Establishment of Department

he Department was established at the instance of the late Sir Julius Vogel in the year 1869, at a time when the lamentable failures of two well-known British offices, the Albert and the European, had drawn public attention to the need for greater security in life assurance. The actual working of the office began in January, 1870, and it has therefore been over thirty-six years in existence.

Management and Methods.

When proposals are made on lives which, although not of such inferior quality as to merit total rejection, are considered not to reach the requisite standard

Under-average Lives.

for at the ordinary rates of premium, they are accepted at increased rates. Great refinement is not attempted in the assessment of such lives, proposals being, as a rule, either accepted at par, with an extra premium of 10s. or 20s, per cent, of the sum assured, temporarily deferred, or declined altogether.

Contingent Debts.

A proposer accepted at an increased premium may, instead of paying the extra, have a special condition embodied in the policy, providing for a de- page 5 duction from the sum assured in the event of the policy becoming a claim within a certain period.

Liberal Conditions.

Policy No. 2059, issued in 1872. The assured borrowed from the Department on the security of this policy and then left the colony, The payment of premiums was page 6 neglected from 1896 until the death of the assured in 1905, but the surrender value and the bonuses allotted from time to time were sufficient to meet the overdue premiums, and the claim was duly paid.

Policy No. 13640, issued in 1880. The assured left New Zealand in 1888, and neglected to pay any further premiums. The policy matured in 1905, and, notwithstanding that sixteen and a half years' premiums were owing, and some of the bonuses had been taken in cash, there was a small balance in the assured's favour, which was duly paid over. The fact that the policy had any value seems to have been forgotten, for the document could not be found, and the Department had to issue a copy for the purpose of obtaining the usual discharge.

Policy No. 51997, issued in 1885. The premiums were paid to 1890 only, but the policy was in full foree at maturity, fifteen years later.

In more than one case a policy has matured long after its existence was forgotten, and the Department has had to advertise in the public Pre as before the assured could be found.

Investment of Funds.

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

Investment Board.

Government Advances to Settlers Office Superintendent, the Public Trustee, and the Government Insurance Commissioner, three of whom form a quorum. The investments are mainly confined to New Zealand page 8 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 three-fifths 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 realestate security, nor more than that sum to any one person or company.

Valuations and Bonuses.

Valuations are made yearly, but bonuses are allotted every three years. Although the Government Insurance Department has not made a special feature of its bonuses in order to obtain new business, it has nevertheless, since its establishment in 1870, distributed to policyholders a sum of £1,180,279 in cash. Which means an addition of £2,222,728 to the sums assured. The aim of the Department has been to safeguard in every way the interests of the assured, and it has therefore, after most stringent valuations, distributed by way of bonus as much as was available, but only after creating a strong reserve page 9 fund to meet all possible contingencies. This prudent police

Valuations.

has been indorsed bv the Consulting Actuaries in Englaud, Messrs. Ralph P. Hardy and George King, who have repeatedly congratulated the management on the impregnable position of the office. For many years past the Department has pursued a policy of strengthening its reserves, and the valuations are now made upon a 3½-per-cent, interest basis. At the last valuation, 31st December, 1905, the sum of £178,994 in cash was distributed amongst the policyholders, representing additions to the sums assured of £302,910. As on the previous occasion, the bonus was distributed

Bonuses.

as a percentage of the sum assured and previous bonuses in force, so that, as the Review remarks, "Every policyholder has the satisfaction of being able to 'tot up' his own bonus, while the saving in expenses swells the profits for division."

Bonuses are allotted every three years, but, as interim bonuses are given for surrenders, loans, and claims by death or maturity, all the advantages of a more frequent distribution are secured to policyholders without the corresponding expense to the Department.

Insurance of Civil Servants.

The above scheme is compulsory on all new entrants into the Service under forty years of age, but a large proportion of the support given to the Insurance Department has resulted from voluntary action on the part of Government employees in all grades of the Service, of whom there are some six thousand insured in the Department for about a million and a half sterling. They contribute in premiums upwards of £44,000 a year out of a total premium income of just over £320,000.

It will be seen that less than 13 per cent, of this large volume of business is of the nature of compulsory insurance, over 87 per cent, of the public servants assured in the Department having used their own judgment in selecting an office, and being perfectly at liberty to withdraw at any time they may think fit, taking with them the full surrender value of their policies.

Progress of the Department.

Consolidated Revenue Account From January, 1870, To December, 1905.

Total Life Assurance in New Zealand.

The foregoing table shows that a very large proportion of the whole business is held by the Government Life Insurance Department, which also transacts the largest amount of new business. It may safely be said that these figures, the results of thirty-six years strenuous effort, are in themselves creditable to the Department, and testify more eloquently than any words to the favour in which it is held by the people of New Zealand.