COLLECTING INSURANCE SOCIETIES FOR THE POOR.
WE have not lately read any more painful history than that .which the Friendly Societies Commissioners give in their concluding Report of the organisation, purposes, and maintenance of the large Burial or Insurance Societies for the poor which chiefly have their head-quarters in Liverpool and Glasgow. These Societies are based upon a plan apparently straightforward and simple, and they, at first sight, seem to differ from private local clubs only in their size. With but one or two exceptions, their benefits are confined to the payment of a sum to the insurer at death. Many profess to give sick-pay, but do not really do so, that department being a "mere shadow or blind." In pursuing this single end, the system is generally that for every penny paid weekly the insurer at death, if an adult, is entitled to six pounds. It used to be eight, but that has been found—with good reason, as we shall see—too much. The society is ostensibly a mutual benefit club, and every member—as distinct from an infant insured by its parents for a stated sum—ought, therefore, to have some voice in its management. But here we begin to observe a difference, for in no single instance is it found that the members have any effectual voice or control at all. In the case of the Royal Liver, the parent and type of all these Societies, and the largest, the management is that of a sort of quasi-proprietary. Its Board of management is composed mainly of persons who have been at a former time collectors of the funds, and is recruited from that class alone. Nobody has any voice in the election of new members of the Board save the old Board. There are annual meetings held, but any power which these might have has been "skilfully neutralised "; in fact, no troublesome or inquiring subscriber has a chance to do anything. Other Societies are in no better plight. In some, the collectors have all the power ; in others, the members may show fight against officialism, but not effectually. As the solicitor of the Royal Liver put it, representation in any of these Societies, Scotch or English, is a myth. The Scottish Legal is the only society which shows the spectacle of an uninterested or outside person having a voice in its affairs.
And what, then, are these Collectors? They are the originators, the upholders of, and principal gainers by these institutions. A collecting system is not peculiar to these Societies, nor did it originate with them. In Lancashire, at lead, it appears to date from a considerable antiquity, and in private local societies it may do much good and no harm, for the collector there seldom or never lives by his collecting. But here the case is different. From the first, the collector of the large Burial Societies lives on the society. The Royal Liver was founded by a collector who seceded from some small club, and seeing his way to large profit, organised and extended the trade until, according to statements of its officials, it now numbers about half a million members, has three hundred agents superintending districts, and from one to two thousand collectors. These men being, then, the supporters of the Society, the motive force by which it lives, it follows that they have to be well paid for their trouble. One gentleman drew a very heart-rending picture of what the collector has to endure, of the low people be has to see, the fever-dens he has to visit, and the risk he runs ; and all this it can hardly be expected he will do for nothing. Accordingly, we find that his emoluments are, as a rule, these :— The entrance-money of a new member, say twopence a head ; 25 per cent. on the collections; six weeks' contributions of new members in full, generally the first six, but sometimes, as in the case of the Royal Liver, the second ; transfer fees, or "3d. in the pound on net collections half-yearly for the trouble of transcribing members' names from one book to another ;" and lastly, the profits on the sale of rules or contribution-cards. Attempts have often
been made to get collectors to work for less than this exorbitant pay, but they do not prove successful. The society is in the col- lector's hands, and if it does not pay him what he deems his due, he can either start a rival one, or carry his members to an opposi- tion establishment at a profit. The only institution doing this kind of business which is said to have made its own terms with its col- lectors is the Prudential Insurance Company, but of that we shall speak hereafter.
