Page 6 – Transforming the insurance industry
Nineteenth-century insurance clerks perched on stools at high sloping desks, entering columns of figures into huge hardbound ledgers. Their companies employed teams of insurance agents to roam the countryside by horseback, train and eventually motor car, attempting to sell policies on commission to anyone they met.
Over the 20th century the New Zealand insurance industry was transformed. Commission agents tied to individual companies largely disappeared and insurance brokers and financial advisors grew in influence. The boundary between the two main sectors of the industry blurred in the 1920s, as life and general insurance companies began to compete for workers’ compensation insurance.
In the 1950s life insurance companies began to move into the fire and general insurance market. Insurance companies also invested increasingly large amounts of reserve capital in mortgages, in the first signs of the integrated financial services industry of the present day.
Standing up for insurance
The manager of South British Insurance was not impressed by the modern office furniture appearing in 1921. ‘Flat-topped tables look well, but I do not approve of them for counter staff. A good counter clerk, in a busy office, really requires to stand for most of the day ... Chairs have a tendency to make one too comfortable ... Quicker work can be done on ledgers standing at a table than sitting at a table.’1
Takeovers and privatisation
The tariff arrangements by which groups of insurance companies agreed to charge the same rates allowed many general insurance companies to operate profitably even in the small New Zealand market. As competition between these companies increased, the smaller ones were taken over by much larger insurance and banking multinationals. Similar competitive pressures caused the decline of the mutual ownership model (by which policy-holders jointly owned their companies) in the life insurance industry.
The economic reforms of the 1980s saw Government Life become a state-owned enterprise, renamed the Tower Corporation. It was then mutualised (owned by policy-holders), then later privatised and eventually listed on the New Zealand and Australian stock exchanges. State Insurance was sold to Norwich Union Holdings in 1990 and in 2003 its operations were combined with its old rival NZI (formerly New Zealand Insurance), then owned by Insurance Australia Group.
More recently, branch offices of insurance companies became fewer and smaller as telephone and internet transactions largely replaced face-to-face customer services. Insurance became simply a branch of the financial services sector, with many banks providing full insurance services.
A $4-billion industry
In 2007–8, the general insurance industry in New Zealand earned a gross income from premiums of over $3 billion, and a net income of $2.6 billion. It paid out claims of $1.74 billion and spent $826 million on staff, commissions and other operating costs. The main business was motor vehicle cover (36%), domestic comprehensive insurance (23%) and commercial property insurance (14%). In the life insurance sector, $1.48 billion was earned from premiums while $837 million was paid out on policies. The wider investment savings sector managed over $60 billion of superannuation, unit trust, life insurance and other funds.