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Produced and published by the School of Historical & Philosophical Studies, The University of Melbourne
Published July 2008
Published July 2008
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Insurance has been a vital part of business activity in Central Melbourne. Over the course of its history, a growing and prosperous population in Melbourne and Victoria insured their lives, and their houses, personal property and motor cars against fire and theft, while business people insured against fire and loss, and their employees against work-related injuries. A host of life and non-life insurers, and insurance brokers and specialist re-insurers have competed for the business.
Actuaries provided specialist services to life and general insurers. The industry had developed sufficiently to warrant the establishment of an Insurance Institute of Victoria in 1884. The insurance companies, many of whom were housed in most handsome buildings, congregated in the financial district around the spine of Collins Street, west of Swanston Street. Before the development of computers to record information and process claims, an army of clerical workers, mostly women, marched to their offices from the railway stations in Flinders and Spencer streets and from the tram stops.
The progress of Melbourne's insurance industry before the turn of the 20th century was modest in comparison to the rise of its banks and stock exchange to national preeminence. Gold brought population and wealth from the 1850s. Three local life offices opened for business in the late 1850s and early 1860s: the Australasian Insurance Co. (1857), Victorian Life & General Insurance (1859), and the Australian Alliance Insurance Co. (1862). None of these companies was particularly successful or long-lasting. The Australasian Insurance Co. ceased trading in 1871; the Victorian Life & General Insurance effectively abandoned its life business in 1889 when it transferred its non-life business to a new firm, the Victoria General Insurance & Guarantee Co., and the Australian Alliance stopped writing new life business in 1888. These local companies struggled against the competition from well-established British firms until the latter were swept from the field in the mid-1880s by an amendment in British tax law that made colonial resident policy-holders liable for United Kingdom probate duty. More importantly, the early proprietary companies could not compete with a new type of life office - a 'mutual' society owned by its policy-holders - offering higher returns. A number of these mutual societies were established in Melbourne in the 1870s: the National Mutual Life (1869), Australian Widows' Fund (1871), Mutual Assurance Society of Victoria (1871), T&G Mutual Life Society Limited (1876), and Colonial Mutual Life Society (1877). Three of them, the National Mutual, the T&G and Colonial Mutual, developed a strong presence in the national market. Both the T&G and National Mutual were at the forefront of innovations such as the introduction of 'industrial policies' with low weekly contributions in the 1880s and superannuation funds management from the early 1960s, respectively. However, only the Colonial Mutual has survived to the present. The Australian Widows' Fund's struggling business forced it into the arms of the Sydney-based Mutual Life and Citizens' Assurance Co. in 1910. National Mutual absorbed both the Mutual Assurance in 1896 and the T&G in 1983 before an aggressive drive to supplant the AMP Society as Australia's largest life office so weakened it that it was acquired by the French insurer AXA in 1996.
Non-life business grew earlier and faster than life assurance. Inhabitants of the city required cover against all manner of personal and business risk. The demand for insurance services attracted new firms into the industry. Many of the leading firms were British, often life offices that continued to offer general insurance after their withdrawal from the life field. Fierce competition for business in the 1880s drove down premium rates to such an extent that many local firms could not survive the investment losses and falling business in the 1890s depression. A huge fire in Flinders Lane warehouses between Swanston and Elizabeth streets on 21 November 1897 resulted in large losses to insurers. This financial blow sped up the reduction in the number of local firms offering general insurance business as more were acquired by foreign companies. The number of firms with Melbourne head offices fell from 10 in 1884 to seven in 1898 and four by 1913. Of these four, only two, the Victoria Insurance Co. (1879) and the Victorian General Insurance & Guaranty Co. Limited (1889) survived beyond the 1930s depression. However, the New Zealand Insurance Co. Limited acquired the Victoria Insurance Co. in 1969.
Competition between firms in non-life insurance eased after all firms abided by a tariff agreement that set rates from 1909. However, two new types of policies, workers' compensation and motor vehicle, started to be written in the first three decades of the 20th century that allowed the emergence of important new insurers operating beyond the tariff companies. The Government of Victoria's Workers' Compensation Act of 1914 that required employers to insure their workers against personal injury led to the establishment of the State Accident Insurance Office. The growing number of motor cars gave rise to new Melbourne-based specialist insurers from the 1920s: Automobile Insurance Co. of Australia (1922) (renamed Automobile Fire & General Insurance Co. of Australia Limited in 1928) provided insurance for members of the Royal Automobile Club of Victoria (RACV) for a number of years before the latter organisation used the services of a Lloyd's broker and then established its own subsidiary Club Motor Insurance Agency in 1934; the Victorian Automobile Chamber of Commerce established its own insurance company, VACCI, in 1930; and the government introduced compulsory third party insurance in 1939 that was provided through the State Motor Car Insurance Office created in that year. Both arms of the government's insurance business were brought together in 1975 in the new State Insurance Office (SIO). The SIO's business expanded beyond its traditional focus under new legislation passed in 1984 and it was privatised in August 1992 as part of GIO.
The transition from public to private ownership was part of a major shake-up of the industry that commenced in the mid-1950s. The divide between life and non-life business was increasingly crossed as companies operated in both camps. The rise of brokers and specialist re-insurers undermined the power of the tariff to limit rate competition, as alternative forms of re-insurance were available to those who competed on price. In the deregulated financial system of the 1980s and 1990s banks owned insurance companies and vice versa. While the Australian Government vetoed a merger between the Melbourne-based ANZ Bank and National Mutual Life in 1990, it issued a banking licence to Australia's largest insurer, the AMP, in 1998. Melbourne still houses a large insurance industry but nearly all the firms operating in this city have their head offices interstate or overseas.