As may be supposed, collecting on such terms is a very profitable business, especially as a member need not be kept on the books longer than is convenient. After a dozen weeks or so, it is a profit- able thing both to the society and the collector to change the man and find a new one. Thus the collector gets his new bonuses, and the society pockets what subscriptions dribble its way, without giving any sort of equivalent whatever. The member has no remedy ; a collector has but to cease calling upon him for the number of weeks necessary to make the society's obligation lapse —a number quite arbitrarily fixed—and everybody is released, while the man has lost his money ; or the collector may withdraw his name and still take the pennies. That this is an extremely common thing in the best of these Societies is evidenced by the fact that they could not exist at all but for these lapses. Supposing all the pennies collected went straight to the coffers at head- quarters without deduction, it would take nearly thirty years subscribing to make up the £6, were anything at all allowed for cost of management ; and when it is considered that between collectors and managers from 40 to 50 per cent. of the whole subscriptions is swallowed up annually, that lives of all ages are taken on ostensibly at the same rate for a fixed death policy, or at whatever deduction the collector chooses to make, that sick and dying may be, and often are, entered on the books of these people for the profit's sake, and that infants, amongst whom the mortality is enormous, particularly in the places where these Societies have the deepest hold, are freely put on the books as soon as born, it is evident that no society could carry on a dozen years without insolvency, were there not fraud and sharp practice of this kind on every hand. And we are not left in doubt about it. All the Societies admit that the lapses are large, and this is on any showing a sign of reckless or dishonest business, it being clear profit that this should be so. Two London Societies appear, how- ever, to bear the palm in this respect, or at least, their officers are more ready to admit the extent of the fact than others. The Secretary of the London Friendly calculates the lapses in his own and similar institutions at two-thirdsof the whole, and thinks the profits from this source alone sufficient to carry on a society doing only insurance- for-death business without any accumulated fund. The Seeretary of the Integrity, another London society, confirms this, and thinks that the lapses may even reach three-fourths, of course all at various stages of payment, and all without any redress or claim on
the society whatever. It is clear, therefore, that in this both societies and collectors find great profit. A good collector's book is a capital investment,—Mr. Atherton, of the Royal Liver, states that intelligence and education are of no account in the trade, in fact a man's success in book-making is much in proportion to his coarseness, ignorance, and unscrupulousness, —and consequently the work is much coveted, and books appear to be keenly competed for. Should a collector bring his book up to return £30 a week, it will yield him £400 a year, and books are sold not unfrequently for large sums to successors, or leased out. Instances came to the knowledge of the Commissioners of £600 or £7430, and even /1,000, being paid for a book, and they beard of a collector who consigned his book to another on condition of receiving a permanent income of £2 per week.
Here, then, we have a class of men going about among the very poorest of the people, telling innumerable falsehoods to entrap victims, who are often ignorant, Irish many of them, and mostly unable to read or write, and therefore totally incapable of judging whether the stories told them are true or not. These men gather their coppers from week to week, taking up one member, dropping one here and there, as profit may determine, without check and without fear, for they are hedged by every cunning artifice against exposure, and know that the people are too ignorant, even when feeling the wrong, to know how to seek redress. If a man changes his town or his house his policy probably lapses. And all this is done under the pretence of benevolence and benefit. Yet it is impossible that in any case the deluded members could hope to get back under this system more than a halfpenny out of every penny they entrust to these men ; and many societies appear even to have a systematic way of paying lees than they have engaged to do when members do get a hold on them ; and but few of all that the collector gathers into his net ever get
that length. The society exists for the collector, therefore it Is administered in his interests, either as the immediate receiver of the money, or as an agent and a salaried manager. No check is put upon him, defects in his accounts may be of constant occurrence ; he need not enter on the books of the society more members than he chooses; the society itself need not debit itself with all it receives, if its expenses are unusually high. The auditors have no control ; the best of book-keeping systems may be used, but it avails nothing. Many of these bodies began to put their houses in order when they heard of the Royal Com- mission, and none more zealously than the Royal Liver, yet its elaborate new system of book-keeping did not prevent a shuffle in the balance-sheet, or make the auditor more able to trace a fraud, should one exist. They are only organised systems of injury to the subscribers, and often worse ; and yet the solicitor of the leading one had the hardihood to tell the Commissioners that they ought to be allowed to incorporate under the Companies' Act. Having made the business, the managers ought to profit by it, just as a grocer or cheesemonger might. But these same people op- posed Lord Lichfield's Bill, on the ground that it was a cunning attempt to rob the poor of their independence.
