ECONOMY IN LIFE ASSURANCE.
"Do not, for one repulse, forego the purpose
That you resolved to effect."--_Shakespeare_.
"We are helpers, fellow-creatures,
Of the right against the wrong."--_E. Barrett_.
"Life was not given us to be all used up in the pursuit of what we must
leave behind us when we die."--_Joseph May_.
"Le bonheur ou le malheur de la vielillesse n'est souvent que l'extrait
de notre vie passée." (The blessedness or misery of old age is often but
the extract of our past life.) _De Maistre_.
Two other methods of co-operative saving remain to be mentioned. The
first is by Life Assurance, which enables widows and children to be
provided for at the death of the assured; and the second is by Friendly
Societies, which enable working men to provide themselves with relief in
sickness, and their widows and orphans with a small sum at their death.
The first method is practised by the middle and upper classes; and the
second by the working classes.
It might possibly take a long time to save enough money to provide for
those who are dependent upon us; and there is always the temptation to
encroach upon the funds set apart for death, which--as most people
suppose--may be a far-distant event. So that saving bit by bit, from
week to week, cannot always be relied upon.
The person who joins an assurance society is in a different position.
His annual or quarterly saving becomes at once a portion of a general
fund, sufficient to realize the intention of the assured. At the moment
that he makes his first payment, his object is attained. Though he die
on the day after his premium has been paid, his widow and children will
receive the entire amount of his assurance.
This system, while it secures a provision to his survivors, at the same
time incites a man to the moral obligation of exorcising foresight and
prudence, since through its means these virtues may be practised, and
their ultimate reward secured. Not the least of the advantages attending
life assurance is the serenity of mind which attends the provident man
when lying on a bed of sickness, or when he is in prospect of death,--so
unlike that painful anxiety for the future welfare of a family, which
adds poignancy to bodily suffering, and retards or defeats the power of
medicine. The poet Burns, in writing to a friend a few days before his
death, said that he was "still the victim of affliction. Alas! Clark, I
begin to fear the worst. Burns' poor widow, and half a dozen of his dear
little ones helpless orphans;--there, I am weak as a woman's tear.
Enough of this,--_'tis half my disease_!"
Life assurance may be described as a joint-stock plan for securing
widows, and children from want. It is an arrangement by means of which a
large number of persons agree to lay by certain small sums called
"premiums," yearly, to accumulate at interest, as in a savings bank,
against the contingency of the assurer's death,--when the amount of the
sum subscribed for is forthwith handed over to his survivors. By this
means, persons possessed of but little capital, though enjoying regular
wages or salaries, however small, may at once form a fund for the
benefit of their family at death.
We often hear of men who have been diligent and useful members of
society, dying and leaving their wives and families in absolute poverty.
They have lived in respectable style, paid high rents for their houses,
dressed well, kept up good visiting acquaintance, were seen at most
places of amusement, and brought up their children with certain ideas of
social position and respectability; but death has stricken them down,
and what is the situation of their families? Has the father provided for
their future? From twenty to twenty-five pounds a year, paid into an
Assurance Society, would have secured their widows and orphans against
absolute want. Have they performed this duty? No--they have done nothing
of the kind; it turns out that the family have been living up to their
means, if not beyond them, and the issue is, that they are thrown
suddenly bankrupt upon the world.
Conduct such as this is not only thoughtless and improvident, but
heartless and cruel in the last degree. To bring a family into the
world, give them refined tastes, and accustom them to comforts, the loss
of which is misery, and then to leave the family to the workhouse, the
prison, or the street--to the alms of relatives, or to the charity of
the public,--is nothing short of a crime done against society, as well
as against the unfortunate individuals who are the immediate sufferers.
It will be admitted, that the number of men who can lay by a sufficient
store of capital for the benefit of their families, is, in these times
of intense competition, comparatively small. Perhaps the claims of an
increasing family absorb nearly all their gains, and they find that the
sum which they can put away in the bank is so small, that it is not put
away at all. They become reckless of ever attaining so apparently
hopeless an object as that of an accumulation of savings, for the
benefit of their families at death.
Take the case of a married man with a family. He has begun business, and
thinks that if his life were spared, he might in course of years be able
to lay by sufficient savings to provide for his wife and family at his
death. But life is most uncertain, and he knows that at any moment he
may be taken away,--leaving those he holds most dear comparatively
destitute. At thirty he determines to join a sound life office. He
insures for five hundred pounds, payable to his survivors at his death,
and pays from twelve to thirteen pounds yearly. From the moment on which
he pays that amount, the five hundred pounds are secured for his family,
although he died the very next day.
