consenting to name that company in the scheduled list of companies in which public servants may assure. Another company carrying on an industrial business in Australia, and a company which is also named in the Government list, works another pretty little fake. It sets against the industrial branch nearly the whole of its management expenses, and as a result the ordinary business branch does not suffer. In other words, it makes the people who pay one penny and two pence, for the assurance of the lives of children, mostly, bear all the brunt of the larger business of the ordinary branch.

Mr R EDWARDS (OXLEY, QUEENSLAND) - In what State is that company doing business ?

Mr HUME COOK (BOURKE, VICTORIA) - In all the States. The company is well known, and I need not name it, though if it were necessary I could name it. I have here a quotation on this subject from the Insurance and Banking Record for March, 1901, which was followed up in other places. There is here some analysis given which shows what this well-informed paper thinks of the matter -

It is preposterous to suppose that the ordinary branch business costs (apart from commission) only a little over 4 per cent, to conduct, the percentage including, moreover, medical examination. A careful examination of the items as stated in the accounts must raise doubt. For instance, of the £2,400 paid in directors' fees (itself a very high sum), only £200 is debited to the ordinary branch, while the industrial policy holders have to pay £2,200. Then the ordinary branch gets off with a charge of only £352 for rents, rates, and taxes, but the industrial branch pays £4,101. Government taxes amount to £114 in the ordinary branch, and £1,210 in the industrial branch. And so on. It is much to be feared that the allocation is inequitable to the industrial branch, and we would strongly urge the directors to review this question with the assistance of competent outside advice.

Sir George Turner - Does the honorable member know the' proportion of assurances in the different branches? They mav take that as the basis.

Mr HUME COOK (BOURKE, VICTORIA) - They* do not; that is the trouble. The total income of the ordinary branch is £145.301, and of the industrial branch £176,406. The expenses of management debited to the ordinary branch, though there is a difference between the income derived from the two branches of only some £21,000, is £6,030, whilst no less than £42,400 is debited to the other branch, the ratio of expense of management to the total income being for the ordinary branch 4' 15, and for the industrial branch 24*03 per cent. Of course it is not my desire to do any injury to any particular company, and I have not named either of the companies to which I have referred.

Mr Mauger - Is that fair to the other companies ?

Mr HUME COOK (BOURKE, VICTORIA) - I prefer to let the companies interested prove their own' case. What I am endeavouring to prove is that, under existing conditions, these companies are offering to do industrial business - and it is with industrial business that I am chiefly concerned in submitting this motion - and are doing it in a way which is unfair and Improper in some instances to the general public who assure with them. In order to safeguard the general public, to do the right thing by them, and, further, to encourage that self-help and thrift which every man in his heart approves, we ought to give an opportunity to the public in this respect, which can be given only by such an establishment as I have indicated.

An Honorable Member. - Does the honorable member propose industrial business for a State Department ?

Mr HUME COOK (BOURKE, VICTORIA) - What I say is that whilst we cannot begin exactly' an industrial business on the lines upon which it is conducted by private companies, we can, in the circumstances which I propose to narrate, begin a life assurance business which will largely tend in that direction: We know that the premium rates which would require to be charged by a State Assurance Department would be so much lower than those at being charged by private companies, that it would attract the class of business which is now being done by private companies, and a class of business which is not provided for in any way at the present time. As we should avoid a very great proportion of the expense of management, and should not require to keep up expensive buildings, such as must be provided by private companies, it is beyond doubt that we could afford to quote lower premium rates whilst we gave as good an investment, and offered as reliable a security as can be offered by any private company. I may be asked why I wish to start a State Life Assurance Department. If it is admitted that industrial business is not in all cases' carried on upon a sound basis, I shall be told that I cannot deny the fact that most of the mutual life companies doing business are sound. I. have already attempted to answer that by endeavouring to show that a large proportion of business can be done which is not being obtained by any company at the present time, because of the excessive premium rates, and the other difficulties to which I have alluded. It will be admitted that our present industrial system is not sound, in some instances, at any rate. The investment is too expensive by far, whilst the benefits are very small indeed; and lastly, and most important, there is no certainty that the assured will get the sums for which they assure. With respect to mutual companies, the expense of management is much too great to enable them 'to reduce their premiums sufficiently to attract all the business which could be attracted by a life assurance office conducted by the Government. In short, they cannot offer the inducements to the public which could be offered by a State Department of Assurance, and in any case the suspicions of the poorer classes of the people are so strong and their fears so great, that there is little likelihood of any considerable increase in the assurance in private offices. In these circumstances it seems to me to be the imperative duty of the State to step into the breach and create a State Department of Assurance.. I have therefore moved the motion standing in my name, and I trust it will be carried. . We do not desire to indulge in any more charity or benevolence in Australia than is absolutely necessary, and we do wish to encourage, so far as possible, self-help and an independent spirit amongst our people. If we offer to them inducements along such lines as I have indicated, I think it will be found that the response will be very much greater than many persons imagine, and as a result, the necessity which exists, and which, to a certain extent, will always exist, for the payment of old-age pensions will not be so pressing. In any case, I do not think we are justified, nor is Parliament right, in guaranteeing particular companies for the assurance of civil servants, unless we get some fee from them. I have already mentioned a couple of instances in which I am satisfied that if assurances do take place, they will be regretted by those who take out policies with the companies to which I have referred. It seems to me that the Government, in going so far as to schedule a list of companies with which the public servants may do business, practically give a guarantee to the assured which they should be prepared to meet. We have 1,500 or 1,600 civil servants, whom we compel to assure their lives in certain offices. The compulsion to assure in these offices seems to me to carry with it a guarantee that if the companies fail the Commonwealth will itself pay the assured amount. Is it not better, therefore, for us, having the public servants as a nucleus, to start on our own account; with an advantage which even the New Zealand Department did not enjoy at the beginning ? Every other life assurance business has had to start from scratch without any nucleus. I am informed that the A.M.P. Society had been in existence ten years before the number of policy-holders reached 1,500 or 1,600. We should begin with that number, and we should not then be under the necessity of giving a guarantee in regard to outside companies. In brief, my proposal is to begin with the public servants and to offer attractions to those outside who do not now assure to any great extent with the mutual offices. Whilst we might not perhaps be able to offer the same inducements in the way of bonuses or awards as do the mutual companies, we could give a guarantee that should in itself be sufficient to attract a large amount of business and enable us to conduct a successful institution. We should not be under the necessity of paying any high commissions, and the collection of premiums could be carried out very easily, because every pay-office throughout the Commonwealth might be made a receiving office. We should not have to maintain any large offices, because the public buildings could be utilized for that purpose. We should not have any drag upon us in the shape of a building fund and all the contingencies which that would involve, and our staff, if it required to be increased, would be augmented only to a very slight extent. There would be no losses arising from depreciation of mortgaged properties, and we should not have to maintain a foreclosed properties department.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Would there not be any bad municipal loans?

Mr HUME COOK (BOURKE, VICTORIA) - I do not think so. That has not been the experience of New Zealand. If need be, we could restrict the investments to Government, or at least to States, securities. I contend that we require something that will be cheap, sound, and certain, something which will attract people to save their money in- order to provide against a rainy day, and which will guarantee to them the payment of the sums for which their lives are assured. Of course, I recognise that this is a far-reaching proposal, and that it marks an advance upon anything yet attempted in- Australia, although not ahead of what has been successfully achieved in New Zealand. Believing that the principle is sound, and that the end to be served is a desirable one, it seemed to me to be a part of my duty to place my ideas before honorable members, and to endeavour to secure for them the favorable consideration which I trust they warrant.

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