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Thursday, 14 July 1904


Mr WATSON (Bland) (Treasurer) .- I do not wish to debate the motion at any length, because the members of the Government have not had sufficient time to consider the details involved to be able to pronounce an opinion as to whether any immediate action can be taken for the establishment of a Commonwealth Life and Accident Assurance Department. Personally, I have always favoured the establishment of a State Department of Assurance. I believe the establishment of such a Department to be of extreme moment to the community. The guarantee which the State could give for the solvency of such a Department would render the idea of life assurance much more attractive to the community generally than it is under present conditions. As things are now, the public are assailed by the canvassers) for the various societies and companies with all kinds of conflicting statements as to their solidity, and as to their possible bankruptcy. Probably, if a Government Department were established, there would be a great increase in life assurance, and habits of thrift would thus be encouraged in the population-


Mr G B EDWARDS (SOUTH SYDNEY, NEW SOUTH WALES) - Why not make a beginning with the Commonwealth Public Service ?


Mr WATSON - The view I took when the Public Service Bill was under discussion was that such a start should be made. I have not yet had time to consider this question with the sense of responsibility which attaches to my actions as Prime Minister, but when the Public Service Bill was in Committee, and it was being insisted upon that our officers should insure their lives against old age and death. I was of the opinion that the Government should establish a Department of Assurance, and thus save the canvassing expenses which are inevitable in connexion with private companies and societies. If such a Department were established, it might afterwards be extended so as to take general life assurance business. At the present time the cost of life assurance is materially increased by the expenses necessitated . by the competition between the various companies and societies.


Mr Henry Willis - Far more than the public have an idea of.


Mr WATSON - Yes. It is not until one examines the results of the working of these offices, and sees what- it costs them to obtain new business, that one begins to appreciate the magnitude of that expense. We have in Australia, in our mutual life associations, two or three splendid examples of the co-operative movement, and I do not wish to derogate in the slightest degree from the credit attaching to their management. I am a member of the Australian Mutual Provident Society, which is now managed in a highly efficient manner, and has, I believe, always been so managed. That society, however, like other offices carrying on the same business, has to incur a vastly greater expense in obtaining new Jives than would have to be incurred if the whole business were in the hands of the State.


Mr G B EDWARDS (SOUTH SYDNEY, NEW SOUTH WALES) - Advertising alone costs a great deal.


Mr WATSON - Yes. I believe that the first year's premium is swallowed up by the expense of getting the policy taken out.


Mr Crouch - That expense is less, so far as the Australian Mutual Provident Society is concerned, than it is with the New Zealand Government Insurance Department.


Mr WATSON - The Government Insurance Department of New Zealand has to compete with private institutions, just as the Australian Mutual. Provident Society has to do, and until the Government Department absorbs all other life offices, there is not likely to be much saving in the expense of canvassing, advertising, and so on. But the New Zealand Department shows, under all the circumstances, a splendid record both as regards its cost of management and the interest which it returns on its investments. Its interest returns are practically equal to those of any private institution, while its expenses are lower than those of any other institution, with the exception of the Australian Mutual Provident Society, doing business in Australia. It must be remembered that the New Zealand Department has a smaller volume of business than the Australian Mutual Provident Society has, and, therefore, its expenses of management must be proportionately greater; but, notwithstanding that fact, they are only very little higher than the expenses of the Australian Mutual Provident Society. Moreover, the New Zealand Department has a population of about 800,000 only to work upon, while the Australian Mutual Provident Society is an older institution, and has a very much larger constituency.


Mr Glynn - I do not think that the New Zealand Department canvasses.


Mr WATSON - Yes, it does. It commenced in 1869 without canvassing; but it was gradually discovered that if it wished to obtain the volume of business necessary to enable it to be cheaply managed, the Department could not afford to stand idle, and ignore the competition of private institutions.


Mr Mcwilliams - I hope that the Government will go further than the establishment of a State Department of Insurance. I am sufficiently radical to hold the view that insurance should be made compulsory.


Mr WATSON - Perhaps that may come in the future. The point I wish to make is that, taking all the circumstances into consideration, the New Zealand Government Department has given practically as good results to its policy-holders as have been obtained by the members of the Australian Mutual Provident Society, and better results than have been obtained by those interested in the great majority of other similar institutions. There is a difference of about 3 per cent, between the expenses rate of the Australian Mutual Provident Society and that of the New Zealand Department, while the expenses rate of other similar institutions is very much higher.


Mr Henry Willis - The Australian Mutual Provident Society is very conservative.


Mr WATSON - I do not think so. It was sufficiently enterprising to advance money on property in Sydney upon which it subsequently lost.


Mr Henry Willis - I mean conservative in the acceptance of lives.


