Post Office Savings Bank, then recently established, proposed
that the services of the postmaster-general should be enlisted
in the promotion of insurance. The result was the passing of
the Government Annuities Act 1864. This act authorized the
commissioners for the reduction of the national debt, for the first
time, to insure a life without granting an annuity upon it, and
enabled the postmaster-general to act as the agent of the commissioners
in the issue of life policies and the grant of annuities.
The limits of insurance were fixed at £20 and £100, and of
annuities at £4 and £50; and the purchase of deferred annuities
or old-age pay, by monthly, or even more frequent instalments,
was sanctioned. The work was eagerly accepted by Lord
Stanley of Alderley, the postmaster-general of the day, and the
machinery for putting the act in action was elaborated by Frank
Ives Scudamore of the Post Office and Sir Alexander Spearman
of the National Debt office. The business was commenced on
the 17th of April 1865. By the end of the year 560 policies of
insurance had been issued, and 94 immediate and 54 deferred
annuities granted. In the first twelve months these figures had
increased to 809 policies and 230 annuities. The opportunity
thus given of insuring through the Post Office with government
security was not, however, embraced with the warmth which had
been anticipated. In 1882, when Mr Henry Fawcett, then in
office, examined the subject, he found that the average number
of policies of insurance granted annually during the seventeen
years which had elapsed was under 400—less, in fact, than during
the first twelve months of the system. The purchase of annuities
had increased slightly, but the business was transacted chiefly
in immediate annuities, and hardly indicated any progress in
provision for old age by means of early savings. Mr Fawcett
procured a Select Committee of the House of Commons on the
subject. Before this committee Mr James Cardin, then assistant
receiver and accountant-general of the Post Office, propounded
a scheme for combining the annuity and insurance business of
the Post Office with that of the savings bank. The Committee
recommended the adoption of this scheme, together with some
enlargement of range and some relaxation of conditions. The
recommendations of the Committee were embodied in the
Government Annuities Act 1882, which came into operation
on the 3rd of June 1884, and which forms the basis of the present
system.
Any person between 14 and 65 can now insure through the medium of the Post Office Savings Bank for any amount from £5 to £100; and the life of a young person between 8 and 14 can be insured for £5. Through the same channel can be purchased annuities, immediate or deferred, from £1 to £100, on the life of any person from 5 years old upwards. Old-age policies, that is, policies securing payment of a specific sum either at the expiration of a fixed period (varying from 10 to 40 years), or upon the attainment of a certain age, or sooner in case of death, can also be obtained. Policies for a fixed period can only be purchased by a single payment, but in all other cases the purchase can be effected by payment either of a lump sum or of annual instalments. Further, all purchases are effected through the Post Office Savings Bank. As soon as a contract is completed, the purchaser is required to pay the first instalment to his account in the bank, or, if he has no account already, to open an account for the purpose. This and all further instalments are then transferred by the postmaster-general, as they become due, to the credit of the National Debt Commissioners; all the purchaser has to do is to keep his banking account in funds; he can pay his savings into the bank when and as he pleases. So, also, when old-age pay, secured either by a deferred annuity or an endowment policy, becomes due, it is paid to the account of the purchaser; and, if it does not cause the sum standing to his credit to exceed the statutory limits, it can remain there earning interest, and be drawn out in such amounts as may be convenient from time to time. The purchaser has also the advantage of the ubiquity of the Post Office Savings Bank. He can make his deposits, and can draw out his old-age pay when it becomes due, at any one of the 13,000 odd post offices where savings bank business is transacted. He can even, if his savings are made from day to day, use the penny stamp slips introduced by Mr Fawcett, affixing a stamp whenever he has a penny to spare, and paying in the slip when it is worth a shilling. In short, every advantage open to the ordinary depositor in the Savings Bank is placed at the service of the working man or woman who wishes to secure old-age pay, or to have a small sum to aid those who may suffer pecuniarily from his or her death. Even the reluctance of many persons to submit themselves to medical examination is tenderly regarded. A policy for any sum up to £25 may, if the information afforded is satisfactory, be obtained without a doctor’s certificate, on condition that, if death happens during the first year, only the premium paid is returned, and if during the second year, only half the sum insured is paid. As regards old-age pay, a purchaser can, by adopting a slightly higher scale of payment, secure the return of his purchase money if at any time before the annuity falls in he repents of his bargain. Further, employers of labour and friendly societies can, on behalf of their workmen or members, make all the payments necessary to buy an insurance or annuity, and recoup themselves out of wages or members’ contributions.
