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Thursday, 14 July 1904


Mr HUME COOK (BOURKE, VICTORIA) - The debate being closed, I desire to say a few words in reply to some criticisms which have been levelled at the motion, and also to refer to the observations which have just fallen from the Prime Minister. Not for a moment did I expect that immediately upon the carrying of this motion the Government would regard it as incumbent upon them to bring in a Bill to carry it into effect. I recognise that time must be allowed for consideration in a matter of this kind, and that those who occupy positions of responsibility must be thoroughly assured of the reasonableness of a proposition before they can be expected to take any steps to carry it out. Therefore, I regard the statement of the Prime Minister as perfectly satisfactory. He has accorded the motion his general approval, and has promised that next session, if possible, a measure shall be introduced which will provide for the establishment of a Government Life Assurance Department to meet the requirements of the Public Service Act, and possibly something more. My proposition was. and is, that the assurance of the lives of the public servants of the Commonwealth should be made the nucleus of the scheme. I contended, when the Public Service Act was before us, that provision should be made in that measure for the establishment of a Department for the assurance of the lives of public servants. My present suggestion is that an institution should be established on lines somewhat similar to those adopted in New Zealand ; that a commencement should' be made with the few thousands of Public Servants of the Commonwealth, whose lives require to be assured, and that the scheme should gradually be extended to embrace the general public along safe and sound businesslike lines, such as have been indicated by the Prime Minister. I do not propose that the Department should be conducted merely as a philanthropic institution, and therefore I am satisfied with the indication given that action will be taken by the Government at no very distant date. The honorable member for North Sydney adopted a critical attitude towards my proposal. He threw some doubt upon the statement that I had made, that the premiums demanded by the New Zealand Life Assurance Department were very much lower than those required by the mutual life assurance societies in Australia. Since my last speech I have made a comparison of the rates demanded by the five great Australian companies and those required by the New Zealand Department. I find that not only was my statement correct, but thatthe difference is very much greater than I had supposed. I have here a comparative statement of the annual premiums charged for an assurance of£100, according to the last published investigation reports. This table includes ' the rates paid by all the companies doing business in Australia, but I propose only to quote the rates charged by the large Australian societies. The Australian Mutual Provident Societv for an assurance of£100 charges an annual premium of£117s.5d. That is the highest rate charged by. any of the Australian societies. The Colonial Mutual Life Assurance Society charges £117s. 4d.; the Mutual Life Association, £1 17 s. ; the National Mutual Life Association, £1 16s. 9d; and the Australian Widows' Fund, £1 16s. 9d. The New Zealand Life Assurance Department charges £1 15s. 7d., or1s.10d. less than the rate demanded by the Australian Mutual Provident Society. That difference amounts, roughly, to 5 per cent. This statement was compiled from official sources, and I think that it affords the best proof of my statement as to the lowness of the premium rates of the State institution. The difference of 5 per cent, in the premiums may not mean much to an individual assurer, but it represents a very large amount in profits to such a society as the Australian Mutual Provident Society, whose annual premiums total something like£1,750,000. Since this motion was brought forward, the Argus has published an article in which reference is made to the wonderful growth of life assurance business in Australia during the last twenty-one years. The accumulated funds of the societies are set out, and the growth of their reserves is favorably commented upon. But the writer of the article does not view with favour the proposition which I have put forward. He seeks to prove that the companies now managed by private individuals have done their work so well that there is no occasion whatever for any interference on the part of this Parliament. Nevertheless, the following extraordinary statement is made in the article under notice. It was published in the Argus of the 27th June. This is the statement -

At first sight, the expenses incurred by most of the societies proportionately to their income appear to be heavy, but they are largely accounted for by the initial cost of new business. This cost is enhanced by the keen competition that exists, and it is desirable that a limit should be fixed.

We all know that the cost is enhanced by the keen competition that exists; but I hardly expected to have the Argus as an ally in my advocacy of this class of " Socialism." I did not anticipate that that journal would be prepared .to urge that a limit should be placed on the expenses that a company may incur in securing business. I am glad to receive the assistance of the Argus in this respect, for I am strongly of opinion that a limit to these expenses should be fixed. In this particular the best way to bring about that result would be to' institute a Government Life Assurance Department, which would con-, duct its business under a much better system than that adopted by any of the life assurance companies now carrying on operations in Australia. The article proceeds to show that the New Zealand Life Assurance Department is not all that it is believed to be, and some of the remarks which it makes are scarcely fair. It sets out that -

The New Zealand Government Life Insurance Department is practically only a Department in name, for its ample funds form the only security its policy-holders require. Its expenses relatively to income are more than half as much again as those of the Australian Mutual Provident, and association with the Government is not, therefore, in that particular a benefit.


