FRIENDLY SOCIETIES REPORT.

Globe, Volume XXII, Issue 2011, 4 August 1880, Page 3

FRIENDLY SOCIETIES REPORT.

fßv Telegraph.! [PBOM Otm OWN COBBKSPONDENT,] WELLINGTON, August 3. The third annual report of the Registrar ef Eriendly Societies was tabled to-night. It commences with statistics of the business of the Registry office department, the work of the year, societies registered, &?. In reference to the registration of new branches, the Registrar remarks:—“The object of registration is to register rules specially applicable to the body desiring registration, and as the Act stands, if a branch does not frame some rules specially applicable to itself as a distinct branch, it cannot be placed on the register. The branches have been informed that in order to enable them to effect registration, rules of the most simple character will be accepted, such as rules for the constitution of the branch, for its name, for due subordination to the district, and (if it is not desired to make laws in detail), adopting generally the district laws relating to branches as the special laws of that branch; provided that such, district laws make provision for all matters required by the second schedule to the Friendly Societies Act, 1877. Although that would only involve the necessity of making two or three short rules, yet twentytwo branches have not thought proper to adopt the suggestion. It is true that in the ease of these branches a few additional rules would have been necessary to comply with the provisions of the Act of 1877, as tho district rules had been registered under the former Friendly Societies Act. This suggestion has been found useful in other cases, and by the adoption of that course several branches have been able to secure registration. It is to be regretted that so large a number of branches should, on account of a difficulty which they could so easily get over, shut themselves out fram the benefits of registration. As, however, there is apparently a strong objection on their part to make rules, it is worth consideration whether, by a slight modification of the Act, this objection could be met. As a general rule, the laws of a district are divided into two parts relating to the constitution of the district and general matters to be dealt with by the central executive and by the representatives of the aggregate lodges ; (2) special subordinate lodge laws regulating their internal economy to a certain extent, by giving them power to make by-laws supplementary of these subordinate lodge laws. It may, therefore, bo matter for consideration whether the Act might not be modified by providing that whenever notice is given of the establishment of a branch for tho purpose of such branch being registered, it such notice be not accompanied by any branch rules it shall be lawful to register such branch ; provided (I) that a declaration duly made by the secretary of the society and by the secretary of the branch, to the effect that such branch has not made any by-laws, but is bound only by tho subordinate lodge by-laws of the district, annexed to the district rules forwarded for registration, and tho district rules so far as applicable be forwarded to the Registrar with notice of the establishment of such branch ; and (2) that the subordinate lodges by-laws make provision for the matters required by the Act to bo contained in tho rules, and such subordinate by-laws or any amendment thereof by the society, be deemed the registered rules of such branch, but that such branch shall have the power of subsequently registering by-laws made by itself as amendments of tho subordinate lodge laws or in substitution thereof. A provision to this effect would probably remove the objection felt by many branches either to remodel their by-laws or to make them where they do not at present exist, and would probably result in placing many branches on the register.” Further on the report says, “ Government has authorised the extension of the facilities of the Friendly Societies Act to societies for the promotion of total abstinence from all intoxicating drinks. This special authority was given in response to a request preferred by the Independent Order of Good Templars. This order could not register under section 7 of the Act, but although this authority was given on the Bth of December, 1879, and that fact intimated to the secretary of the grand lodge, 1.0.G.T., on the 9th, the Registrar has received no further communication from this society on the subject. The provisions of the Amendment Act so far have worked very smoothly and well. The information required under section 4 has been in general furnished, sometimes with cheerfulness, and certainly not with greater reluctance than tho information required under section 13 of the principal Act. In two particulars only has special reluctance been shown in a few instances, namely, in the furnishing of names of the members, and of information respecting tho wives of members. It is the 7th section of the Act which appears to have given the greatest trouble. It has done so in two ways, and in each case tho trouble has proceeded entirely from the Provincial District of Otago. The Oddfellows and Foresters of that district are both affected