Now, if he had deposited this twelve or thirteen pounds yearly in a
bank, or employed it at interest, it would have taken about twenty years
before his savings would have amounted to five hundred pounds. But by
the simple and beautiful expedient of life assurance, these twenty-six
years of the best part of his life are, on this account at least,
secured against anxiety and care. The anticipation of future evil no
longer robs him of present enjoyment. By means of his annual fixed
payment--which decreases according to the profits of the society--he is
secure of leaving a fixed sum at his death for the benefit of his
family.
In this way, life assurance may be regarded in the light of a contract,
by which the inequalities of life are to a certain extent averaged and
compensated, so that those who die soon--or rather their
families--become sharers in the good fortune of those who live beyond
the average term of life. And even should the assurer himself live
beyond the period at which his savings would have accumulated to more
than the sum insured, he will not be disposed to repine, if he takes
into account his exemption from corroding solicitude during so many
years of his life.
The reasons which induce a man to insure his house and stock of goods
against the accident of fire, ought to be still more imperative in
inducing him to insure his life against the accident of disease and the
contingency of sudden death. What is worldly prudence in the one case,
is something more in the other; it has superadded to it the duty of
providing for the future maintenance of a possibly widowed wife, and
orphaned children; and no man can justly stand excused who neglects so
great and binding an obligation. Is it an obligation on the part of a
husband and father to provide daily bread for his wife and children
during his life? Then it is equally an obligation on his part to provide
means for their adequate support in event of his death. The duty is so
obvious, the means of performing it are so simple, and are now so easily
placed within the reach of all men,--the arrangement is so eminently
practical, rational, benevolent, and just,--it is, moreover, so
calculated to increase every wise and prudent man's sense of
self-respect, and to encourage him in the performance of all proper
social duties,--that we cannot conceive of any possible objection that
can be urged against it; and it is only to be regretted that the
practice is not far more general and customary than it is, amongst all
classes of the community.[1]
[Footnote 1: It may be mentioned that the total amount assured in
existing British offices, mostly by the middle classes, is about three
hundred and fifty millions sterling; and that the annual premiums
payable amount to not less than eleven millions sterling. And yet no
more than one person in twenty of the persons belonging to the classes
to whom Life Assurance is especially applicable, have yet availed
themselves of its benefits.]
The Friendly or Benefit Societies of the working classes are also
Co-operative Societies under another form. They cultivate the habit of
prudent self-reliance amongst the people, and are consequently worthy of
every encouragement. It is certainly a striking fact that some four
millions of working men should have organized themselves into voluntary
associations for the purpose of mutual support in time of sickness and
distress. These societies are the outgrowth in a great measure of the
English love of self-government and social independence,--in
illustration of which it maybe stated, that whereas in France only one
person in seventy-six is found belonging to a benefit society, and in
Belgium one in sixty-four, the proportion in England is found to be one
in nine. The English societies are said to have in hand funds amounting
to more than eleven millions sterling; and they distribute relief
amongst their members, provided by voluntary contributions out of their
weekly earnings, amounting to above two millions yearly.
Although the working classes of France and Belgium do not belong to
benefit societies to anything like the same extent, it must be stated,
in their justification, that they are amongst the most thrifty and
prudent people in the world. They invest their savings principally in
land and in the public funds. The French and Belgians have a positive
hunger for land. They save everything that they can for the purpose of
acquiring more. And with respect to their investments in the public
funds, it may be mentioned, as a well-known fact, that it was the French
peasantry who, by investing their savings in the National Defence Loan,
liberated French soil from the tread of their German conquerors.[1]
[Footnote 1: At the present time one individual out of every eight in
the population of France has a share in the National Debt, the average
amount held being 170 francs. The participants in the debt approach
closely to the number of freeholders, or rather distinct freeholdings,
which amount to 5,550,000, according to the last return. France
certainly furnishes a singular exception to those countries of Central
and Western Europe, where "the rich are getting more rich and the poor
ever more poor." In France wealth becomes more and more distributed
among the bulk of the population.]
English benefit societies, notwithstanding their great uses and
benefits, have numerous defects. There are faults in the details of
their organization and management, whilst many of them are financially
unsound. Like other institutions in their early stages, they have been
tentative and in a great measure empirical,--more especially as regards
their rates of contribution and allowances for sick relief. The rates
have in many cases been fixed too low, in proportion to the benefits
allowed; and hence the "box" is often declared to be closed, after the
money subscribed has been expended. The society then comes to an end,
and the older members have to go without relief for the rest of their
lives. But life assurance societies themselves have had to undergo the
same discipline of failure, and the operation of "winding up" has not
unfrequently thrown discredit upon these middle-class associations.