Mr Watson - The difference between 10 and 13 per cent.


Mr HUME COOK (BOURKE, VICTORIA) - Quite so. The article continues -

There is, in fact, no warrant for the interference of Government in a business that has been brought to a high degree of perfection by private enterprise and skill.

The sting, as usual, is in the tail. The statement is true so far as it goes, but unfortunately it is not a full exposition of the facts. The truth is that, whilst the expenses of the New Zealand Department exceed those of the Australian Mutual Provident Society, they are yet very much lower than those incurred by any other office doing business in Australasia. 'It should also be borne in mind that the annual income of the Australian Mutual Provident Society is about six times as great as the income "of the Department under review. Proportionately speaking, therefore, the New Zealand Department is really the most cheaply conducted of all the offices. The proof is readily forthcoming. It will thus be gathered that the interjection made by the honorable and. learned member for Corio, that proportionately the Australian Mutual Provident Society is conducted on more economical lines, is not correct. Coghlan gives a table showing the percentage of expenses to premium receipts of the companies which I have already mentioned, and from a perusal of that table, it will be found- that the percentages are as follow : - The Australian Mutual Provident Society, 13`4 ; New Zealand Life Assurance Department, 20*4; National Mutual Life Assurance Company, 24*7 ; Colonial Mutual Life Assurance -Company, 25"o j Mutual Life Assurance Company, 27*7 ; and the Australian Widows' Fund Life Assurance Company, sc-'o. Had the Argus desired to place the full facts before the public, it should have pointed out first of all that the premium receipts of the Australian Mutual Provident Society are more than six times as great as are those of the New Zealand Life Assurance Department, and that, proportionately, its expenses are greater than those of the New Zealand Department. It should also have fairly pointed out that, compared with any other society whose business is of anything like the same volume, the New Zealand Life Assurance Department is conducted on very economical lines indeed.


Mr Watson - According to the last published returns in regard to purely life assurance business in New Zealand, the percentage was 10 per cent, in the case of the Australian Mutual Provident Society and 13*27 in the case of the Government Department'.


Mr HUME COOK (BOURKE, VICTORIA) - That is quite correct, but those figures apply to New Zealand only. Those I have given relate to life assurance business in Australasia. I wish to show further that the Argus article conveys a misconception, inasmuch as it does not point out the efficacy of the New Zealand institution from our point of view. What we ask is that those who desire to assure their lives shall obtain greater security. It is not so much a question of bonuses as it is of security. One of the best means to judge of the popularity of the security offered by the various societies is to look at the number of policies which they issue, and to ascertain their general volume of business. There are ten companies conducting life assurance business in New Zealand, and out of 99,908 policies taken out in that Colony, 42,406 were issued by the New Zealand Department. In other words, almost one-half of this business was secured by the Government Department, 57,502 poli,cies being divided amongst the nine other institutions conducting operations there.

These figures show that the Government Department is not only regarded as a safe and sound institution, but that it is extremely popular, and is catering for a class of business for which a large number of life assurance offices in Australia have no regard. It is the institution of the poor man and of the middle classes. According to the latest return as to the policies issued by the several companies doing business in New Zealand, it would -appear that the average policy issued by the Austalian Mutual Provident Society in that Colony is ,£227, while the average policy issued by the New Zealand Department is £137, a difference of £90 on every policy.


Mr Watson - Hear, hear; consequently the working of the Government Department must be more costly.


Mr HUME COOK (BOURKE, VICTORIA) - The most important point is that the poorer classes of the community are assuring their lives in the Government Department of New Zealand. Its volume of business is larger, the number of policies issued by it are in excess of those issued by any other company, and, consequently, as the Prime Minister interjects, the ratio of expense must be greater. But, notwithstanding that disability, it is second on the list of life assurance institutions in Australasia, so far as the cost of management is Concerned. Further than this, annuities representing a total of ,£45,668 have been issued by various institutions in New Zealand, and of that amount the annuities issued by the Government Department represent .£36,392, so that practically the whole business in annuities -in New Zealand is being done by this Department. These facts and figures are very interesting, and the impression they convey is so vastly different from that which one would form from a perusal of the Argus article, that they are worthy of presentation to the House, if only in order that the true position of the New Zealand Department may be clearly shown. Since I last addressed myself to this question I have been fortunate enough to have had sent to me a small pamphlet entitled, A Brief Survey of New Zealand's State Life Insurance, specially prepared for distribution at the World's Fair, St. Louis, by Commissioner J. H. Richardson, F.F.A., F.I.A.V. Mr. Richardson is the Commissioner for the New Zealand Life Assurance Department, and the ' facts and figures which he gives in regard to its business management and methods are exceedingly interesting. With respect to these, he says -

The Department is conducted almost exactly on the same principles as those generally adopted by private mutual life insurance offices. All the usual classes of policies are issued to those who can pass the customary medical examination, and the colony is vigorously canvassed by travelling agents, who obtain the vast bulk of the new business, now amounting to nearly three quarters of a million sterling per annum. The expenses and taxes are borne by the policy-holders, who share the whole of the profits, just now accruing at the rate of between ^60,000 and ^70,000 per annum.

