Friendly Societies.

Friendly Societies. The prototype of the modern friendly society has been found in the medieval trade or craft guilds; and there is some connection between the older specimens of the village benefit club and these guilds, which were the friendly societies of their day. During the nonage of Edward VI. the craft guilds were disestablished and disendowed (their revenues becoming the prey of greedy courtiers); but there are traces in some rural districts of England that the convivial, if not the beneficial, aspect of the old guilds survives in the annual feast of the village club. The germ, however, of the present system of mutual provident associations under the friendly society form is contained in Defoe's Essays on Several Projects (1696), in which the author of Robinson Crusoe advocated the promotion of 'societies formed by mutual assurance for the relief of the members in seasons of distress . . . by which not a creature so miserable or so poor but should claim subsistence as their due, not ask it of charity.' Indeed, it would seem as though Defoe was only seeking to extend the operations of a species of thrift institution already in existence, since we find a London society founded in 1687 among the dozen known survivors of benefit clubs established during the last quarter of the 17th and the first half of the 18th century. The Ancient Order of Free Gardeners is of considerable antiquity in Scotland, the oldest known lodge being that of Dunfermline, the charter of which dates from 1715.

This form of provident insurance is peculiar to the English-speaking race, and is the invention of the industrial classes of Great Britain, as the means whereby they have supplied their economic needs for themselves by themselves, 'no man showing them the way, not by prescription of law, not by influence of superiors.' In 1793 the legislation first recognised the expediency of protecting and encouraging friendly societies, and enacted 'that it should be lawful for any number of persons in Great Britain to form themselves into and to establish one or more society or societies of good fellowship, for the purpose of raising from time to time, by subscriptions of the several members, a stock or fund for the mutual relief and maintenance of all and every the members thereof, in old age, sickness, and infirmity, or for the relief of the widows and children of deceased members' (Rose Act). And a parliamentary committee of 1825 excellently gives the raison d'être of the mutual friendly society as compared with the individualistic savings-bank: 'Whenever there is a contingency, the cheapest way of providing against it is by uniting with others, so that each man may subject himself to a small deprivation, in order that no man may be subjected to a great loss. He upon whom the contingency does not fall does not get his money back again, nor does he get for it any visible or tangible benefit; but he obtains security against ruin, and consequent peace of mind. He upon whom the contingency does fall gets all that those whom fortune has exempted from it have lost in hard money, and is thus enabled to sustain an event which would otherwise overwhelm him. The individual depositor, not the contributor to a common fund, is really the speculator. If no sickness attacks him during his years of strength and activity, and he dies before he is past labour, he has been successful in his speculation; but if he fall sick at an early period, or if he live to old age, he is a great loser, for his savings, with their accumulations, will support him but a short time in sickness.' What the Rose Act of 1793 was to societies that existed in the last decade of the 18th century the enabling enactment of 1829 (10 Geo. IV. chap. 56) was to societies which belonged to a more developed period of history. Much of the efficiency and good working of this act was due to the new departure taken by its sponsor, Lord Portman, then M.P. for Dorsetshire, in putting himself into communication with representatives of those bodies for which he purposed to legislate. The Act of 1829 'forms the transition from the system of local to that of central registration,' and the supplementary Act of 1834 carried centralisation a step further. Prior to the date of the former act a provincial system of registration and returns prevailed, each clerk of the peace holding the office of registrar for his several county, the rules being certified and the scales of contributions passed by the county magistrates. But henceforth three registrars of co-ordinate authority for England, Scotland, and Ireland were appointed. The provision requiring justices to be satisfied that the tables of contributions and benefits might be 'adopted with safety to all parties concerned' was repealed; but, in view of existing imperfect and inefficient data in the matter of vital statistics, societies were under the obligation of making quinquennial returns of their sickness and mortality experience. The following privileges of the Act of 1793 were confirmed: power to recover funds from defaulting officers by summary proceedings; priority of claims for moneys on the assets of any deceased or bankrupt officer or trustee; power to determine disputes by arbitration, and of justices to enforce compliance with the ruling of the arbitrators; exemption of stamp duty on bonds.

