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Five classes of societies exist under the provisions of the Friendly Societies Act: Friendly societies, cattle insurance societies, benevolent societies, workmen's clubs, and specially organized societies. Of these only the first is entitled to consideration from the standpoint of industrial insurance.
PRESENT PURPOSE AND SCOPE.
Friendly societies are in essence mutual insurance societies, restricted by the law regulating them to five purposes, which are in brief:
1. Relief in case of sickness or other infirmity and in old age, and the care of widows and orphans of members.
2. Birth and death benefits.
3. Travel benefits while in search of employment, and benefits when in distress and in case of shipwreck or loss of boats or nets.
5. Insurance against loss of tools by fire, in an amount not exceeding £15 (873).
Few societies offer all these benefits, the majority providing only for payments in cases of sickness or death.
Any society wishing to register must have at least seven members, who, with the secretary, must sign an application, submit the rules, and indicate the person or persons authorized to sue or be sued on behalf of the society. The rules must set forth the name of the society, its place of business, its object, its mode of holding meetings, altering rules, keeping and auditing accounts, making returns and inspecting books, and its provisions for the investment of funds, the settlement of disputes, and the appointment and removal of officers. Alterations in rules are not effective until registered. If annuities are assured, the tables must be certified to by the actuary of the national debt, or by an actuary of five years' standing. Dividing societies, i. e., those in which accumulated funds are periodically distributed among the members, may be registered if the rules show a distinct provision for meeting all existing claims before the division takes place. Refusal to register may be referred by appeal to the chief registrar, and further to the high court of justice, or, in Scotland, to the court of session.
Details required to be set forth in the rules, besides those indicated above, are the mode of admitting members and the terms on which they can become entitled to the benefits offered by the society, the fines and forfeitures imposable and the consequences of nonpayment, and the provisions as to voting, which may restrict that right to certain classes of members. Since the whole organization is voluntary, no heavier penalty can be enforced than would be involved in the loss of rights to benefits or membership. Fines can not be arbitrary, but must be fixed and definite. The investment of funds must be as provided for in the rules, except that deposits may be made in a savings bank or with the commissioners for the reduction of the national debt. No investment can be made on personal security except by way of loans on the society's policies or a loan from a special loan fund.
Model rules have been prepared by the registry office, which any society may use by the simple addition of such details as are desired. No requirement is imposed as to the actuarial correctness of the scheme of any society, each one being left free to adopt or reject the well-digested tables that express the experience of many years of sickrelief and death benefits. They are equally independent in the management of their affairs, the registrar having no authority to interfere except on petition of the members, even though the reports show present insolvency and its inevitable continuance. The quinquennial valuation ordered by law may be performed by any person whom the society may employ who is willing to undertake the work, and the society is entirely free to act on or reject any advice or conclusions drawn from the work of the valuer.
Registration is entirely optional, and is said to be availed of in practice by hardly more than a moiety of existing societies. It involves certain obligations, as having a registered office, the appointment of trustees, the audit of accounts, making annual returns to the registrar, making a quinquennial valuation of assets and liabilities, and keeping copies of balance sheets and valuations on view at the registered office. The privileges attendant on registration are exemption from the penalties of the corresponding societies act (relating to unlawful societies and seditious meetings); exemption from stamp duty on papers and documents; the transfer of stock standing in the name of trustees who are absent, deceased, bankrupt, or otherwise disqualified, by an order of the chief registrar; priority of claims against the estate of any deceased or bankrupt officer, or of one against whom an execution or other process is issued, for the recovery of any property of the society which may be in the hands of such official at the time; power to admit as members minors over 1 year of age; and power to subscribe to hospitals or charitable or provident institutions for securing benefits to members. Exemption from income tax is also allowed unless annuities in excess of £30 ($146) are insured. Money invested by a registered society with the nationaldebt commissioners receives a fixed rate of interest, independent of the fluctuations in the value of stocks; such companies are also free from the usual restrictions as to the amount of money that may be deposited in a savings bank or post-office savings bank. In discharging a mortgage no reconveyance is necessary, the mere indorsement of a receipt thereon being sufficient. Certificates of birth and of death
of members or insured persons can be obtained at a reduced fee. The charges of public auditors and valuers are also fixed at a lower rate for registered societies than for other bodies.
Some of these privileges amount to actual state assistance, while others give them a pecuniary advantage by enabling them to transact business at a less expensive rate than is possible for citizens generally. The rate of interest payable on investments with the national-debt commissioners has been fixed at different amounts from time to time, ranging from 2 to 3 per cent. This has at times exceeded the amount that the Government was able to earn with the investment. The rate under the act of 1896 is 2.75 per cent.
Societies may be organized with a central body and any number of branches, a branch being any number of members, under the control of the central body and bound to contribute thereto, but having a separate fund administered by themselves. The list of branches must be kept accurate by reports to the registrar. Rules of branches may be registered and changed in the same manner as the rules of societies.
The registrar has the power to appoint, with the consent of the Treasury Department, inspectors to examine into the affairs of a society and to call special meetings on application of a certain number of members. This power does not extend to the case of branch societies, however, without the consent of the central body. Nor can a branch society exercise the power to change its name, to amalgamate with other societies, to convert itself into a company, or to transfer its obligations to an existing company (all of which independent societies may do), though it may secede.