Then, dealing with the investment of the funds, he points out that -

The investments of the Department are controlled by a Board, consisting of the Colonial Treasurer of the Colony, the Solicitor-General, the Surveyor-General, the Commissioner of Taxes, the Public Trustee, and the Government Insurance Commissioner, three of whom form a quorum. The investments are mainly .confined to New Zealand 'Government securities, loans to local bodies (secured by special rate), loans to policyholders on the security of their policies (limited to 90 per cent, of the surrender value), and loans on mortgage of real estate (not exceeding threefifths of the valuation). No loan can be granted to a local body without the joint concurrence of the Board and the Governor. The Board must be unanimous before any loan on mortgage can be granted, and not more than ^10,000 can be lent on any one real estate security, nor more than that sum to any one person or company.

The distribution of cash bonuses from 1870 to the present time, according to this pamphlet, amounts to £1,001,285. These figures show that ' the Department is not only financially sound, but a magnificent profit-earning institution, ' and they warrant some attention at the hands of the Government, who now promise something more than a mere acknowledgment of their belief in this class of business being conducted by the State. The only other matter to which I desire to draw attention is that relating to the position of the public servants of New Zealand. At first members of the Public Service of New Zealand were not compelled to assure their lives with this Government Department. It was not until 1893 that an Act was passed compelling all persons who joined the service from that date to assure with it; but it is somewhat remarkable that, before this date, the bulk of the public servants of New Zealand had voluntarily taken advantage of the Government institution. From the figures supplied by Mr. Richardson, it appears that the premiums received from the civil servants of New

Zealand amount to , £40,300 per annum. This amount is made up of premiums paid by railway employe's and officers connected with the Post and Telegraph Department, the Education Department, the Police Department, and other branches of the Public Service. Of this total, no less than £37,000 represents premiums in respect of policies voluntarily taken out by members of the Public Service, only , £3,300 being in respect of policies issued as the result of compulsion on the part of the Government. This is a very valuable fact. I do not quite agree with the interjection made by an honorable member, who said that this subject of State life assurance is not a very important one, and that there are very many matters of far greater significance to be dealt . with by the Government. Life assurance has entered sp largely into the political economy of the nation, and constitutes so large a proportion of the financial operations of every country, that it is becoming more and more apparent that the time is ripe for State action. Older countries, such as Germany and the United States of America, are already moving very rapidly in the direction which I desire the Commonwealth Government to take. They recognise that the wage conditions of the working classes are such that it is almost impossible for them to acquire a competency or to provide against old age, except by means of life assurance or of some such plan dovetailing with a system of old-age pensions. Notwithstanding that Australia is supposed to be the richest country in the world per head of the population, the wage conditions here are such that a man in full and constant employment and receiving the ruling rate of wage in almost any industry that might be named, finds it almost impossible to provide against old age if he rears a family and does his duty by it. In these circumstances many persons are beginning to recognise that the best thing for them to do is to endeavour fo secure an annuity, or to assure their lives for the benefit of their families. I believe it to be part of the dutv of the State, therefore, to see that this class of business is safeguarded- in every possible way. The man who makes a life assurance department his savings bank should have a guarantee that his savings will not be interfered with in any manner. Those who have read the article to which I have already referred will have learned that, notwithstanding careful management, many societies in other parts of the world have gone to the wall. We all know of the case of the Scottish Provident Society, whose dissolution brought disaster to the homes of thousands and thousands of persons in the United Kingdom. In later times there have been two or three other failures. Admitting that a great number of the Australian institutions are brilliantly managed, and that in all human probability - as was stated by the Prime Minister - there can be no failure in connexion with some of them, I still hold that what I have urged again and again should be kept in view. i do not look to these institutions for immense profits. I do not ask that their policyholders shall receive large bonuses as the result of their contributions, but I do say that what is paid into them should be absolutely safeguarded - that the investment which married men make on behalf of their wives and families should be irrevocably secured to them. Under all the circumstances, I think that I am more than justified in asking for State action on the lines I have indicated. Consequently I was more than delighted to hear what the Prime Minister stated to-day. I shall welcome the proposal which he intends to submit next session, inaugurating a system of State life assurance, with the public servants as its nucleus, and I shall be prepared to help him to extend that system along the lines which I have projected when the time is ripe for such an extension to take place.

Question resolved in the affirmative.







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