Observations on the State and Condition of the Present Friendly Societies
and Proposal for the Formation of a Friendly Society on Improved Principles

Castletown: Printed by M. J. Backwell, Malew Street [1860]

OBSERVATIONS ON FRIENDLY SOCIETIES.

The Clubs or Friendly Societies at present existing in this Island, are based upon an erroneous foundation ; the principle of equal contributions from members joining at different ages has now been proved to be inequitable and unfair, and Societies formed on such a principle are shewn by Statistics of sickness and life which have been carefully collected and studied in England within the last 20 years, to have the seeds of dissolution sown in them at their formation.

What is stated in various works published on the subject in England, is corroborated by our own experience in this Island ; many of the Clubs formed here have ceased to exist, and, on their being broken up, much injury has been inflicted on the remaining members, by their being deprived of the benefits they have expected in sickness and old age, at a time when they were too old to join any other Society. Other Societies have drawn out a languishing existence by reducing to a very small amount, the payments originally promised in sickness, and at death. A few instances may be stated : in one case a person aged 17 joined a Society, it lasted until he was about 60, when it was broken up, and the remaining members received somewhere about 3 each ; during his membership he had contributed about 26, and had only drawn from the box one week's sick money, 7s., so that when the Club was dissolved he had lost 22 13s. with interest, and was bereft of relief in sickness, at a time when, from increasing age, be would begin to require it. In another Club which was in existence about forty years, the original allowance to sick members was 10s. per week, and they accumulated a large sum of money, but at length, no new members joining, and the average age of the members having attained that amount of years that is shewn by statistical tables to be accompanied by a considerable amount of sickness; the Club declined, they first reduced the allowance in sickness to 2s 6d. per week, and if the sickness continued any time, to 1s., and at last divided the remaining money. Many more cases could be stated were it necessary, but they are too well known to need repeating here.

We will now proceed to explain the reason these societies fail to fulfil the objects they have been formed for and cease to exist at the end of a certain period from their formation, generally 50 or 60 years : they are, strictly speaking, Mutual Assurance Societies, and every one must be aware that if a Life Assurance Office were to ensure all lives, without respect to age, at the same rate of premium, it would soon become bankrupt, no ! the Life Assurance Company charges a higher annual sum for the payment of £100 at the death of a man aged 30, when he insures than it does for the like payment at the death of a man aged 20, and why, because on the average of the life of all the insured the man aged 30 will die 7 years before the man aged 20. Now the probable length of sickness of men at different ages has been, by the Statistics we have mentioned, reduced to as great a degree of certainty as the average duration of life, and Friendly Societies have now the opportunity of arranging the payments to be made by persons joining at different ages on such a scale as will meet the amount of sickness the person is likely to be subject to.

The Societies hitherto established in this Island have not recognized the foregoing principle, but admit at any age between 17 and 30, and some even up to 40 years of age, at the same rate of payment; now this is manifestly erronious, a man, being less liable to sickness in his youth, will not, in general, join a Club until he is near the age above which he cannot enter, and the effect of this is, that he has contributed so much less to the funds at the time he requires relief than a man who joins earlier in life. Again, all persons above the age of 30 or 40, as the case may be, are refused admittance, whereas by adopting a scale of payment, varying in amount according to age, no one need be refused on account of age, and the benefit of the Society may thereby be considerably extended.

The practical working of a Society established on the present plan is this : a Club is formed of 100 members between 20 and 30 years of age; little in comparison is drawn from the funds for the first 30 years, and and if investigation is made of the average age of the whole of the members, it will be found moderate, many new members will come in during these 30 years, whereby the average age will be lessened, at the end of that time the Club is in a flourishing condition, with a large fund in hand, but every year after the calls upon the fund increase, more members are sick and draw from the fund for relief in sickness, some are become unable to work; it will be found on investigation of the average age of the members that it is alarmingly increased, and the increase of sickness is only what may be expected from such increased age, what is the result, young men will be loth to join a Society, the members of which are mostly of the age of 60 years, and whose claims on the funds are so much increased ; the number of contributors therefore falls off, and in time; the funds are found insufficient to meet the claims upon them, the amount of relief in the first instance is diminished, but this only puts off the evil day, at length the Club is broken up, and men who have contributed 30 or 40 years are left without any provision in their sickness and old age. Or if an effort is made when a Club is 30 or 40 years old, to induce young men to join it, and they do so in some numbers, it will have the effect of carrying it on for a few years longer, but is it not a fraud upon these younger members to induce them to contribute their money for the benefit of the old members of the Club, and leave them eventually in the situation the others would have been in at an earlier period.

