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Thursday, 15 May 1930

Senator THOMPSON (Queensland) . - It is required by this clause that-

The basis of valua tion adopted shall be such as to place a proper value upon the liabilities, regard being had to the mortality experience among the class of persons whose lives have been insured in the company, to the average rate of interest from investments, and to the expenses of management (including commission), and shall be such as to secure that no policy shall be treated as an asset.

The question I raise in this connexion is in relation to the secret reserves which must have been created in every insurance office in Australia by the fact that premiums fixed many years ago were based on an expectation of life, which, in the succeeding years, has been proved to he entirely higher than was predicted. It is admitted that during the last 30 years there has been an improvement of twelve years in the expectation of life. It is obviously unfair that premiums based on a shorter expectation of life aremuch higher than they ought to be, but I do not know how we can protect policy-holders in that respect. With other honorable senators, I have received a communication which has missed its objective by being unreasonable in many of its terms, but on this phase of of the matter it says -

For these reserves have been accumulated by charging excessive premiums in anticipation of a death-rate of about twice that which has actually been realized. At the same time the rateof interest earned has been nearly double that which was assumed in the calculations.

I do not go so far as to agree with the writer in this, but I do think that it is a fair thing to state that there has been an improvement of twelve years in longevity in the last 30 years. The letter continues : -

At the same time the rate of interest earned hasbeen nearly double that which was assumedin the calculation. As a result all sorts of extravagances have been perpetrated .

I shall not follow the writer any further as I do not agree with the terms or the style of the letter generally. However, as I have taken up this point throughout the passage of this bill, I should like to have an assurance that there is a possibility of this matter being rectified in the near future.

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