Page 1 – Early life insurance
The need for insurance
Early colonial New Zealand was a country full of risks. A lack of roads and a scattered population meant communication and supplies relied on coastal shipping. Shipwrecks and fires at sea were common and every year a number of vessels were lost. Life on shore was just as hazardous. The mainly wooden-built early colonial towns often caught fire, and since many people worked in mines, mills or other workplaces, accidents and deaths were frequent. In this raw society insurance was valuable, and the insurance industry grew quickly.
Insurance involves paying premiums in return for protection against the cost of specified risks or the provision of financial benefits in certain circumstances. The contract between the insured person or organisation and an insurance company is known as a policy. Some policies also protect the insured against liability to others (third parties).
There are two main types of insurance business:
- General insurance began with marine and fire insurance and now includes insurance against loss or damage to all types of property, motor vehicles, aircraft, and goods in transit or storage. General insurance also offers protection from loss of profits, and includes travel and health insurance.
- Life insurance now includes cover for personal injury and sickness, income replacement (paid when policy holders are unable to earn their usual income), mortgage guarantee (when policy holders are unable to pay their mortgage) and other credit insurance.
Early life insurance companies
The first life insurance companies in New Zealand were mutual companies, meaning they were owned by their policy-holders. Local branches of Australian companies dominated the market. The Australian Mutual Provident Society (AMP) operated in New Zealand from 1854, and others soon followed. The National Mutual Life Association of Australasia (later part of the AXA group), founded in 1869, anticipated trans-Tasman operations in its name but did not open a New Zealand branch until 1880.
These early companies usually sold whole-of-life policies, with the sum assured paid out on the death of the insured person. Later they also sold endowment policies, which paid out during the life of the insured person, usually in a series of regular instalments, to provide for their retirement. By 1900 endowment insurance made up about half the business of most life companies. From the 1890s insurance companies also offered group endowment insurance schemes for employers to make available to their staff.
Fighting for life
Selling life insurance in 19th-century New Zealand was fiercely competitive. Colonel George Whitmore, a veteran of the New Zealand wars, found that ‘[a] person can hardly get out of a railway carriage without someone rushing up to him and wanting to “take his life”.’1 Some customers were more valuable than others. Insurance agents were told to charge more to insure ‘Maoris, half-castes, quadroons [quarter-castes], Chinese or other men of colour’. Special conditions also applied to ‘persons connected in any way with the manufacture or sale of intoxicating liquors’.2
Government Life Insurance
Not everyone who wanted life insurance could afford the premiums, and the financial stability of the early insurance companies could not be guaranteed. So in 1869 the government set up Government Life Insurance, at first selling its policies through the national network of state-owned post offices. The business grew rapidly and by 1877 Government Life was bigger than the combined total of its competitors. Local branches of British and American companies also appeared now and then, but the New Zealand life insurance market was dominated by Government Life and the Australian mutual companies until the 1980s.