OUR FRIENDLY SOCIETIES.

Marlborough Express, Volume XLII, Issue 247, 17 October 1908, Page 2

OUR FRIENDLY SOCIETIES.

A WARNING NOTE;

(Duhedin Star.) (Concluded.) On the question of the necessity for compulsion in the matter of furnishing adequate scales of contributions, it will not be out of place, here to reproduce the opinion of the Registrar of Friendly Societies in New South Wales, who had been requested by an influential deputation to postpone the K>wers he possessed under the new gislation of that State until after the report of his valuation for 1909 was published. Mr Trivett was very candid, and it will be well if the executives of some of our friendly societies lay his admonitions to heart. I have given careful consideration to the suggestions advanced by your Association in the letter of April 6, and discussed by your daputation on the 29th idem.—viz., that I should defer taking any action with respect to the recommendations of my valuation report for the period onding 1904 until the 1909 investigation takes place, and that in the Interim the societies should be allowed to continue on the same basis as heretofore, every society giving -consideration to the recommendations that I may think desirable. I *annpt see my way to accede to the request of your Association for reasons which may be grouped under two heads^—viz.:—

(1) That the Friendly Societies Acts give no power to suspend the operations of their provisions, which are that the valuation shall be made, and that certain specified action shalj be taken forthwith as "the outcome of such valuation; and

(2) That even if the Acts gave any such power it would be most inexpedient, as well as unjust, to exercise it, in view of the circumstances of the case.

As to the question of the legality <6f the proposed concession, no more need be said, as the provisions of the Act are clear, and" equally binding on all parties. In regard to the question of expediency,^ the main arguments presented by the deputation were that conditions of working have ini{woved -since 1904, so as to operate argely in favor of the societies;;(b) the^'greater part of another quinquennial has* .e^asped, and, in the interests of the society, action might be deferred till the next valuation report is issued, thereby economise ing in cost of printing, etc., and giving societies time to prepare for the recommendations which might then be made. Even admitting an improvement in conditions, it is -clear that the deficiencies in the cases of each society seeking postponement of action are huge, and nave been caused by the insufficiency of old members' contributions; consequently, while existing conditions continue, the reserve funds are being depleted in two ways: (1) By loss of the necessary contributions which would be accumulated under an adequate scale; (2) by d pletion by great risks consequent upon increased age of the "old members" who draw the full benefit for which they have not paid, in this connection I cannot do better than quote the opinions of Mr R. P. Hardy " expressed in his valuation in the Hearts of Oak Benefit Society: "Should, in any society, a real deficiency be found to exist, and no steps be taken to adjust the finances, then these deficiencies will grow against the society -at compound interest, thus either Impairing, or, in extreme cases, destroying the Association, leaving the surviving members without any remedy against the inevitable' disaster. " In all societies it is to the interest of younger members not to i allow any properly-ascertained defi- | ciency to remain unadjusted, but on the other hand, they should resolutely refuse to sanction the older members (who will have _ passed away before* the day of rectification lias arrived) drawing out at the full rate of 20s in the £, when the common property, scientifically measured, would permit only a les■Sßr rate." Further, he quotes: "Continued neglect to reform the administration, .'ollowed by the usual growth of an adverse^ balance that is sure to attend a neglect of the necessary discipline in working, must inevitably bring out a position that, while it must affect the credit of the society and check the entrance of new members, cannot practically be distinguished from insolvency." But I do not admit that there has been improvement or alteration in the conditions, excepting in the direction of enhanc&d interestearnings and superior or stricter supervision. The great factors which affect the fortunes of a sickness fund are, apart from the question of supervision: (1) Sickness ate, (2) secession rate, (3) sufficiency ot contributions, (4) interest earnings on capital. And those affecting a funeral fund are the .same as above, substituting "mortality." rate for "sickness"' rate. There is nothing attendant on the operations of the period subsequent to the valuation 1900-04 which would lead us to the conclusion that there is any improvement in the controlling factors enumerated -above, except .in the matter of interest, in which admittedly an improvement is found. But heroic alterations must be experienced in the interest rate (far transcending anything practically possible in that direction) to counteract the absence of the needful capital in the case of a deficiency of the great magnitude we have found in some societies. Capital is wanted; the interest is secondary. Consequently, I see no reason to think that the postponement of the xemedial action for another term fffiid the prolongation of present disastrous conditions would be in the slightest <iegree justifiable. _ I would like to refer the Association to the arguments which I have already advanced against the views of certain individual societies in this matter, and especially to my contention that "there is no escape from the truth that persons of each age group, or, as may be expressed, «ach generation, must rely on the efforts of their own age group for their ultimate safety as to the benefits. _ For if it be contended that it is righteous to pass the burden of , the old upon the young, the claim involves the argument that it is K^".*. or one generation to pass, its liabilities on to a future generation, and so on to all successive generations, and, by parity of reasoning, if at any time a society, based on such reasoning, becomes stationary, -or becomes smaller in membershitx its doom is certain. Consequently "£ ftny society the membership •should be entirely self-reliant and self-contained in each age group smd the old members should rely on tne contributions and savings of the

