Vickipedia

FRIENDLY SOCIETIES. The uncertainties of human life and health, and the effects of these on the well-being of those who are dependent for their subsistence on human labor, are too manifest not to have arrested the attention of men in all ages, and to have taxed their ingenuity to guard against them. It is probable, therefore, that traces of some sort of institution, corresponding more or less closely to the friendly societies of modern Europe, might be found wherever mankind have not depended for their means of living on the spontaneous products of the soil. At all events, they had their prototypes in the cases, boxes, and chests, or kists—as they were called in Scotland and Germany—of the guilds and corporations of medieval Europe; which were funds not only for maintaining the dignity and ministering to the conviviality of the members, but for providing for the aged and the sick. Mr. Turner finds them in Anglo-Saxon England, and, like the other institutions connected with municipal life, they probably formed part of the legacy of the Romans to the Teutonic conquerors of Europe. Friendly societies are a form of mutual insurance, and, like all insurances, they depend on the principle of substituting the certainty which attends the fortunes of large numbers of men for the uncertainty which belongs to the fortune of each. Their main objects are the securing, in virtue of a small periodical payment during health and vigor, of a weekly sum during sickness, a sum to cover funeral expenses at death, and sometimes of a pension after a certain age.

In some respects, therefore, joining a friendly society is better than becoming a depositor in a savings-bank. Sickness may come before the savings are considerable; or, if considerable, they may be melted away by a long-continued sickness; but after the first weekly payment is made to a friendly society, the member is secure of succor, at least for a time, and he has, perhaps, other advantages. It is possible, on the other hand, that a difficulty may be experienced, in certain circumstances, in keeping up the weekly or other periodical payments required, and in this case, in most societies, he altogether forfeits the expected benefits.

It is to be regretted that, of this excellent class of institutions, many are founded upon erroneous principles, or rather upon no principles at all; and it often happens, therefore, that those who trust to them are disappointed, the funds falling short before all claims are satisfied. This was at one time not to be wondered at, as no proper calculations for friendly societies existed; but such is no longer the case, sound calculations being now attainable. The most important observations on the average amount of sickness incident to human life are those made by the Highland Society, Mr. Charles Ansell, Mr. Finlaison on behalf of the government, Mr. F. G. P. Neison, and the Manchester Unity of Odd-fellows. The first two were formed on data too limited to be of much value; those of the government were rendered practically worthless by an arbitrary definition of sickness, which made them uncertain for youth and maturity, and deprived them of all authority in reference to old age. The calculations of Mr. Neison and the Odd-fellows are based on by far the greatest number of cases, and though investigated by the former in relation to the five years ending 1840, and by the latter in relation to a period precisely twenty years later, they corroborate each other almost completely. We give the estimate arrived at by Mr. Neison of ‘ sickness experienced in weeks in passing through different periods of life :’ 20 to 30, 8-7; 30 to 40, 9′9; 40 to 50, 14-8; 50 to 60, 27-1; 60 to 65, 26-6; 65 to 70, 50-7; 70 to 75, 84-9; 75 to 80, 120-5.

One great mistake in the formation of friendly societies is to assume that each member should pay an equal sum, whatever his age may be. This is unjust to the younger members, who are less likely to become burdensome to the funds than the middle-aged; and, indeed, there is a rising scale of probability of sickness throughout all the years of a man’s life. It is, however, well to remember that as sickness varies more considerably than mortality with the salubrity of the localities inhabited and the occupations of the members, no absolute reliance can be placed on published averages. All of them, however, agree in this, that increase of years is attended by increased liability to sickness. Now, a rightly constituted friendly society is bound to take this circumstance into account. To admit all ages at an equal payment, is clearly making the younger members pay for the elder.

Another great error in the constitution of benefit societies is in making them for a year only. These yearly societies are to be found in almost every colliery in the north of England, and are popular among the less intelligent of the people. The objects are generally a fund for sickness and funeral expenses, a deposit fund, and sometimes a loan bank.

Towards the first, there is perhaps a weekly payment of twopence or threepence, together with the interest arising from the loan of money to the members. Towards the deposit fund there is a payment ranging generally from sixpence to two shillings, the accumulations being received back when the society closes. The money deposited is employed in making loans to such of the members as desire such accommodation, within the amount of their several entire deposits for the year, one penny per pound per month being charged by way of interest. The surplus, if any, of the twopences and interest, after sick and funeral money, books, and other necessaries are paid, is divided amongst those members who maybe clear of the books at the close of the society. In some instances, only three-fourths of the funds are divided, and the members commence another year with the balance, but this only happens when they are all in good health. Nothing of the kind would occur if one or more of the number were likely to suffer move than the ordinary rate of sickness. Then the healthy members join other societies, and leave the sick to take care of themselves. In any case they are so left at the end of the year, as no society will receive them. Yearly societies are, indeed, in every point of view a most objectionable class of institutions, to which working-people would never resort except through ignorance.