To quote the words of the Registrar of Friendly Societies, in a recent
report: "Though the information thus far obtained is not very
encouraging as to the general system of management; on the whole,
perhaps, the results of the investments of the poor are not worse than
those which noblemen, members of Parliament, merchants, professed
financiers, and speculators have contrived to attain in their management
of railways, joint-stock banks, and enterprises of all kinds."
The workmen's societies originated for the most part in a common want,
felt by persons of small means, unable to accumulate any considerable
store of savings to provide against destitution in the event of
disablement by disease or accident. At the beginning of life, persons
earning their bread by daily labour are able to save money with
difficulty. Unavoidable expenses absorb their limited means and press
heavily on their income. When unable to work, any little store they may
have accumulated is soon spent, and if they have a family to maintain,
there is then no choice before them but destitution, begging, or
recourse to the poor-rates. In their desire to avoid either of these
alternatives, they have contrived the expedient of the benefit society.
By combining and putting a large number of small contributions together,
they have found it practicable thus to provide a fund sufficiently large
to meet their ordinary requirements during sickness.
The means by which this is accomplished are very simple. Each member
contributes to a common fund at the rate of from fourpence to sixpence a
week, and out of this fund the stipulated allowance is paid. Most
benefit societies have also a Widows' and Orphans' Fund, raised in like
manner, out of which a sum is paid to the survivors of members at their
death. It will be obvious that such organizations, however faulty they
may be in detail, cannot fail to exercise a beneficial influence upon
society at large. The fact that one of such associations, the Manchester
Unity of Odd Fellows, numbers about half a million of members; possesses
a funded capital amounting to £3,706,366; and distributes in sick relief
and payments of sums at death above £300,000 a year, illustrates in a
striking light their beneficial action upon the classes for whom and by
whom they have been established. By their means, working men are enabled
to secure the results of economy at a comparatively small cost. For,
mutual assurance is economy in its most economical form; and merely
presents another illustration of that power of co-operation which is
working out such extraordinary results in all departments of society,
and is in fact but another name for Civilization.
Many persons object to Friendly Societies because they are conducted at
public-houses; because many of them are got up by the keepers of
public-houses in order to obtain custom from the members; and because,
in their fortnightly meetings to pay their subscriptions, they acquire
the pernicious habit of drinking, and thus waste quite as much as they
save. The Friendly Societies doubtless rely very much on the social
element. The public-house is everybody's house. The members can there
meet together, talk together, and drink together. It is extremely
probable that had they trusted solely to the sense of duty--the duty of
insuring against sickness--and merely required the members to pay their
weekly contributions to a collector, very few societies of the kind
would have remained in existence. In a large number of cases, there is
practically no choice between the society that meets at a public-house,
and none at all.
It so happens that the world cannot be conducted on superfine
principles. To most men, and especially to the men we are speaking of,
it is a rough, working world, conducted on common principles, such as
will wear. To some it may seem vulgar to associate beer, tobacco, or
feasting with the pure and simple duty of effecting an insurance against
disablement by sickness; but the world we live in is vulgar, and we must
take it as we find it, and try to make the best of it. It must be
admitted that the tendencies to pure good in man are very weak, and need
much helping. But the expedient, vulgar though it be, of attracting him
through his appetite for meat and drink to perform a duty to himself and
neighbours, is by no means confined to societies of working men. There
is scarcely a London charity or institution but has its annual dinner
for the purpose of attracting subscribers. Are we to condemn the
eighteenpenny annual dinner of the poor man, but excuse the guinea one
of the rich?
A vigorous effort was made by Mr. Akroyd of Halifax, in 1856, to
establish a Provident Sick Society and Penny Savings Bank for the
working men in the West Riding of Yorkshire. An organization was set on
foot with these objects; and though the Penny Bank proved a complete
success, the Provident Society proved a complete failure. Mr. Akroyd
thus explains the causes of the failure: "We found the ground
preoccupied," he says, "by Friendly Societies, especially by the Odd
Fellows, Druids, Foresters, etc.; and against their principles of
self-government, mutual check against fraud, and _brotherhood_, no new
and independent society can compete. Our rates were also of necessity
much higher than theirs, and this was perhaps one of the chief causes of
our failure."
