The Pamphlet Collection of Sir Robert Stout: Volume 29
Report — Which Accompanied Tables of Contributions for Specified Benefits;
Which Accompanied Tables of Contributions for Specified Benefits;
Mr. Joseph Braithwaite, G.M., I.O.O.F.,
Sir,—Having completed the necessary calculations for the various tables as specified in your letter of April 13th, we have now the honor to submit the results, which, we feel assured, will afford you every facility for framing an equitable scale of contributions suitable to the requirements of your Society.
The rate of interest upon which these Tables have been calculated is 4 per cent., a rate that has been almost invariably adopted by Actuaries for the valuation of Life Assurance Societies in these colonies. In calculations of this character, the future as well as the present must be looked to; therefore we think it would be scarcely prudent to reckon upon more than 4 per cent., for though higher rates may at present prevail, it is by no means certain that such will always continue to be the case. Moreover, it must be borne in mind, that in order that these results may be applicable to the Society, it is imperative that the rate of interest reckoned upon shall be received per annum upon the total capital of the Sick and Funeral Funds, whatever the same may consist of—houses, land, or goods, or anything in fact that represents money belonging to these Funds. In the event, therefore, of any of these Tables being adopted, it would be incumbent upon the officers of the Society to see that these conditions are complied with, for although as a rule societies here receive more than 4 per cent, for investments, it will be found upon investigation that considerably less than that rate is realised upon their total capital. All circumstances considered, then, we think that we are fully justified in not selecting a higher rate of interest than 4 per cent.
The Tables of Sickness and Mortality used are those of the Manchester Unity Oddfellows, compiled from the experience of that Society in Great Britain, by Mr. Henry Ratcliffe, the C.S. of the Order. The reputation which these Tables have acquired renders comment on our part almost unnecessary. Such is the estimation in which they are held that the Actuarial Commission lately appointed by the Imperial Government have affirmed them to be the only reliable Tables extant, relative to Friendly Societies.
Now, there is an opinion pretty generally entertained that the rates of Sickness and Mortality experienced among Friendly Societies in this colony are page 23 considerably less than those of the home country, it being argued that our climate and manner of living is more conducive to health. Without presuming to dispute the correctness of this opinion, we would simply point out in the first place that no experience has been hitherto collected to confirm it, and in the second, that although the average sickness per member may be less hero than at home, this may proceed from causes of a less permanent nature than those of climate and manner of living. It is a fact amply demonstrated by all tabulated experience, wherever collected, that the rates of Sickness and Mortality show a continual increase, year by year, in almost regular gradations, from the youngest age at which persons are admitted into the Society, to the end of life. This may not be the experience of ten, twenty, or one hundred persons, but it is of a hundred thousand. Now, it is notorious that we have not that proportion of old men amongst the members of Friendly Societies in this colony which they have at home. Take for example the Manchester Unity Oddfellows in Otago—out of 1,583 members, they have not one beyond the age of 56 years. We may safely affirm that few, if any, societies of the like number can be found at home so favourably circumstanced, and this Society may be taken as a fair sample of the rest. It inevitably follows, therefore, that the sickness experienced by them will be less than that of Great Britain. But this advantage is only of a temporary character, (which will be lost in time,) and any experience in sickness that may be collected in this colony must first show the ages at which it occurs before any comparison can be made. Mr. J. M. Templeton, Certifying Actuary for Friendly Societies in Victoria, in giving evidence before the Royal Commission lately appointed there, spoke upon this subject as follows :—"I believe the laws of sickness and mortality to be general laws, subject to variations for different races of people and for the varying circumstances of life, such as climate, occupation, and manner of living. We have in these colonies the same race of people as they have in England, they follow much the same occupation, their manner of living is probably better, there are not so many in extreme poverty; but as the very poor are not to be found among the members of Friendly Societies, this circumstance is of slight importance, and our climate may be considered more healthy, although even this is doubted by many, who hold that the violent changes of temperature to which we are subject more than counterbalances the advantages we derive from our warmer climate. Therefore, we may naturally conclude that the sickness and mortality among the members of Friendly Societies in this colony will very closely approach to that which obtains in England." In this opinion Mr. Templeton is amply borne out by the actual experience of Victorian Friendly Societies, which has of late years been considerably in excess of that obtained in England. It is perfectly evident then, that for us there remains no alternative but to base our calculations upon the English Tables of Sickness and Mortality, which we may fairly assume to be perfectly applicable to our circumstances.