by this section, though indifferent ways. The former had since 1874 adopted the practice of crediting'all interest beyond 4 per cent, to the management fund of their lodges ; the latter have been in the habit of paying their court surgeon and other medical expenses out of the sick and funeral funds of the courta. Both these practices became illegal by the Amendment Act of 1878. Yet the returns for 1879 show that in five out of six registered courts of the United Otago District of Foresters from which returns have been received, the malpractice was continued during that year, while in the case of the Manchester Unity of Oddfellows, although the law appears to have boon obeyed by nearly all the Lodges, and the district rules have been remodelled so as to comply with tho Act, a petition has been presented to Parliament, praying that this special prohibition should be rescinded. Tho Foresters’ Courts were communicated with on tho subject of their breach of the law, but as the district had recently registered rules which would have tho effect of preventing a repetition of the malpractice no prosecution was instituted. In the case of the Oddfellows a letter was sent to the district secretary, explaining the object of the section referred to, pointing out that their tables do not include provisions for tho possibility of_ adverse fluctuations in tho society’s experience of sickness or mortality. Tho fluctuation is likely to be very considerable in the case of small Lodges, especially in regard to the amount of protracted sickness; hence if a society wore to enter on a given period of say five years with exactly sufficient funds in hand to meet its liabilities according to their tables, and were throughout tho five years to appropriate all interest beyond 4 per cent, to the management fund, it follows that apart from the profits accruing from investments there would be an equal likelihood of a surplus or deficiency ot tho close. The existence of a surplus is not a mutter to be deprecated, but a deficiency is a serious disaster. To permit the two results to bo equally probable is quite an inadmissible course. Life insurance offices regard it as a maxim that there ought never to bo a deficiency at a valuation, hut as a further and more perfect safeguard it is desirable the interest actually earned should exceed the interest assumed, so that tho excess may compensate for unfavorable sickness experience, should such bo the society’s lot. It i B not an infrequent thing for life insurance offices to realise s rate of interest exceeding by 2 per cent, or 3 per cent, tho rate assumed in their valuations and in computation of the premiums. Thus, the Australian Widows’ Fund was recently valued at 4j par cent, at a time when the annual interest was about 8.) per cent, on tho aggregate fund. Such are the general principles which forbid the application to management expenses of interest earned by the benefit fund. But in the case of the Otago District of Manchester Unity of Oddi fellows there are circumstances which would make such appropriation were it to bo ooni tinned especially disastrous. The rate of oon- ■ tribution which has hitherto obtained, is one : which all actuaries are agreed in regarding . as totally inadequate to provide tho benefits I promised. This rate, it is understood, will • continue to be charged to all members iu-

I (tailed prior to Ist July, 1879. Even a» reI garde new members the contributions to be charged are considerably lower than the minimum scale which it is considered prudent for societies to adopt. A rate of interest, much higher than 4 per cent., would be needed to make these contributions adequate, hence it would be a moat pernicious thing to make 4 per cent, the maximum rate obtainable for the sick and funeral fund. Lastly, although no lodges of the district have as yet been valued, a comparison of the funds in hand with the duration of the lodges, number of members and nature of the benefits, will in many cases afford prima facie evidence against their solvency.” The Registrar remarks, however, that the officers of the Otago district are deserving of high praise for the large measure of success which has attended their efforts to bring their lodges into compliance with the new Act. The now lodge rules are mostly models for imitation, excepting in the matter of the rates of contribution, which, though a great improvement on the old uniform rates, are still too low. In regard to deferred annuities commencing at sixty years of age, the Registrar says, “There is reason to believe that the mortality experienced in this colony is lighter than in England. This will, pro rata, increase the liability of the annuity fund, as a larger number of members will survive to claim the benefit and will claim it for a longer time. If the annuity is established the sick pay should cease from the time of its commencement. It is very desirable that the superannuation risk should be spread over the whole district, as the funeral liability already is. The liability for payments in all cases of protracted sickness —say after the the first six months of sickness—should be spread over the entire district, as in several districts of the Order of Foresters