Low rates of contribution have been the principal cause of the failure
of Friendly Societies.[1] It was of course natural that the members,
being persons of limited means, should endeavour to secure the objects
of their organization at the lowest cost. They therefore fixed their
rates as low as possible; and, as the results proved, they in most cases
fixed them _too_ low. So long as the societies consisted, for the most
part, of young, healthy men, and the average amount of sickness remained
low, the payments made seemed ample. The funds accumulated, and many
flattered themselves that their societies were in a prosperous state,
when they contained the sure elements of decay. For, as the members grew
older, their average liability to sickness was regularly increasing. The
effects of increased age upon the solvency of benefit clubs soon
becoming known, young men avoided the older societies, and preferred
setting up organizations of their own. The consequence was, that the old
men began to draw upon their reserves at the same time that the regular
contributions fell off; and when, as was frequently the case, a few
constantly ailing members kept pressing upon the society, the funds were
at length exhausted, "the box" was declared to be closed, and the
society was broken up. The real injustice was done to the younger men
who remained in the society. After paying their contributions for many
years, they found, when sickness at length fell upon them, that the
funds had been exhausted, by expenditure for superannuation and other
allowances, which were not provided for by the rules of the society.
[Footnote 1: The Registrar of Friendly Societies, in his report for
1859, states that from 1793 to 1858, the number of societies enrolled
and certified had been 28,550, of which 6,850 had ceased to exist. The
causes of failure in most cases were reported to be, inadequacy of the
rates of contribution, the granting of pensions as well as sick pay, and
no increase of young members. The dissolution of a society, however, is
frequently effected with a view of remodelling it, and starting afresh
under better regulations, and with rates of premium such as increased
knowledge has shown to be necessary for the risks which they have to
incur.]
Even the best of the Benefit Societies have been slow to learn the
essential importance of adequate rates of contribution, to enable them
to fulfil their obligations and ensure their continued usefulness as
well as solvency. The defect of most of them consists in their trying to
do too much with too little means. The benefits paid out are too high
for the rates of contribution paid in. Those who come first are served,
but those who come late too often find an empty box. Not only have the
rates of payment been generally fixed too low, but there has been little
or no discrimination in the selection of members. Men advanced in years
and of fragile health are often admitted on the same terms as the young
and the healthy, the only difference being in the rate of entry money.
Even young lodges, which start with inadequate rates, instead of growing
stronger, gradually grow weaker; and in the event of a few constantly
ailing members falling upon the funds, they soon become exhausted, and
the lodge becomes bankrupt and is broken up. Such has been the history
of thousands of Friendly Societies, doing good and serving a useful
purpose in their time, but short-lived, ephemeral, and to many of their
members disappointing, and even deceptive.
Attempts have been recently made--more especially by the officers of the
Manchester Unity of Odd Fellows--to improve the financial condition of
their society. Perhaps the best proof of the desire that exists on the
part of the leading minds in the Unity to bring the organization into a
state of financial soundness, is to be found in the fact that the Board
of Management have authorized the publication of the best of all data
for future guidance,--namely, the actual sickness experience of the
Order. An elaborate series of tables has accordingly been prepared and
published for their information by Mr. Ratcliffe, the corresponding
secretary, at an expense of about £3,500. In the preface to the last
edition it is stated that "this sum has not been abstracted from the
funds set apart for relief during sickness, for assurances at death, or
for providing for necessitous widows and orphans, but from the
management funds of the lodges--funds which, being generally raised by
direct levy on the members, are not therefore readily expended without
careful consideration on the part of those most interested in the
character and welfare of their cherished institution."
We believe that time and experience will enable the leaders of Friendly
Societies generally to improve them, and introduce new ameliorations.
The best institutions are things of slow growth, and are shaped by
experience, which includes failures as well as successes; and finally,
they require age to strengthen them and root them in habit. The rudest
society established by working men for mutual help in sickness,
independent of help from private charity or the poor-rates, is grounded
on a right spirit, and is deserving of every encouragement. It furnishes
a foundation on which to build up something better. It teaches
self-reliance, and thus cultivates amongst the humblest classes habits
of provident economy.
Friendly Societies began their operations before there was any science
of vital statistics to guide them; and if they have made mistakes in
mutual assurance, they have not stood alone. Looking at the difficulties
they have had to encounter, they are entitled to be judged charitably.
Good advice given them in a kindly spirit will not fail to produce good
results. The defects which are mixed up with them are to be regarded as
but the transient integument which will most probably fall away as the
flower ripens and the fruit matures.