FRIENDLY SOCIETIES.

Te Aroha News, Volume 1, Issue 47, 26 April 1884, Page 3

FRIENDLY SOCIETIES.

The earliest legislation affecting friendly societies in England took place in the last years of the eighteenth centu ry . Since that time about 20 Acts have been passed to regulate them, none of which can be said to have given much satisfaction. It wa& at last determined (in 1870) to appoint a Royal Commission to make an exhaustive examination into the working of these bodies with the view of framing a comprehensive statute aiming at something like finality. This Commission, of which the Chairman was Sir Stafford Northcote, and which had among its members one of the most eminent English actuaries — the late Mr W. P. Pattison— -conducted an inquiry extending over four years, and collected a mass of evidence which is, to this day, the richest mine of information in existence relating to friendly societies. As a result of their labours, all previous Acts were repealed, and the Imperial Friendly Societies Statute of 1875, which is still the law in England relating to this subject, was passed. As this statute is substantially identical with the Act now in force in New Zealand, it may be interesting to mention some of its leading provisions. The main object of the Act is similar to that which dominates the existing legislation in regard to life assurance companies, namely, the enforcement of publicity. It is not meant by this that any attempt is made by the Legislature to violate the secrecy of the great affiliated orders, but simply that the financial transactions and actuarial solvency or insolvency of the societies are to be made known to Government officers, and reported on by them to the Parliament of the country. There is, however, this difference between friendly societies and life insurance offices, that whereas the latter are compelled, without exception, to come under the Act, the friendly societies are not so compelled, inasmuch as they are at liberty if they please to remain unregistered, the consequence being merely that they necessarily forfeit the privileges attaching to registration. These privileges are very numerous, but the principal one is that a registered society has an easy legal remedy against its trustees and other officers for defalcation, whereas, in the case of an unregistered body, the remedy is both expensive and doubtful. Let us examine a little more closely what matters a registered society is required to make public. It is first of all asked to send annual returns to the Registrar — the Government officer charged with the administration of the Act— of its receipts and expenditure, funds and effects, number of members, and experience of sickness and mortality. Secondly, it is required to make an actual valuation once in every five years. What is a valuation ? It is a periodical stocktaking, analogous to that which every prudent merchant would make. But there is this difference — that the assets are calculated for the purpose of covering liabilities thai are yet. to accrue, and have present elements of uncertainly about them. Still the uncertainty is not so great as persons unskilled in acturial science might suppose. The law of averages, -when applied to probabilities of sickness and death under analagous conditions, becomes almost absolutely accurate— so certain indeed that variation may be calculated upon only when reasonable proof can be given that the conditions are essentially different. Mow, the dissatisfaction with the present Act and the officers who administer it, which has led to the agitation among various societies for the total repeal of the law, arises from two causes. The first is the work thrown upon lodge officers in the compilation of very elaborate returns required by the Government Actuary ; and the second, the perennial controversy between the actuaries and the lodges concerning their solvency, and the adequacy of their fees to cover the probabilities of claims under their guaranteed scale of benefits. Mr Frankland's mission to Auckland has been undertaken with the object of meeting the representatives of the various societies, and discussing these and other questions with them. The result of his conference with the Auckland delegates has not been made public, but we are told that it was of a satisfactory character, and will, it is hoped, produce useful results. With respect to the first objection, there does seem some reason in the complaint of the societies that the expense of iraking up these returns, which are not required by the lodges is thrown upon them. The Government may, no doubt, reply that this work is enforced without recompense in England and Victoria, and in the latter colony registration is compulsory, and the law is in other respects more stringent than it is here ; but the fact remains that the demand for returns causes very great irritation, and interferes with that good understanding which it is most desirable to promote among these admirable societies. The alternative of discontinuing the returns is out of the question. For the good of the societies, and for their own information and guidance, as well as for the public protection, a basis of acturial calculation, founded upon New Zealand experience, is absolutely indispensable. We are sure that the leaders of the societies who have fairly considered the question will agree with this, and will acknowledge that tne Government, in doing for all the societies what any one Lodge or Order could not accomplish for itself, is acting for their common good. The societies, however, have a claim to consideration ; they are doing a great public work already, and should be encouraged rather than harrassed and disheartened. And we believe it would be generally accepted as a conciliatory act on the part of the Government if a moderate fee were allowed, adequate to cover the actual cost of compiling these returns. The total expense would not be very great—probably not more than £150 or jl2oo for the entire colony, and it would get rid of that grievance. The other ground of complaint, in the present condition of the law, is more sentimental than real. The Government actuaries may declare lodges to be offering benefits which their tees can never give, and to be incurring responsibilities to their members which will, a few years hence,bring them down to a condition of insolvency ; but so long as they do nothing to constrain the lodges into adopting any other scale of fees, or to enforce their opinion by legal process, the societies have not much to complain about. They can continue to set what they believe to be their experience against the declarations of the actuaries until a long enough period has elapsed to base an average upon.

The acturial reports will have a wholesome effect on the management of the societies, producing watchfulness, and educating the officers •in the mysteries of acturial science. Those who dispute the fairness of the acturial figures contend that four per cent, interest, the rate upon which the acturial calculations are framed, is far too low— that the actual average obtained is very much higher. The objection has, we believe, considerable force, and the Department might meet it half-way by publishing two soules of fees, one intended, as afc present, to cover every possibility of failure: the other allowing a higher rate of interest and showing the probabilities of safety in the event of a society escaping extraordinary disaster. The existing Friendly Societies Act is a very excellent measure ; it is, however, capable of improvement. Registration should, we think, be made compulsory, as in Victoria, but without insisting upon any scale of fees or code of rules. The Revising Barrister might be dispensed with, getting rid of a lot of useless red tape and expense which serves no purpose. Any benefit society might be registered, no matter what its rules may be, if the Government enforce the conditions for regular returns and institute a quinquennial valuation, the results of which, with the opinion of the actuaries on the solvency of the society, is published in the district where the society carries on its operations. Provision should be made for doing this, and then members would join with a full knowledge of the facts. The societies exist by mutual agreement and for a mutual benefit, and the less State interference there is with them the better. The Government while doing everything that can be accomplished in the way of collecting evidence and employing acturial skill, should depend entirely upon the growth of opinion within the lodges favourable to the views of the actuaries. When they are fully persuaded that their societies lack the element of stability, the members will only be too glad to initiate measures for placing them on a better footing.