Mr WATSON - That may be so; but every insurance institution should be conservative in that respect. It should accu rately ascertain the condition of the wouldbe policy-holder before accepting his proposal. The Australian Mutual Provident Society takes proper precautions by insisting on a medical examination. But while the New Zealand Department has given to its policy-holders advantages which are practically equivalent to those obtained by the members of the Australian Mutual Provident Society, the former have enjoyed the further advantage of absolute security. Even if the Department were unable to meet the claims upon it, the policy-holders or their representatives would not lose, because all claims are guaranteed by the Government of New Zealand.


Mr Henry Willis - The fees of the Australian Mutual Provident Society are higher than those of other societies.


Mr WATSON - That is a relative matter. It depends upon a comparison of the benefits given. Although some institutions quote lower rates than- are given by the Australian Mutual Provident Society, they do not give the same proportionate returns. It would be invidious for me, in my position in Parliament, to compare one society with another. I wish, however, to emphasize the fact fhat catastrophies and disasters may occur with the best' managed societies. Even in the case of the Australian Mutual Provident Society, with all its careful management, and its fifty years of existence, there has always been the possibility of a sudden drop in the values of securities, and of the consequent inability of the Society to meet its engagements. It has met them handsomely up to the present, and to-day has an immense reserve which, in all human probability, will prove sufficient to meet all possible demands that may be made upon it. There is, however, always the contingency that such a set of circumstances may arise that any privately -controlled institution will be unable to meet its engagements. No such risk could occur in connexion with a Government Department. Possibly a Government Life Assurance Department would not give the policy-holders the same profits upon their investments, but it would afford a greater degree of security. I fail to see why a properly managed Government Department, free from political influence and from the suggestion of control by members of the Government, and with experts at the head of it having a free hand, consistent always with responsibility as to the detailed management of the institution, should not be worked in an economical fashion, and at the same time give the best results to the people immediately concerned. In my view, an active influence in deterring people from engaging in life assurance at the present time is exerted owing to the fact that, if a man allows it to be imagined that he is prepared to insure his life, he is immediately surrounded by a dozen canvassers representing different societies. Each of these canvassers does his best to convince the intending assurer that all the other societies, except the one he represents, are rotten, and that his own is not only solvent, but is throwing money away ; that it is, in fact, a philanthropic institution, which ..is attempting to give something for nothing all the time. That is a very unsatisfactory state of affairs whenwe recollect the importance of life assurance. If the public are led to believe that these societies are unfinancial, by a multitude of counsellors in whom there is no wisdom, the result must be regarded as most unfortunate.


Mr Henry Willis - That occurs to a large extent in connexion with fire insurance.


Mr WATSON - Fire insurance as a form of piracy has been developed to a far greater degree than has life assurance.


Mr Mcwilliams - The fire insurance companies have established a ring.


Mr WATSON - The honorable member is quite correct. They have, I believe, a complete understanding among themselves and, so far as New South Wales is concerned, I know that those who desire to insure have for some time past been called upon to pay very dearly for the privilege. It will be interesting to watch the way in which the New Zealand experiment in this direction works out. So far as our position in Australia is concerned, I am not prepared to put forward any scheme for the establishment of a State Life Assurance Department at the present time. The matter is one that will have to be considered on business lines, and we shall have to adopt very careful safeguards before it will be wise for the Commonwealth to embark upon any such undertaking.


Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - There are much more pressing matters to be dealt with.


Mr WATSON - Perhaps there are, but the motion is now before us for consideration, and upon its merits I must express the utmost sympathy with it. At the same time, I do not think it is reasonable to expect that, with the other matters pressing on the attention of the Government and of Parliament, we should be prepared to take up the matter at the present moment. I feel that throughout Australia evidence is fast accumulating in favour of the Government taking charge of a number of enterprises, which can be, and which should be, more effectively worked by the Parliament on behalf of the community than by any set of private individuals. I should, however, prefer to take some time to think over this matter, in common with other large problems which must come up for consideration. In the meantime, I certainly feel that we could, during next session perhaps, bring forward some proposal which would at least provide for the assurance -of the lives of public servants by the Government. Our public servants are compelled under the Public Service Act to assure their lives, and we have by regulation named a number of approved societies in which public servants may effect their assurances. I think it would be much preferable, and that we should achieve much better results, so far as our public servants are concerned, if they were freed from the necessity of carrying on their backs a portion of the expenses incurred in canvassing carried on by the privately conducted societies. We have some 12,000 public servants at present, and, although the whole of them may not be required to assure their lives, because many are interested in various pension or superannuation allowances under State Acts, as the years go on we shall gradually arrive at a condition of affairs when every public servant will be required under the Public Service Act to assure his life. Therefore, it would be much better for the Government to establish a Department for assurance purposes, and simplv make a deduction from the salaries of its officers. By this means we should save all expense beyond that entailed by the simple bookkeeping involved. Of course, arrangements would have to be made for investing the money contributed to the assurance fund, but that could be arranged for in some form or other by a Government Department. As I have stated, I have no objection to the motion, but I cannot undertake, on behalf of the Government, to give effect to it for some little time to come.







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