Fire was a constant danger in early New Zealand, since most homes and commercial buildings were built of timber and the first fire services were little more than bucket brigades. In July 1858 a whole block in central Auckland was destroyed by fire. Agents for British fire and general insurance companies appeared in New Zealand by the early 1850s but could not meet the growing demand for coverage against the high risk of fire. This provided an opportunity for local businessmen.
A number of local companies were formed, but only four proved long-lasting. The New Zealand Insurance Company (NZI) was founded in Auckland in 1859 and followed by the Auckland-based South British Fire and Marine Insurance Company, formed in 1872, and Dunedin’s National and Standard companies, registered in 1873 and 1874. Later many British and Australian companies appointed agents or opened branches in New Zealand, and by 1893 a total of 27 companies were represented in the local general insurance market.
General insurance tariffs
General insurance companies cooperated to standardise their premiums (the cost of their policies) on the basis of agreed schedules known as tariffs. The tariff kept the cost of premiums stable and reduced undercutting between companies, making them more profitable and better able to meet the cost of claims. In 1868 the first fire insurance tariff in New Zealand was agreed by seven companies operating in Auckland, and other centres soon followed.
To make sure the companies kept their rates to these tariffs even in times of increasing competition, the Council of Fire Underwriters’ Associations of New Zealand was set up in 1895. All the major fire and general companies in New Zealand belonged to the council. It became the Insurance Council of New Zealand in 1967.
‘That’s not our fire’
Many 19th-century insurance companies had their own fire brigades, to fight fires in the buildings they insured. The first duty of a brigade captain called to a fire was to inspect the metal plate on the building that identified the company it was insured with. If it was not his own company, the brigade returned to their fire station.
State Fire Insurance
Although the tariffs provided some advantages for customers, they were also seen as keeping premiums unreasonably high. The government responded by setting up the State Fire Insurance Office in 1903. It was the first such company in the British Empire and only the second in the world. The private insurance companies tried to prevent the new company from getting established by denying it the reinsurance that all general insurance companies need to cover their own losses. However State Fire opened for business in January 1905 with premiums 10% below tariff rates. The tariff companies immediately dropped their own rates, but by 1920 State Fire insured more property than any other general insurance company in New Zealand.
In the 1930s other non-tariff companies emerged offering general insurance and these, along with insurance brokers, placed further commercial pressure on the tariff companies. The tariff system had practically collapsed by the 1960s.