Members of societies have a right to be supplied with copies of the annual returns, to inspect the books, to insure for benefits within the limits prescribed by the rules, and to serve in the militia or volunteers without forfeiting benefits; they are also entitled to the accumulation of surplus contributions at interest, where the rules permit. No society registering under the Friendly Societies Act can contract for an annuity of more than £52 ($253), (£50 ($243) prior to the amendment of 1908), nor for a lump-sum payment of more than £300 ($1,460), (£200 ($973) prior to the amendment of 1908). As to insuring children, it
may be noted that not more than £6 ($29) can be carried on the life of a child under 5 years of age, and not more than £10 ($49) on one under 10 years, whether carried in one or more societies. Penalties lie against both society and parent for paying or receiving any sum in excess of these amounts. The amending act of 1908 removes the prior existing age limit of 1 year, and makes children eligible to benefits from birth.
Societies may be dissolved or may amalgamate with other societies of like purpose or character with the consent of five-sixths in value of the members, including honorary members, and with the consent of all those receiving any relief, annuity, or benefit, unless the claims of such persons are duly satisfied, or adequate provision has been made for that purpose. Dissolution of an insolvent society may be effected by the registrar on the application of one-fifth of the members (or of a smaller part if there are 1,000 or more members). He may also direct how the funds and property of the society are to be divided. Registry may be canceled at the request of any society, or on proof of fraud or mistake in procuring the registry, or registration may be temporarily suspended. Where a society wishes to become a branch of another society a modified form of cancellation is used.
Friendly societies, being affected in part by tradition, and being in part the expression of immediate local needs and conditions, present a very considerable diversity both in their objects and in the methods adopted for attaining them. Definable briefly as mutual insurance organizations, they exhibit a surprising variety of forms, the royal commission of 1874 having enumerated seventeen classes. The characteristics of the principal groups are noted below.
THE VILLAGE CLUB. Oldest and least complex in its workings is the village club, providing only “sick pay and burial money.” Frequently no difference is made in the amounts of dues to be paid by older and by younger members, and as the active members grow old the outgo increases until the younger men refuse to join, the funds diminish and are finally distributed, and the club is dissolved, leaving its members unprotected. The next generation repeats the process, and, to quote the language of a chief registrar, “so the vicious succession is kept up, each club in its turn lasting out its one generation of members.” In some cases graduated scales of contribution and other safeguards have contributed to the success and stability of village clubs, the disadvantages of small membership and the subjection of the whole group to identical economic adversities being largely compensated for by the thorough mutual acquaintanceship of the members and the corresponding reduction of expense of administration and of danger of improper demands for relief.
In the larger towns these clubs may take on a more exclusive form, being administered with perhaps a greater degree of care and discretion, but not making the general provision for insurance that the spirit of the friendly society would indicate. The society may by its rules limit the number of members, one established in 1809 fixing the maximum at 100, later admitting 130, but in fact having after more than sixty years only 50 members. The disposition to restrict membership and a narrow spirit of corporation are said to characterize this class of societies and to interfere with their usefulness. They seem to be unable to meet the stress of competition with the so-called afliliated orders.
Much the same may be said of the county societies, which have undertaken to cover larger areas and avoid the dangers of limited groups subject to identical economic changes. These are frequently patronzied by the clergy and gentry, the control being largely in their hands. They commonly adopt a sound actuarial basis, but do not appeal so much to the community at large as the more democratic and less expensive, even if less trustworthy, local clubs. “The villagers have the pardonable weakness of preferring to do things in their own way to having things done for them by other people, even in a better way.”
The “Dunmow Friendly Society for Dunmow and the Neighbourhood, in the County of Essex” may be cited as an illustration of the localized society. It was founded in 1832 by the vicar of Great Dunmow, and has continuously had the patronage of honorary members, including the clergy and gentry. “It has been stated by a government official that the success of the society is due in no small measure to honorary management, such managers being unbiased and free from all motives ulterior.
The managers are representative of the various districts in which the society is working and they take a personal interest in the members.” (a) It is the announced purpose of the society to furnish to the industrious and provident among the laboring classes an opportunity of making for themselves a secure provision against sickness and infirmity. The monthly payments are calculated according to the age of the members at the time of their admission, and in proportion to the benefits for which they insure. Monthly contributions are to be paid continuously, in sickness or health, until the age of 65 is reached, when payments cease and the member becomes the recipient of a pension. Sickness and death benefits are also provided. The distinctive features announced are: (1) Fifty-two weeks' full pay in sickness; (2) half pay during remainder of sickness; (3) a sum payable at death; (4) a pension at 65 years of age. All members receive all benefits, without option. A juvenile branch has been in existence since 1896, admitting members between 7 and 14 years of age. Entrants to the society proper must be males between the ages of 15 and 50 years, in good health and not engaged in any occupation injurious to health. Females were formerly admitted, but none have been received for a number of years (only 4 surviving to 1908), the management declaring that the
a Seventy-Sixth Annual Report.