in England. A few cases of chronic- sickness, even whore the contributions would have been sufficient for average expenses, will soon exhaust the funds of a small lodge. The liability for payments in acute diseases can be borne with less danger by a small society. As it is not necessary to have a large number of members to insure a fair average, members may be startled at the magnitude and number of contributions they will have to pay, but it is imperative that any annuity fund started must be so safe, that fairly to fulfil its obligations it should be an absolute, or at least a moral impossibility, that no rule for providing annuities can be registered unless the tables of contributions to meet them are certified to by an actuary appointed by the Government. Section 10 of the Friendly Societies Act provides in the case of the Order of JReohabites for two tables of contributions for an annuity of £lO, commencing at the age of sixty, the contribution being in one case returnable in the event of earlier death, and in the other case non-returnable. They were formally submitted to the actuary for his certificate, but that he was unable to give, as the proposed contributions were found inadequate. The scales had in fact been copied from scales certified in South Australia, only that sixty had been substituted for sixtyfive as the ago for the commencement of the annuity. The increase of liability produced by this alteration is greater than a non-pro-fessional mind might imagine. A smaller number of premiums will bo paid ; they will have a shorter time to accumulate at compound interest ; a larger number of members will survive to claim the benefit; and they will claim for a longer time. There ore thus four distinct causes conspiring to produce an increase of liability. The actuary reported to the district officers on the proposed scales, and strongly advised that superannuation should begin at sixty-five instead of at sixty. This course, it is believed, will be adopted. Tho returns of sickness and mortality for the quinquennium 1873 to 1877 have been subjected to careful examination with a view of rectifying errors as far as possible, but chiefly excluding all data of an erroneous or suspicious nature. This work was entrusted to Mr Prankland, the actuary, and is nearly completed. The result has been the exclusion from tho proposed experience of the returns furnished by a considerable number of lodges and courts. The number of lives which the residue of the data will embrace may be stated approximately at from seven to eight thousand. This is equivalent to between twenty and thirty thousand years of life experience, about equal to that upon which Mr Ansell’s Friendly Societies’ table is based. As soon as ready the process will be completed as everything is ready for tabulation. The data is too scanty to bring out a reliable law of deterioration of tho average health, but if the positive results are shown it will go far to refute the arguments against the use of English data in tho constiuction of premiums derived from the law of the rate of sickness which obtains in Now Zealand at present. Apart from the error of those who rely on a low rate of sickness without taking into consideration the ages of members, there is a subtler fallacy which leaves out the account of the effect of recency of admission. Mr Frankland anticipates this influence, in conjunction with the cession of healthier members, will bo found considerable. There is another feature which tends to bring out the fictitious appearance of salubrity in the experience of New Zealand societies, namely, the occasional forbearance of members in good circumstances to claim all tho benefits to which they are entitled under the rules. The saving thus effected has been in many lodges considerable. This cause of apparently low sickness rates will not operate so strongly in future as in the past. It would bo difficult, however, to eliminate the influence of this factor from the data. In view of the fact that a movement is in progress towards tho establishment of superannuation funds, as well as on other grounds, it is greatly to be desired that an investigation should be made into the mortality experience of New Zealand as exhibited in the records of the Registrar-General’s office. The actuary to the Scottish Provident Institution has determined the rates of mortality at various ages in New Zealand by comparing the deaths for the year 1873 with number of population according to the census of March, 1874. “The result,” he says, “compares favorably with any other table.” I cannot certify to the scales of contributions for annuities unless they are based on a table showing low mortality, especially where it is made optional with members whether they will insure for superannuation benefits. Pending the construction of a Now Zsaland life table premiums should not be lower than net 4 per cent. The districts combined in this table show much lower mortality than the Manchester Unity experience. Moreover, there is a table for female lives showing still lower mortality. Serious blunders in the adoption of erroneous mortality are apt to prove hurtful to the interests of a society. This is only one of the many evils