These are the total lapses for the two main divisions of insurance, namely ordinary and industrial, for the years 1930, 1931 and 1932. These figures, I believe, tell a really tragic story when we stop to consider the hundreds of thousands of Canadians who, perhaps for years, have been trying to protect their families but during the past few years have had to release their hold and lose all that they had paid.
Let me now compare the only state insurance scheme concering which I have been able to get figures, with the companies with which I have been dealing. The ratio of expenses to gross premiums for the first year policies in the Massachusetts system in 1929 amounted to only 9-17 per cent, whereas the average for all companies doing business in that state was 49-21 per cent. It ran as high as 78 per cent in the case of one company. Private companies doing business in Massachusetts had an expense ratio to all those premiums of 18-32 per cent for ordinary policies and 26-34 per cent for industrial policies. These were the figures based on all business done in 1929. In the case of the Massachusetts savings bank system, this ratio was only 4-63 per cent. According to the annual report for 1929 of the Massachusetts commissioner of insurance, by eliminating selling costs, advertising and high salaries, the Massachusetts savings bank life insurance system was able to sell insurance 26 per cent below private companies and more than 50 per cent below the commercial rates on the weekly premium plan. Detailed figures show that in some cases two years' protection in a private insurance company cost the insured five times as much as it would have done under the state scheme. Another instance is that of a holder of a twenty-year endowment policy, aged 30 at entry. In the case of a S250 policy, the net result at the end of two years showed a cost of $2.50 under the savings bank life insurance scheme as compared with a cost of $31.20 in the case of a private company. In this instance the policy holder paid more than twelve times as much for $250 protection in an industrial insurance company as he would have had to pay for insurance under state control.
I see that my time in running short and I must turn from these figures to urge an argument based thereon. I urge that the whole life insurance business of this country should be taken over by the government. It is obvious that in a forty minute speech one cannot give a detailed plan for the taking over of insurance companies, but I do not know of anything that could be taken over more easily. The entire paid-up capital of all insurance companies in Canada amounts to only $10,000,000, and this is S10,000,000 that they have no business to have. Insurance companies do not need capital of that sort; $10,000,000 of unneeded capital is only an added charge upon the policyholders. It serves no other function. If the government took over the business now done by private companies it would be in an even better position to meet the requirements of the policyholders than private companies are. If the will was present, I do not anticipate any difficulty in the government finding a proper, efficient and effective way of putting this scheme into effect.
Perhaps one of the greatest advantages in favour of a state scheme is the wider distribution of risk which is made possible. The wider spread that can be given to the risk, the lesser risk there is and the cost of insurance accordingly becomes less. We have but to take the idea which is exemplified so well in group insurance and apply it to a still larger group, say to seven million Canadian citizens. As the group is enlarged, the cost is decreased. Under the group insurance plan an insurance company can go into a factory and sign up a group of fifty men without medical examination. They know from their actuarial experience that it is quite safe. They are able to give insurance to the oldest man as cheaply as the youngest. If that can be done with a group of fifty, it can be done much more easily with a group of seven million. By making this a national business and spreading the risk out to seven million people we can reduce the cost of insurance to a fraction of what it is now costing under the competitive system, figures in regard to which I have just given.
The next point in favour of nationalization is the compulsory feature. I suggest that our national insurance should be compulsory, it should apply to every person in the state who reaches a certain age. This age can be fixed at fifteen, eighteen, or twenty, that is a matter of detail. The maximum and minimum of the policies is another detail which could be arranged. The compulsory feature would reduce greatly the cost of insurance. At present
Li]e Insurance-Mr. Gershaw
we have forty-three companies in Canada, each with a network of agencies across the dominion; there are forty-three head offices and branch offices of each company in almost every city, town and village. There is an enormous cost in getting business under these conditions. A compulsory system under state control would permit this business being obtained for practically nothing. With a national compulsory scheme permitting the spreading out of risks there would be a material reduction in the cost of insurance and it would be brought within the reach of millions of our people who are now unable to obtain protection in a private company.
Another point to 'be considered is the amount of insurance investments in relation to the national economy. Perhaps I have time to put on record the figures in connection with the investments of Canadian insurance companies which I obtained from the Department of Insurance. These figures are the book value of the assets as at December 31, 1932. The Canadian real estate assets were valued at $55,034,238; the nomCanadian at $3,303,321, making a total of $58,337,559. I have not the time to give the details of other assets, so I shall give only the totals. The total Canadian assets of the Canadian companies were valued at $1,015,253,376; the nonCanadian at $528,182,242, making a total of $1,655,104,037. The total investments of these companies amount to well up to two billions of dollars.
I am one of those who believe that the time has come when this country will have to exercise some control over investments. If the Canadian government should make such a decision in the near future it would be necessary for them to obtain control of this tremendous sum which, is now at the mercy, if I may say so, of these private companies. It is not too much to say that these private companies collect money from the people of Canada and then invest that money to the detriment of those who subscribe. Sometimes the investment may be safe enough but I am sure that very often it is made in enterprises which do not need further capital. Over capitalization causes a rise in prices of the commodity produced to the very people who have furnished the money for the investment. Let me give an example. When binders were made by hand they could be bought by the farmers of Canada at about $100, but when the machine production made it possible to stamp out hundreds almost like biscuits, they cost about $300 apiece. The rise
in price was due very largely to overcapitalization, and insurance companies have done their share of over-capitalization among industries both in this and in other countries.
I contend that a government cannot afford to allow an investment of two billion dollars to be made by these sixty-two private companies if there is to be any control of investment with a view to national policy. I sincerely hope that the day is not far distant when the government of this country will insist on planning its investments with a view to the national economy, and thus taking hold of insurance from that point of view as well as from the point of view of giving insurance to all of the people of Canada at the lowest possible price. Let me also point out that the nation really is in the insurance business, whether it wants to be or not, for when an individual dies and leaves his dependents unprotected, their care falls upon the community. The community must 'take care of those who are not protected by insurance whether i-t is in the insurance business or not. I submit that it is bad business for the community to pick up only those who are entirely incapable of protecting themselves and to allow the cream to Ibe skimmed off 'by the private insurance companies who take as policyholders those who are well able to pay for insurance, and who perhaps scarcely need it at all.
Subtopic: PROPOSED SYSTEM OF NATIONAL COMPULSORY INSURANCE