The act of 1882 directed that the tables upon which annuities and policies of insurance are granted should be revised from time to time; and in February 1896 new tables reducing the rates of annual premiums, and giving greater facilities for old-age insurance, were issued. The rates are now but very slightly (less than 3%) higher than the average rates of the larger insurance offices. But the expense of small insurance business must necessarily be above the average, and it is fairer to compare the Post Office rates with those of the office which stands pre-eminent in the insurance of the working classes. Such a comparison shows that up to the age of 40 a life insurance can be effected with the Post Office at a cheaper rate than with the Prudential Insurance Company; between 40 and 60 the advantage is slightly on the side of the company.
In 1885, the first complete year after Mr Fawcett’s improvement took effect, 103 deferred annuities and 457 insurance policies were granted; in 1905, 158 deferred annuities and 741 policies. The increase of business, measured in percentages, is no doubt appreciable, but the figures themselves are so small as to make such a comparison trivial. If we compare the two periods, before and after Mr Fawcett’s reforms, we find that between the 17th of April 1865 and the 2nd of June 1884 (about nineteen years) 7064 policies of insurance, amounting to £557,625, were issued, and between the latter date and the end of 1905, 16,577 policies, amounting to £875,496. For the whole period the figures are 23,641 policies for £1,433,121. During the same time 3144 contracts for old-age pay, amounting in all to £64,378, were made. When we contrast with this sum total the fact that in 1905 alone 1,435,329 new accounts were opened in the Post Office Savings Bank, and more than £42,000,000 deposited in the bank in the course of the year, it becomes apparent that, while the Savings Bank has reached the mass of the population, insurance against old age and death through the Post Office has not.
In 1894 Mr C. D. Lang, the Controller of the Post Office Savings Bank, and Mr Cardin, giving evidence before the Commission on Old-Age Pensions, ascribed the small insurance and annuity business of the Post Office to the want of a personal canvass. They pointed out that there had been some temporary increase in insurance, through an appeal to the Post Office employés themselves, and they suggested that something might be done if the masters of the elementary schools could be induced to interest themselves in recommending to their scholars and the parents of their scholars the advantages offered by the Post Office. It was also pointed out that the friendly societies might, if they were so disposed, act as intermediaries between their members and the Post Office, and thereby, as it were, reinsure their risks with the government; but it was added that all overtures of this nature to the societies had failed, apparently from the fear—quite groundless—of introducing government control of the societies’ affairs. There may, indeed, be another reason for the failure of the deferred annuity system. The insurance of old-age pay is not popular even amongst the members of friendly societies, or even in Germany, where it has been given to the workmen largely at the expense of other people. Insurance against death, sickness and accidents appeals to the young working man; but old age is too far off to be an object of solicitude, especially since the grant of old-age pensions by the state has made the future secure from destitution at least. However, if at any time opinion changes, the Post Office stands ready to make foresight or philanthropy easy. Though no great results have been achieved, a machinery has been established which works with perfect smoothness, and which may some day be of service to the nation.
VI. Marine Insurance
Marine insurance long antedates the kindred businesses of fire and life insurance. Villani, a 14th-century Florentine historian, speaks of marine insurance as having originated in Lombardy in 1182. This proves, at least, that in his day it was no novelty. It is mentioned in a History. Pisan ordinance of 1318, and in Venetian public documents of the early years of the 15th century. The earliest form of policy known is that given in the Florentine statute of 1523. It is uncertain whether insurance was introduced into England directly from Italy or by way of Flanders. The earliest policies issued in England which have yet been discovered are in Italian, but the subscriptions are in English (“Santa Maria di Venetia,” Cadiz to London, 1547, “Santa Maria de Porto Salvo,” Hampton to Messina, 1548).
