|Assurance about Insurance|
|Written by Dr Rowland S. Ward|
|Wednesday, 12 December 2007 00:00|
ASSURANCE ABOUT INSURANCE
The Presbyterian Banner - May 2002
General Insurance is in the news these days. We have the Royal Commission into the HIH collapse revealing that the Company doctored their accounts so as to appear profitable when they were not. We have rapidly escalating Public Liability premiums putting community and tourism operators at risk of closure, an escalation driven by a change in attitudes and definitions of negligence as well as lawyers touting for business on a 'no win, no fee' basis. We have the impact of the terrorism attacks on 11th September reducing capital available in insurance markets and increasing the cost of the insurance insurance companies buy (reinsurance) to spread their risk. Compounding the problem is the higher capital adequacy (solvency) ratios required under APRA regulations promulgated some time ago.
In actual fact insurers in Australia have a loss ratio exceeding 150% for Public Liability, so expect on average a doubling of liability premiums in 2002 and increases on property, particularly in NSW where weather claims have been a major problem for some time. To this fact the new roof on our Armidale church bears witness. Despite what I expect will be continual difficulty with liability business, now is probably the right time to buy shares in Australian general insurers. They will be more closely supervised in future and the cycle is moving in favour of more adequate premium to risk that had been undermined by excessive competition, not least from HIH. No one would want to insure with a Company that is not financially secure.
The nature of insurance
In very early times Chinese traders shared their cargoes among the fleet so that all shared in the loss if a vessel foundered. Villagers in early times would share in rebuilding the house of one of the community destroyed by fire or other misfortune. Burial clubs existed in ancient Rome.
Marine insurance was common in Europe before the organisation we know as Lloyd's of London began in 1688, but Lloyd's became one of the great success stories. Merchants met at Lloyd's Coffee House to pledge their fortunes as security for taking a share of the risk of loss of a particular vessel by writing their names under details of the vessel or goods insured (hence the term 'underwriter').
One of the early fire insurance endeavours in London offered house insurance for 31 years following a single premium payment! That didn't last long. Another (1696) was a mutual society called The Amicable Contributorship or, from its logo/firemark the Hand-in-Hand. The idea reflects the concern for each other that belongs to a true community. My first employer, the Sun Insurance Office, was founded in 1710, and was the oldest insurance company in the world (now part of Royal Sun Alliance).
The oldest life insurance organisation still existing was established in that then most Presbyterian city of Philadelphia in 1759. Sponsored by the Synod of Philadelphia it provided pensions for Presbyterian ministers and their dependents. Our own PCEA was one of the first clients of the AMP Society after it was formed in 1859.
Abraham Kuyper, Calvinist theologian and one-time Prime Minister of the Netherlands, was a strong supporter of the workers' compensation legislation in his country enacted when he was in Opposition in 1901.
Through the magic of averages and the predictability of what we call chance, there are many matters which can be reduced to practical statistical certainty. God is, after all, the God of wisdom and order; he has not let our rebellion create true randomness although from one viewpoint it may seem so. It is reserved for the future for some to descend into chaos. Meantime, then, let us get on with serving God in this world making reasonable and rational decisions but always knowing that we depend on the one who makes all things, even the voiding of our insurance by some mischance, work together for the good of those who love him.
However, if we judge everything in here and now money terms and want someone else to pay for matters which belong to the common things of life, we will be back to subsistence living. Already, medical malpractice premiums are almost unbearable so that if there is to be any protection in the future there will have to be considerable tightening up and the imposition of additional statutory limitations. A reversion to a true community with common goals, and values will help if those goals and values are seriously reflective of Christian teaching. You'll still be liable if your ox that is known to be dangerous gores someone, or if you don't have a guard on your terrace, but we'll not be in the ridiculous situation that presently obtains.
The New Zealand no-fault accident scheme, which is run by the Accident Compensation Corporation there, covers everyone 24 hours a day, and might well provide a helpful model for a better way for many injuries. It should be considered. Taking away common law rights is a serious matter, but if leaving them destroys the system, change must come one way or another.
|Last Updated on Sunday, 15 June 2008 17:13|