The Victorian era was contemporaneous with the financial period in the history of the friendly society system. Hitherto societies had been rather benevolent than benefit, more convivial than financial, in their status. But with Mr Charles Ansell came the dawn of actuarial light on the friendly society world. The purely scientific principles laid down by Mr Ansell were rectified and extended by Mr Neison the elder, in his magnum opus, Contributions to Vital Statistics (1845). Five years later appeared Observations on the Rate of Mortality and Sickness amongst Friendly Societies, &c., with a series of tables showing the value of annuities, sick gifts, assurance for death, and contributions to be paid equivalent thereto, calculated from the experience of the Manchester Unity of Oddfellows, by Henry Ratcliffe, corresponding secretary. The outcome was the famous 'Ratcliffe Tables,' subsequently corrected by the compiler, and endorsed by the Royal Commission of 1871-74 as the soundest and most reliable tables extant. Thus twenty-five years prior to the Friendly Societies Act of 1875 (which embodied the recommendations of the commissioners), making a valuation of assets and liabilities compulsory, the late secretary and actuary of the Manchester Unity laid down the true principles of financial security, and prepared the way for a process of self-reform in the society which it would be difficult to match in the history of any other public and corporate body. The classification of the various trades of members occupied Mr Ratcliffe from 15 to 17 hours per day, and 1,321,048 years of life were brought under observation. It was not until 1850 that the affiliated class of friendly society received legal recognition under a temporary act, which became, five years later, a permanent measure (18 and 19 Vict. chap. 63). Prior to this date they had been illegal combinations, coming under the clauses of the Corresponding Societies Act (39 Geo. III. chap. 79) and of the Seditious Meetings Act (57 Geo. III. chap. 19). The legal recognition was, however, of little use to the affiliated societies, since the then newly-appointed registrar, Mr J. Tidd Pratt, in opposition to the spirit as well as the wording of the act, refused to allow the registration of branches of the orders, except as separate and isolated societies—a misruling which was not corrected, so far as branches registered under this act and not registered under the Act of 1875 were concerned, till 1886 (Supreme Court of Appeal: Scholfield and others v. Vause and others). The only other alterations of importance were the requirement of an actuarial certificate in the case of societies granting an annuity or superannuation benefit, and the abolition of all fees for registry. The Act of 1855 failing to bring about the beneficial results hoped for by its promoters, in 1871 a Royal Commission of Inquiry was appointed, with Sir Stafford Northcote (the late Lord Iddesleigh) for chairman and J. M. Ludlow, Esq., secretary. The labours of the Commissioners extended over a period of four years, and the recommendations of their final report (1874) were embodied in the act now in force (38 and 39 Vict. chap. 60), which, owing to the above-mentioned ruling of Mr J. Tidd Pratt, had to be supplemented by a short Amendment Act (1876), under which societies with branches (i.e. affiliated orders) could be registered as such. The following are among the principal alterations effected by the Acts of 1875-76: one chief registrar and three assistants, instead of three separate registrars for England, Scotland, and Ireland with co-ordinate authority; special clause (30) dealing with collecting societies; deposit of rules by unregistered societies no longer allowed; annual audits required; valuation of assets and liabilities required every five years; public auditors and valuers to be appointed by the treasury, but their employment not compulsory; the number of members who can apply to the registrar for an award of dissolution reduced; further powers given to the registrar on this point. Alterations in friendly society law subsequent to 1876 have been unimportant, and generally introduced 'to declare the true meaning' of some clause in the Act of 1875. Note, however, should be made of 50 and 51 Vict. chap. 56, which empowers juvenile societies and branches to retain membership till the age of twenty-one years, the former limit being sixteen years. Societies and branches consisting wholly of members between three and twenty-one years of age may be registered, provided (1) they are in connection with some adult society registered under the act, or a branch of any such society, or (2) in connection with some institution or school.

Owing to technical legal difficulties, the registry office is unable to supply accurate information as to the present numerical and financial strength of the friendly society position; but the writer, from returns specially made to him, is in a position to give the following estimate (which will be found approximately correct) of the principal types of society, registered and unregistered:

(1) The affiliated societies are broadly distinguished from their competitors for public favour by being before all things 'friendly' fraternities, in which the social element is the motor of action—sick and burial clubs, and something more. Long ago this type of society crossed the seas and accompanied the emigrant to his new home in 'Greater Britain.' In constitution and government the orders, as they are termed, are pure democracies. First comes the individual branch—lodge, court, tent, or senate—possessing an independence of management (subject only to general law), and retaining its own sick fund. Then succeeds the district (the limbs, as it were, of the body), a local gathering of branches within a certain given area, in which the funeral allowance is reinsured; and, lastly, the central body itself, called by some distinctive name (as Annual Movable Committee, High Court Meeting), an annually or biennially elected parliament of delegates, carrying out its rules and regulations through a working executive. The far and away largest bodies are the Oddfellows (Manchester Unity) and the Ancient Order of Foresters, appropriating between them 1,313,721 members out of the grand total for the class and £10,495,000 of the funds. Other important orders are United Order of Oddfellows (150,806), Temperance Order of Rechabites (75,000), Ashton Unity of Shepherds—the strongest order in Scotland—(71,000), and Order of Druids (58,216). The average cost of management is 7 per cent. of the annual contributions. (2) Is a development of the purely local class to meet the altered needs of the day. The class consists of societies of divers degrees of merit, but all possessing a common central fund. The giant among them is the Hearts of Oak (London), with its 115,284 members and capital of close on one million sterling. The county societies are the 'old established houses' belonging to the 'patronised' group, and are being deserted for the better known of the orders. (3) This class is specially devoted to insurance against the fatal and non-fatal accidents of hazardous occupations, and is of interest as being largely used by workmen to contract themselves out of the Employers' Liability Act (1880). There has been a recent development of peculiar trade societies, and certain of the professions have established benefit institutions—e.g. Medical Sickness and Annuity, and Clergy Friendly Societies, the former possessing a membership of over 1000 and funds to the value of nearly £25,000. (4) Local societies are fast disappearing before the onward march of a better class of mutual provident association. But the low type of friendly society which periodically divides its funds, and is always beginning afresh to run in the thrift race, is sadly too prevalent; the increasing liability to sickness with advancing years is altogether ignored; a blind eye is turned on the future. (5) Societies which gather in their weekly or fortnightly pence by means of collectors calling from door to door. The bulk of membership is composed of the most necessitous poor, and probably two-thirds are women or children. No benefit beyond an insurance at death is given.