At the formation of such a Club, the average age of the members would be between 20 and 30, when it had been 40 years in existence, the average age would be between 50 and 60; now it is well ascertained that the average sickness of a man during the ten years between 20 and 30 is 8 weeks 5 days, and that for the like period between 50 and 60 it is 27 weeks 14 hours, but for the following ten years, to wit between 60 and 70 it has risen to the length of 77 weeks 2 days. Now see what the Club has to provide for when it has been 40 or 50 years in existence, no new members joining, all becoming old, the funds that have been laid by will evaporate very quickly.

Such has been the fate of many Clubs in this Island, and will continue to be so until a rate of contribution be adopted varying in amount according to the age of the person when he joins.

It is found in England that the larger a Society is, the more likely it is to insure a practical approximation to the average results, in fact that when the Society is large. it is the more certain to be lasting, from the adoption of rates of contribution which are based on Returns gathered from large masses of the population.

It is therefore proposed THAT FRIENDLY SOCIETIES BE ESTABLISHED UPON THESE IMPROVED PRINCIPLES, for the following objects, which may be added to hereafter.

1st. Relief in Sickness up to a specified age, say 65.
2nd. The purchase of a Government Annuity for each member, to commence at the age when the relief in sickness ceases ; or the granting of such Annuity by the Society.
3rd. A payment at death.

Three general Classes of contributors may be embraced in this Society, so as to meet the wants of-

1st.. The Labouring Man.
2nd. The Mechanic.
3rd. The Shopkeeper.

And the following tables will skew the monthly payments required for insuring the benefits necessary for _~lr of these Classes respectively.

CLASS 1.

Age at entry
15
20
30
40
50
6s a week in sickness
6d.
6¾d.
8¼d.
11¼d.
1s 3d.
Government Annuity of £8, to commence at 65
10½d
1s 1d
1s 8¼d.
2s 0¼d
5s 4d
£6 payable at death
2d
2¼d
3d
4½d
7d
Total
1s 6½d
1s 10d
2s 7½d
4s 1d
7s 2d

CLASS 2.

Age at entry
15
20
30
40
50
10s a week in sickness
10d.
11¼d.
1s 1¾d.
1s 6¾d.
2s 1d.
Government Annuity of £13, to commence at 65
1s 5d
1s 9d
2s 9d
4s 6d
8s 8d
£6 payable at death
2d
2¼d
3d
4¼d
7d
Total
2s 5d
2s 10½d
4s 1¾d
6s 5d
11s 4d

CLASS 3.

Age at entry
15
20
30
40
50
15s a week in sickness
1s 3d.
1s 4¾d.
1s 8½d
2s 2d.
3s 1½d.
Government Annuity of £20, to commence at 65
2s 2d
2s 8¼d
4s 2¾d
6s 11
13s 4d
£10 payable at death
3¼d
3¾d
5d
7½d
11¾d
Total
3s 8¼d
4s 4¾d
6s 4¼d
9s 8½d
17s 5¼d

The contribution required for purchase of the Government annuity, as set forth in the above tables, is considerably more, and in some cases twice the amount that is charged for annuities granted by some Friendly Societies, but the advantage in having a Government annuity is: 1st-The unexceptionable character of the Security. 2nd-A party may at any time before the annuity becomes payable, have back all the money advanced by him. 3rd-In case of the party's death before the annuity becomes payable, the Money advanced will be returned to his Executors, whereas, the money advanced to a Friendly Society is never returned.

If the advantages of a Government annuity be not considered equivalent to the increased payment required for it, the following tables shew wat whould most probably enable the Society itself to grant the annuity.

CLASS 1.

Age at entry
15
20
30
40
50
6s a week in sickness
6d.
6¾d.
8¼d.
11¼d.
1s 3d.
Annuity of £8, to commence at 65
4d
6d
9¾d.
1s 8¼d
3s 8d
£6 payable at death
2d
2¼d
3d
4½d
7d
Total
1s
1s 3d
1s 9d
3s
5s 6d

CLASS 2.