A well-constituted friendly society involves, in the first place, the principle of payments appropriate to particular ages, as no other plan can be considered equitable. It stands forth before the working-classes as a permanent institution, like the life-assurance societies of the middle and upper classes, and necessarily requires its members to consider the connection they form with it as an enduring one, because its grand aim is expressly to make provision, at one period of life, for contingencies which may arise at another—for youth, in short, to endow old age. By a yearly society, a man is left at last no better than he was at first, as far as that society is concerned; but the proper friendly society con-templates his enjoying a comfortable and independent old age, from the results of his own well-bestowed earnings.

It is essential to the character of a proper benefit society that individuals be not admitted indiscriminately. To take a person in bad health, or of broken constitution, is unjust to those members who are healthy, because he is obviously more likely to be a speedy burden upon the funds. Here, as in life-assurance societies, it is necessary to admit members only upon their showing that they are of sound constitution and in good health. And it may be well to grant no benefits until after the member has been a year in the society. By these means, men are induced to enter when they are hale and well, instead of postponing the step until they have a pressing need for assistance, when their endeavor to get into a benefit society becomes little else than a fraud.

Under the sanction of government, tables have been formed by Mr. John Tidd Pratt, late registrar of friendly societies in England, and by Dr. Farr, the actuary of the English registrar-general. The former, together with useful instructions in the book-keeping of friendly societies, are embodied in the reports by Mr. Pratt, printed by order of the House of Commons for the years 1856— 1857; and the latter, together with a masterly essay on the mathematical treatment of the subject, are contained in the twelfth report of the registrar-general.

On the imperative necessity of acting on correct tables for such a purpose, it would be superfluous to dwell; and the necessity of identifying the rates of any society with such responsible authority is the more apparent, as we are told by Mr. Pratt that ‘ although the registrar certifies to the legality of the rules of a friendly society, it does not follow as a necessary consequence that the constitution of the society is based on good principles, or that the rates of payment are sufficient in amount to guarantee the promised benefits and allowances.’ In fact, there are large numbers of insolvent societies whose rules have been certified in the most regular manner. It cannot be too much insisted upon that the registrar’s certificate is absolutely worthless as a guarantee of safety.

We have an idea of a benefit society in its simplest form, if we suppose a hundred men, of 35 years of age, to associate, and make such a payment at first as may be sure to afford each man that shall fall sick during the ensuing year one shilling a day during the term of his sickness. Taking, for the sake of illustration, Mr. Nelson’s Tables, we find that, amongst such a body of men, there will be nearly 100 weeks of illness in the course of the year. This, multiplied by 7, gives the whole sum required, £35 or even seven shillings each, which, less by a small sum for interest, will accordingly be the entry-money of each man. A society of individuals of different ages, each paying the sum which would in like manner be found proper to his age, would be quite as sound in principle as on the above simple scheme. It is only a step further to equalize each man’s annual payments over the whole period during which he undertakes to be a paying member.

A point for consideration, however, is the rate at which the funds of the societies may be improved. In many cases, it is best to rest content with depositing the money in the funds or the savings-banks, in which case they are sure to obtain for it interest at a rate of not less than £3, Os. 10d, per cent, per annum, or twopence per cent, per day. Some of these societies have sums invested with the Commissioners for the Reduction of the National Debt, at threepence and twopence-half-penny per cent, per day. Many of them invest with local building societies, some in corporation debentures, and in many other ways which afford a better rate of interest with safety; and the tendency to abandon the old routine of merely savings-bank deposit seems rapidly and generally growing.

By the act 27 and 28 Vict. c. 43, government gave to the working-classes an opportunity of effecting small life-insurances, or of purchasing immediate or deferred monthly allowances or annuities, in a manner absolutely free from risk, as the credit of the nation itself is pledged to meet the obligation purchased by the subscriptions or payments of the contributor. A great number of people have availed themselves of the new facilities, but it is probable that very many more would have done so had the scale begun at a lower and been continued to a higher point. At present, no life can be insured for less than £20, or more than £100.

Now, many people are willing enough to insure for as much as will cover their funeral expenses, say for £10, who would not be disposed to make further provision for their families. This class, and it is not a small one, is practically excluded from the benefit of the government system, and it would be well, in future legislation, to reduce the minimum to at least half its present amount. At the same time, the maximum might be safely increased to £200 without interfering with the legitimate business of life-assurance companies.

These government insurances are effected through the agency of the Post-office. A list of offices authorized to act may be obtained at any post-office, and at the places so authorized all necessary information and forms of proposal may be had. There also, when filled up, the forms of proposal may be delivered. The premiums charged vary with the age, but not with the sex, of the person to be insured, and the mode in which they are to be paid. For example, the life of a man or woman in his or her 30th year may be insured for £100 :

Smaller sums may be insured by proportionate payments, but no one payment must be less than two shillings.