One such company there is which does almost as large a business as all the Societies put together, the Prudential Insurance, and it may be well to look at it for a moment, to see how the poor fare under the change. This company consists of a proprietary of thirty, of policyholders of the ordinary kind, who share in the profits, and of " industrial " policyholders from among the very poor, similar to those in the Royal Liver and other societies. It has the complete mastery of its servants, its remuneration to collectors is stated to be under 20 per cent., and strict management had reduced the proportion of lapses to 27 per cent. in 1871. Every five years the profits are divided in the proportion of 80 per cent, to the ordinary participating policyholders and 20 to the shareholders. The last division gave £60,000 to be so divided, after carrying £16,000 to the guarantee fund. How is this profit made? Mainly off the industrial policyholder, the penny-a-week man who pays high and gets nothing, who sustains this 20 per cent. for collecting, whose " lapses " are most frequent, and who is too ignorant to know how he is wronged. This company issues of necessity stamped policies, and allows its agents to represent them to the poor as being a sort of Government guarantee, in order to beat the mere friendly societies in the field who use no stamps. "One of our great canvassing features is that we issue a Government stamped policy," said the secretary ; and the company would by no means hear of the stamps being abolished, although they cost it £3,000 to £4,000 a year. And it issues these policies, apparently illegally, to infants, so that very often what its agents represent as giving a Government security, does not even constitute a claim. Hence the society can cut the benefits it allows down as it likes when reckon- ing-day comes. However perfect the organisation of such a com- pany may be, it is an organisation for the benefit of the proprie- tary first, and of the rich policyholders and the collectors after ; but it is a curse to the poor,—and it is such another that the Royal Liver wants to be.
Such are a few of the more striking points in the Commissioners' Report upon this subject, and it will be admitted that they afford food for reflection. Friendly societies, sick-clubs, and such like, may fail because of the over-generous scale on which they fix their payments, but not so these. Here we have wholesale injustice to a class of people who, above all others, need to be tenderly dealt with, and taught thrift by distinct evidence of its benefits. And how is it to be remedied ? The elaborate Registrative scheme which the Commissioners propose for dealing with ordinary Societies can hardly meet the case of these. And we doubt whether any legis- lation could thoroughly cope with the evil here revealed. The people themselves are so helpless, that fence them round with rules as we may, they will still fall victims to agents of this kind. Nothing but constant and minute Government supervision could do anything effectually to remedy the evil so far as the lower strata of the people are concerned, and as well let the Government do the whole work at once. But as it is, some check might be put upon the system of infant insurance, and it might be made illegal for societies of the kind to organise their scale of premiums and pay- ments without allowing for surrender values. While this Collect- ing system exists in any shape, however, little can be done by the law, and it would be unfair to many little institutions to put the system down summarily, as well as a great injustice to the people to whom it might be made, if well managed, a very great boon.
The true remedy appears to us to be Government competition. This is a kind of business which ought to be peculiarly that of the responsible Government of the country, simply because it alone is above selfish considerations ; and it is much to be regretted that Mr. Gladstone's Post-Office Insurance scheme was stultified in 1864 in deference to the outcry of societies such as we have described. At present, both from its clumsy organisation and from the high limit of £20 at which its lowest policy is fixed, the Post-Office Insurance cannot do this trade. But it ought to do it ; it would meddle with noreally valuable institution or system if it did; it would merely tend gradually to make the collector's trade too poor to be worth anything. We are glad to observe that Mr. Scudamore gave a favourable opinion in regard to such an extension before the Com- mission, and that the Commission itself distinctly adopts this view, urging, as we have done, that it is difficult for members to protect themselves, and equally so for the law to protect them. With the ordinary Post-Office system for a base, these penny payments might easily be managed ; Government paid collectors could call from house to house ; it would not cost one-half of the present outlay that these Societies sustain, and might yet leave a profit, or at least prevent a loss, to the State. Mere liberty for the people to come with their money to the offices, though it ought to be per- mitted, would not do. People could not do so, as a rule, even if willing, and many able and willing enough would forget. But burdened as the work would be with this new machinery, it is one thoroughly worth doing, and that one none but the Government could do well, for it would never cheat. The people must, as Mr. Scuds- more says, have the benefits and advantages of insurance explained to them by lecturers, and so be induced to insure, and then their policies should be kept up by systematic collecting. The existing system is at bottom good ; it is only the gross abuse of the collecting machinery revealed in this report which is bad, and while the people remain ignorant this abuse cannot be rooted out. And business of this kind would not imply interference by the Government with any friendly society worthy of living. Sick-pay business we cannot think the Government should ever have anything to do with. But this burial-fund insurance is simple life insurance, and it ought from the first to have been part of the Government scheme. Post-Office Insurance, as it is now organised, can hardly be said to benefit any class,—its non-success is proof that it does not ; but if it were extended to policies of .£5, and worked as it was meant to be, so as to counteract or destroy collectors' benefit clubs, like those we have described, it would do a great work indeed. In this direction we believe that the remedy for this evil must lie, and it is clearly high time it were applied.
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