The actual number of societies forming the class is a small one compared with the total number; for England only 47 out of about 24,000 different bodies registered as societies or branches; in Scotland 5 out of 900; in Ireland none out of some 400. The largest societies are the Royal Liver (1,211,259) and the Liverpool Victoria Legal (1,003,787). The expenses of management, with commissions, range from 20 to 52 per cent. of the annual premiums. The numerical increase of the class is only surpassed by that of the Industrial Assurance Companies. (6) Societies of women are but poorly represented in the voluntary thrift army, and the few that exist were mostly established in an unfinancial age. An order which aims to be national in its area of membership was, however, established in 1885 by a clergyman of the Church of England (Rev. J. Frome Wilkinson), which has already opened branches in several counties (one in Scotland), and should meet the ever-increasing economic needs of women. The society is registered as the United Sisters' Friendly Society (Suffolk Unity). (7) Juvenile societies are the thrift 'nurseries' of the adult societies, and are mostly confined to the affiliated class, the largest number of branches being in connection with the Foresters, Manchester Unity, and Rechabites. There is a steady increase in the popularity of juvenile friendly society membership.

Tests of Financial Security and Good Management.—Registration, 'not because registry of itself can make any society safe, but because its position must be always unsafe without registry.' Rates of contribution for benefits, both sick and funeral, on a graduated or sliding scale, according to age on entry, which rates themselves shall be held by actuarial authority sufficient to carry benefits contracted for. Record of yearly sickness and mortality experience kept, so that the valuer may be in possession of sufficient data by which to estimate the society's or branches' liabilities. Yearly audit and five-yearly financial overhaul or efficient valuation of assets and liabilities. Effect given, without undue delay, to remedial measures recommended by valuer, should liabilities exceed assets. The several insurance funds kept separate, and expenses of management provided for. Sick benefits insured till sixty-five, at which age a pension or deferred annuity shall commence, and continue for remainder of life. Reserve funds to realise a clear percentage of interest, equal to that on which tables or scales of contributions have been calculated, generally 3 per cent. Candidates refused who cannot 'pass' the doctor, or who have exceeded in years the maximum limit of forty-five, forty being preferred. Efficient supervision of sick payments to guard against 'malingering' or fictitious claims. Society not to be of local isolated type, dependent solely on its own resources, but associated with other branches of one and the same organisation, or of the centralised type. Means to be taken, in seasons of distress or loss of work, whereby membership may be retained. Provision, if desired, for juveniles, widows, orphans, and decayed members.

We would strongly endorse the subjoined authoritative warning: 'A word of caution may be added against forming too hasty conclusions adverse to friendly societies, if it should turn out that the valuations in many cases show an estimated deficiency in the funds to meet the liabilities. It would be strange if it were otherwise, when for the first time scientific tests are applied to contracts that have been in operation without a scientific basis for a long series of years. It must be borne in mind, however, that nothing is more elastic than the contract made by a friendly society with its members; no error more easy of remedy, if found out in time, than one existing in the original terms of such a contract. Hence the words "insolvency," "rottenness," and the like, which we sometimes hear freely used as describing the general condition of friendly societies, are utterly out of place. Of friendly societies in general it may be said that, as there are no associations the benefits of which are more important to their members, so there are none that are managed with greater rectitude, and few with equal success.'—Introduction to W. Tidd Pratt's Law of Friendly Societies (1881), by E. W. Brabrook, F.S.A.

For further information, the following authorities may be consulted: Dr Baernreither's English Associations of Working Men (1889); the present writer's Friendly Society Movement (1886) and Mutual Thrift (1891); Year Book of Friendly Societies Registry Office; Annual Reports of Chief Registrar. Also Ratcliffe's Experience of the Manchester Unity; Mr Francis G. P. Neison's Foresters' Experience; and the same eminent actuary's Observations on the Efficient Valuation of Friendly Societies.