If after five years’ payments the insurer desires, or is compelled by circumstances, to discontinue his insurance, a portion of the premiums, not being less than one-third, will be returned to him.

The sums charged for the purchase of immediate annuities vary with the age and sex of the person on whose life the annuity is to depend. Thus a man aged 65 can purchase an immediate annuity of £10, payable half-yearly, for £88, 18s. 4d.; a woman of the same age can purchase a like annuity for £103, 16s. 8d. A man aged 70 can purchase an immediate annuity of £10, payable half-yearly, for £73, 3s. 4.d.; a woman of the same age can purchase a like annuity for £84, 19s. 2d.

The sums charged for the purchase of deferred annuities, or deferred monthly allowances, also vary with the age and sex of the annuitant, with the number of years which are to pass before the commencement of the annuity, and with the conditions of the contract as to the mode of purchase, mode of payment, and return or non-return of purchase-money.

When no part of the purchase-money is to be returned, a man aged 80 may purchase a deferred annuity of £10, to commence on his reaching the age of 60, and to be payable half-yearly, either by an immediate payment of £24, 3s. 4d., or by an annual payment, until he reaches the age of 60, of £1, 8s- 4d. A woman of like age may purchase a like annuity by an immediate payment of £32, 8s. 4d., or an annual payment up to 60 of £1 17s. 6d. ; and a man aged 30 may purchase a deferred allowance, of £2, 7s 3d per month, to commence when he reaches the age of 60, by a payment until he reaches that age of 8s. per month; and a woman aged 30 may, by a like payment, purchase a deferred allowance of £1,16s. Id., also to commence at 60.

Purchasers of annuities are permitted to elect whether the purchase-money shall be returned to their representatives in case of death before reaching the stipulated age, or to themselves in case of desiring for any reason to withdraw from the arrangement; but for this privilege, they must pay a higher price. Thus, instead of the £24, 3s. 4d. referred to above, the purchaser at 30 of a £10 annuity, to commence at 60, would have to pay £40, 9s. 2d., and so in proportion. No annuity can exceed £50 per annum, or £4, 3s. 4d. per month, except in the case of husband arid wife, who may each be insured or purchase an annuity to the full amount allowed by the act.

After many fruitless attempts at legislation, an act (38 and 39 Vict. c. 60) was passed in 1875 to consolidate and amend the law relating to friendly societies. It deals with (1) all societies which provide for the relief of members or their relatives during sickness, infirmity, old age, or widowhood, or for orphans during minority; for small insurances on occasions of birth or death; for maintenance of members in distress, or when on travel in search of employment; for endowment of members or their nominees; and for insurance of tools or other working implements up to fifteen pounds value. It is, however, provided that no society assuring annuities exceeding £50 per annum, or gross sums exceeding £200, shall be registered under the act, and that no sum exceeding £6 altogether shall be insured or paid on the death of a child under five years of age, and no sum exceeding £10 on the death of a child under ten years. It also deals with (2) cattle insurance societies, to whatever amount the insurances extend ; (3) benevolent societies; (4) working-men’s clubs; and (5), with certain limitations, specially authorized societies, for any purpose to which, in the judgment of the Treasury, the act ought to extend. The act establishes a central office, with chief registrar and assistants, whose functions are to examine and certify rules, to prepare and circulate model forms of accounts, balance sheets and valuations; to collect and publish statistics of life and sickness, and other matters applicable to the business of friendly societies; and to construct and publish tables for the payment of sums of money at death, in sickness, old age, or other calculable contingencies. These tables, though intended for the guidance of societies, are not to be compulsory, but no society granting annuities can be registered under the act unless its tables are certified by an actuary approved by the Treasury. All societies are to have registered offices, must appoint trustees, provide for efficient audit, and furnish classified returns of receipt and expenditure annually to the registrar. Friendly societies must also, once in every five years, make a return of the sickness and mortality of their members, and prepare a valuation, either by their own valuer or the registrar, of their assets and liabilities. The nominee of a member may be paid a sum not exceeding £50 on the death of the nominator, and societies are empowered to pay a like amount to the representatives of a deceased member, without letters of administration. Minors may be members, but they are not permitted to hold office.

Societies may invest moneys in the post-office or other savings-banks, in the public funds, with the Commissioners for the Reduction of the National Debt, in the purchase of lands or the erection of buildings for their own use, and in other securities directed by their rules. Under certain circumstances, and with special guarantees, loans may be made to members on personal security. Officers are to provide sureties and render accounts, and provision is made for arbitration or summary legal jurisdiction in cases of dispute, as also for amalgamation or dissolution. The act bears abundant evidence of the care bestowed upon it in its elaborate arrangements for registration, and other precautions for the safety and success of the societies to which it relates.