Age at entry
15
20
30
40
50
10s a week in sickness
10d.
11¼d.
1s 1¾d.
1s 6¾d.
2s 1d.
Annuity of £13, to commence at 65
6¾d
10d
1s 4¼d
2s 9¾d
6s 1¼d
£6 payable at death
2d
2¼d
3d
4¼d
7d
Total
1s 6¾d
1s 11½d
2s 9d
4s 8¾d
8s 9¼d.

CLASS 3.

Age at entry
15
20
30
40
50
15s a week in sickness
1s 3d.
1s 4¾d.
1s 8½d
2s 2d.
3s 1½d.
Annuity of £20, to commence at 65
10d
1s 3d
2s 0d
4s 2
9s 2¾d
£10 payable at death
3¼d
3¾d
5d
7½d
11¾d
Total
2s 4¼d
2s 11½d
4s 2d
7s
13s 4d

The above tables are given as examples, but it is to be observed that parties of any age, from 15 to 65 may be admitted as members ; and that a party may contribute to all or any one of the objects, with this limit, that a person contributing for weekly advances in sickness, must also contribute for an Annuity equal to one-third the sick allowance, to commence from the time relief in sickness ceases to be afforded ; but a person may contribute for the Annuity without contributing for the sick allowance, and may at any time increase such contribution ; and a person may, by consent of the managers, be removed from one class, of sick allowance to another on equitable terms, to be agreed on.

As a Society consisting of a large number of members has been found to be the safest, it is proposed that this new plan should be commenced by the establishment of a Society to be called the "CASTLETOWN DISTRICT FRIENDLY SOCIETY," and that its operations should extend to the parishes of Santon, Malew, Arbory, and Rushen; that the whole of the present existing Clubs in these parishes should be invited to join in, or be amalgamated with it, and it is conceived that a plan may be formed whereby these Clubs can do so on equitable principles, preserving to the present members of them every benefit to be derived from the funds they have in hand.

It is very clear that every one of these Clubs is insolvent, in other words, the funds they have in hand and the value of the contributions they are entitled to from their members are not nearly sufficient to meet their liabilities, this can be proved by taking a valuation of the Society in the manner pointed out in a small book published by Mr. Charles Hardwick, called "A Manual for the use of Friendly Societies," at page 198, this valuation can be made by any fair Accountant, from the published tables, the members therefore as a body cannot derive all the benefits the Clubs have contracted to give, though some members, to wit, those whose claims will speedily arise may do so.

Now amalgamation may be made in the following manner, the whole of the funds already accumulated by the old Club should become the property of the new Society, and each member of the old Club should become a member of the new Society, liable to pay the rates of contribution according to their respective present ages, subject, however, to such deduction as each member may be entitled to in respect of such member's estimated interest in the funds of the old Club, to ascertain which, the funds of the old Club should be stated, and from them deducted such an amount as would purchase from the new Society an annuity, or weekly sum for each of the members of the old Club who at the time are permanent recipients from the funds, or, (as is termed in this Island,) "superannuated members," according to such rate as may be agreed on that the remaining funds should be allotted for the benefit of the other members of the old Club, rateably according to the value of the Interest which each member has in the old Club, and which value can be ascertained by calculations from the probable length of life and liability to sickness, according to age of each member.

When the amount of the Interest of each member in the old funds is ascertained, it must be deducted from the value of the payments to be made by such member to the new Society, and a proportionate deduction must be made from his monthly contributions, for instance, if the Interest of a member in the old fund be 10, and the value of contributions to new Society be 30, then a deduction of one-third must be made from this member's monthly contributions,

The rates proposed in this paper may be varied, and another plan may be thought more advisable for amalgamating the present Clubs with the new Society, but the necessity for reformation in the system under which these Clubs are carried on is so glaring that it is hoped an effectual effort will be made to form the proposed Society, and to bring within its operations the present Clubs in the District, if this is clone speedily, before their funds are materially diminished, it will tend to the advantage of the present members.

MARK H. QUAYLE.
J. GELL.
R. T. QUAYLE.
J. T. CLUCAS.

Castletown 1st. May, 1860.

M. J. BACKWELL, PRINTER, CASTLETOWN


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