Table A. shows the monthly premiums necessary for the benefits at present given by your Society, taking into account that part of the Initiation Fees which, is apportioned to the Sick and Funeral Funds. The table has been assimilated as nearly as it is possible to calculate with the present financial regulations of the Society, and for all purposes of comparison will therefore be found amply reliable. The considerations, however, which were appended—viz., members admitted at the opening of a new Lodge, and members out of compliance readmitted at half the usual rates for initiation—we have found it impossible to take into account, the proportion of members who join or re join under these conditions not being specified. Moreover, with all due deference, we may remark that it seems to us both inconsistent and unjust that A. should be admitted into the Society on Monday for one pound, whilst B. who joins a fortnight later, although possessing the same qualifications as A., must pay two. It may be urged that it is an inducement for a greater number to join on the opening of a new Lodge, but the best answer to such an argument is the fact that the fewer who join upon these terms the better for the financial condition of the Society, and the same will also apply in the case of members out of compliance re-joining. A great proportion of those who allow their memberships to lapse are men whose material prospects in life have so improved as to render page 24 the benefits of the Society a matter of indifference to them, and we believe that the number of those is very small who cease to be members of the Society through sheer inability to pay their contributions. Altogether these considerations are of a most pernicious character, detrimental to the financial progress of the Society, and the first step made in the direction of financial reform should undoubtedly tend to their abolishment.
Table B. has been calculated for the same benefits as Table A., except that new members are not entitled to benefits until the expiration of twelve months, and shows the Initiation Fees which would be required at each age, with a fixed contribution of 7½d. per week. At some of the younger ages it will be seen that the 7½d is more than sufficient, whilst at the older, the fees requisite are so large that we believe the table will be found of little practical use to the Society.
Table C. shows the monthly premiums necessary for the same benefits as Table B. without Initiation Fees, and is without doubt the one best adapted to the requirements of the Society as at present constituted. By adopting it, the loss at present incurred by accepting Clearance members would be avoided, for in this Colony, where the number of those who join by Clearance is much greater than those who leave, the loss entailed upon Societies is no doubt considerable. With a graduated scale of payments, without Initiation Fees, the hardships would of course fall on the member who, by drawing his clearance, must forego all the advantage he derives from joining the Society at a younger age. But. until a general system is adopted by Societies that shall be equitable between them and the member, the question of Clearances will always continue to be one of difficulty.
Table D. gives the monthly premiums necessary without Initiation Fees, for the same benefits as Tables B. and C., except that Sick Benefit, ceases at age 65, after which an annuity of 10s. per week is to be received. The officers of the Society must be complimented on their sagacity in asking for a Table of this kind; it evinces on their part a keen perception of what are the true functions of a Friendly Society, which should offer facilities for its members to make provision for old age, as well as the ordinary contingencies of sickness and accident to be met with in life, and we venture to affirm that the time is not far distant when the system of deferred annuities will be more generally adopted by Friendly Societies than is the case at present. If in this instance the contributions are found to be too high, the difficulty might be overcome by reducing the amount of the annuity.
In life assurance calculations, it is customary to assume that when the premiums are paid they are at once invested, but as this is scarcely practicable in the case of Friendly Societies, it is generally thought that to allow six months for the payment and investment of contributions would be a fair average. In accordance with this principle these Tables have been calculated, and if any of them be adopted, it is imperative that this condition be borne in mind.
Before concluding, we wish to soy that the only infallible method of testing the sufficiency of the Society's scale of payments is by periodical valuations, but if the Tables of Sickness and Mortality upon which our calculations are based be applicable to Societies here, (and we have already given strong reasons for the supposition that they are so,) then most certainly these contributions will be required to produce the benefits. It behoves the members then to assure themselves that they are not at present paying their contributions into the Society in the hope of receiving benefits that can never be realized.
In conclusion, we beg to compliment the officers of the Society upon the spirit shewn by them in raising the question of financial reform. It evinces on their part an interest in the welfare of the Society that cannot be too highly commended; and we sincerely hope that their efforts will meet with that co-operation on the part of the members which its importance deserves.
May 11th, 1877.