connected with the present condition of friendly societies, and although the visitation may bo more remote the awful consequences of such a calamity, like every other evil of procrastination, will be irreparable. We sea hence how needful it is to beware of assuming too high mortality in constructing premiums for annuities. It should never be forgotten that the adoption of the erroneous Northampton table so fortunate in the interest of insurance, caused the loss of about three millions of pounds to the British Government in the transaction of its annuity business. In a society consisting of a small number of members, and probability of large fluctuations in sickness and mortality, it is imperative that there should be heavy loading on tho premiums computed on the assumption ot average experience. This loading or margin is partly provided by profit arising from tho withdrawal of members, as the latter are not, as in life offices, allowed any compensation for loss they sustain. But a more certain and satisfactory margin is provided by tho realisation of a higher rate of interest than that essumed in the computation of premiums, and in tho valuation of its assets and liabilities. As regards the tables of sickness and mortality, it is believed by tho actuary attached to tho office that they overestimate both the rate of sickness and the rate of mort dity likely to be experienced by the majority of New Zealand friendly societies at each age of life, except, perhaps, at a very advanced age. Unless a rigorous interpretation be placed on tho rules relating to relief in chronic infirmity, payments very old members are likely to bo heavier than the scanty, though mutually corroborative data of the Manchester Unity have shown. Tho possibility is that the claims for payment in old age may bo at a higher rate than that indicated by the Manchester Unity experience when combined with tho probability. The mortality experienced by New Zealand societies is lower than ths Manchester Unity in England, and therefore a larger proportion of members survive to claim what is virtually superannuation. This goes far to show that it would be imprudent in a majority of cases to estimate tho sickness liabilities of a society at a lower amount than that givem by the Manchester Unity experience. Even

in regard to funeral liabilities, tho presumption in favor of low mortality is not sufficiently strong to justify a departure in the direction of leniency from tho Oddfellows’ data. Considering the magnitude of the operations of friendly societies in this colony, receiving contributions from over 20,000 members, it is a matter of the greatest import to tho State that the contributions by members of these societies are adequate to meet the promise of benefits, as the failure to do so would involve much misery, especially among aged members who are depending on their sick pay in case of infirmity and inability to work, and would impose upon the State or up»n society the additional duty of supporting these aged people. Therefore it will be interesting to note the improvement in the premiums charged by these societies since the organisation of this office. When the Friendly Societies Act 1877 was passed, only throe or four branches of societies in the colony charged premiums adequate to the benefits guaranteed. There were then about 200 branches of societies, with an aggregate membership of about 20,000 persons. Since that time the number of branches in existence has increased to 314, although only about ono - half of them are registered, besides possibly others the existence of which is not known in tho office. Of these, tho following havo adopted rates which are equal to or slightly in excess of the rotes recommended by the actuary of tho department:— Manchester Unity of Oddfellows, Hawke’s Bay district, 8 lodges ; Wellington district, 12 ; North Westland district, 3; Volunteer Lodge, 1.0.0. F., M.U., Sydenham. Independent Order of Oddfellows (American) 21 ; Ancient Order of Foresters, Auckland district, 7 courts. Total, 72 branches. Besides this there has been considerable improvement in the rates of contribution of other branches, even although the standard recommended by the actuary may not havo been attained. Thin improvement has usually taken the form of the substitution of a graduated scale of contributions for a contribution uniform for entrance at all ages. In other cases the improvement has arisen by ceasing to charge the sick and funeral fund with medical expenses as a liability. A list of those branches known to have effected either of these improvements is appended. Manchester Unity of Oddfellows Hokitika district, 6 lodges ; Lyttelton district, 9; Otago district, 24; Invercargill district, 4 Ancient Order of Foresters —Court Queen of the Isles, 1 ; Otago district, 20 courts. Ancient Order of Shepherds—Sanctuary Sir George Grey, 1. Independent Order of Rechabitos—New Zealand central district, 31 tents. Sons and Daughters of Temperance division, 1. Total, 97 branches. No application has been made during the twelve months under review for the registration ot any Trade Union, nor have there been any duties performed under the provisions of the Trade Unions Act, 1878, to report upon.