men of their own generation—i.e., on themselves- —and not on the young men of a future generation, who have enough to do to provide

for their own old age. Reverting to the report of our own Registrar, we are glad to note that Mr Hayes has found it necessary to warn the friendly societies of New Zealand against the dangers of the 'uniform death low," the glamour or which has captivated some of our organisations, which will be wise if they retrace their steps and revert to saner and safer methods of finance. Mr Hayes observes: — There seems to be a disposition in some of the Dominion friendly societies to-adopt the uniform death levy or assessment for high funeral benefits, ' and in view of the dangers of such .schemes it would not be out of place to sound a not© of warning as to the unfinancial character of the system. The United States of America, as in many other social and fraternal experiments, has furnished an illustration of the results of assessment as applied to friendly societies; but to the layman a pound of practical experience is probably more convincing than a ton of expert

opinion. In passing, we would explain that the term "Fraternalismr in the United States is synonymous, of course, with "Friendly Societies" in New Zealand. The following quotation is taken from the Philadelphia Intelligence, in the course of a review on "Half a Century of Insurance Experimentation" :— These local groups in the early days of fraternalism almost entire^ eliminated the agent, for the members did tlieir own solicitmg, because they: are imbued with the beauties of fraternal* relations. The expense item was almost nominal. Hundreds and thousands of men rushed into these Orders. Everybody was alike. It was s a dollar or dollar and a quarter assessment, with flat rate at a given age. The man who started in at twenty-five paid the same if he lived to be forty." It was ideal in theory, had it not been for the persistency of Old Mortality. Members were reported by tens of thousands and hundreds of .thousands, and everything went along swimmingly. By-randrby average' age began to get in its work. Then the fraternalists made the acquaintance of normal death-rate, and it became necessary to increase the number of assessments. Then the little fellows began to drop out, and the large ones in the central bodies began the long fight for securing increased rates. This fight is still going on, for fraternalism is still a mighty force in this country.1 The fight now, however, is to get the existing Orders upon a basis founded upon experience with proper cost charge. Quite a good many of the Orders may riot survive this phase of evolution. Some will, and it does not seem A far cry to believe that some of these days Fraternalism, pruned j of its crudities, and strengtnened in its weak places, may attain to some such position in the life insurance world that industrial health and accident insurance is coming to attain in the accident and" health1 world. As is the case with assessment life insurance, while the trail is strewn with wrecks and disappointed people, nevertheless, take \ the country as a whole, the good which must come from a comprehension of life insurance, fair-minded men must, *ye believe, concede that it is well that the assessmentism and fraternalism have been part of the life' insurance development of the past

fifty years. Uniform assessment for high funeral benefits is certainly very attractive; and giving, as it does, a large monetary compensation immediately to. a bereaved family, has "caught on." But it is based on unsound finance, and hits the young members of our friendly societies very hard, because no one can tell how often they will be called on to meet a levy during the term of their membership. We contend that. it is poor fraternity and worse business which says, "Let us eat and drink, for to-morrow we die," which revels in the false prosperity of the moment, and which passes on to future generations either the requirements of a more drastic reform, in order to ensure financial stability, or leaves to those coming after them a legacy of insolvency, instead of making provision, 'as they fondly hoped, for the peaceful. enjoyment of the winter of their lives.