The first legislation relating to friendly societies was passed in England in 1793, and by the middle of last century the movement had many members. As might be expected, members when emigrating overseas were anxious to form lodges, and the first ones were established in the early years of settlement in New Zealand. Within two years of the meeting of the first New Zealand Parliament, in 1854, a Friendly Society Act was introduced. The preamble of this Act is of interest and reads as follows: “Whereas the protection and encouragement of Friendly Societies, for raising by voluntary subscriptions of the Members thereof separate funds for the purpose of affording relief and maintenance to the Members thereof in sickness, old age and for other purposes of a provident and benevolent nature is likely to be attended with very beneficial effects by promoting the happiness of individuals, and at the same time diminish public burdens; and as it is expedient to give protection to such Societies and the Funds thereby established, and to afford encouragement to form like Societies within the Colony of New Zealand: Be it therefore enacted by the General Assembly of New Zealand as follows:”.
Almost without exception the societies established in New Zealand were linked with societies in Great Britain, for the members arriving in New Zealand were anxious to retain their link with rituals and benefits with which they were familiar.
The 1856 Act did little more than authorise the establishment of societies in New Zealand and set out the form of the annual return that had to be made to the Registrar of the Supreme Court. A further amending Act was passed in 1867, the main changes being the provision for the appointment of a Registrar of Friendly Societies and also of a revising barrister for each province. The functions of the latter were to ensure that proposed rules of the various societies complied with the provisions of the Act. It was not, however, until the passing of the Friendly Societies Act 1877 that considerable changes were made. In 1874 a Royal Commission in the United Kingdom made a comprehensive study of friendly societies and the Commission's recommendations became law in England in 1875. This legislation was the basis of the 1877 Act in New Zealand which introduced the principle of quinquennial valuations of funds of societies, as well as providing for additional information to be contained in the annual returns and for the appointment of one revising barrister for the whole of New Zealand.
Some of the provisions of this Act are most interesting. One, based on the United Kingdom Act, provided that among the societies that might be registered under the Act were “Societies for the insurance to any amount against loss by death of neat cattle, sheep, lambs, swine and horses from disease or otherwise”. As far as can be ascertained, no such societies were ever formed in this country. Another provision, which still exists, was to provide for death certificates to be furnished for friendly society purposes at a cost of 1s. per copy – one of the few charges that has not increased for over 85 years.
A most important provision of the 1877 Act required the Registrar of Friendly Societies to make an annual report to Parliament, and the first report outlines some of the difficulties that arose with the passing of the Act. An Actuary was appointed whose first task was to “prepare a series of tables of rates of contributions corresponding to the benefits most usually granted by the friendly societies of the Colony. In view of the circumstances that the bulk of the settlers in New Zealand are of the same race as the inhabitants of the British Islands, having similar occupations and living in a climate which, while somewhat more temperate, assimilates in character to the English climate, and as there is in the Colony a comparative exemption from the evils attendant on the severity of the struggle for existence in the Mother country, it was concluded that the sickness and mortality among the members of friendly societies in this Colony might safely be expected to be, on an average, not in excess of that which obtains among the friendly societies in England”. Tables based on experience in England between 1866 and 1870 were used, an interest basis of 4 per cent being used. This interest rate is still the rate used in valuations today.
While the English tables served as a basis, they were not entirely satisfactory for it soon became evident that the mortality experienced in New Zealand was much below that of England. The allowance for sickness benefit was therefore inadequate. The passing of the 1877 Act did, however, result in contributions being charged more appropriate to the benefits offered, though it was not for many years that valuations of societies revealed surpluses instead of deficiencies. In his report for 1880 the Registrar stated that, at the time the Act was passed, only four of the 250 lodges in the colony charged premiums adequate to the benefits guaranteed. The chief complaint was that societies charged the same rate of contribution irrespective of age of entry, and it was only after years of effort that this system was finally broken down.
Thirty years were to elapse before further major legislative changes were passed. A Bill was drafted and circulated to interested parties in 1907 and, with some further amendments, was introduced into Parliament in 1908. Two clauses relating to the method of paying for death benefits were strongly opposed by the Ancient Order of Druids, and a special Parliamentary Committee was set up to hear representations concerning the Bill. Their report recommended that the controversial clauses remain in the Bill, but it was not until 1909 that it was proceeded with, and then only after dropping the disputed clauses. The new consolidation did, however, make considerable changes, chiefly of a technical nature, and brought the legislation up to date with that of the United Kingdom.
The popularity of friendly societies in this country is shown in the increases in the number of members in the following table:
|Friendly Society Membership and Funds|
|Year||Number of Members||Total Funds||Average Capital per Member|
This popularity can be readily understood, for the lodges provided not only a social centre for their members, but also benefits that were of very great value. These benefits were usually a sickness benefit, a death benefit and, what was often regarded as the major attraction, provision whereby, for a small sum, the member, his wife and children could obtain the services of a doctor without charge and to obtain any medicines, free of cost, that might be prescribed. At a later date auxiliary benefits to assist with hospital expenses were introduced.
People accustomed to the benefits of the existing social security scheme do not realise the worry and very often hardship for working people associated with illness in earlier years. In evidence given to the Parliamentary Committee in 1908, a witness for a large society stated: “A very large majority of the people who join a friendly society do so to get the benefits of doctor and medicine and regard them as worth the whole of their contributions”. The truth of this statement is indicated by the effect on membership of the societies of the introduction of the Social Security Act in 1938. In 1938 membership exceeded 113,700; in 1963 it was just over 66,000. The biggest drop occurred between 1938 and 1945 when the impact of the introduction of social security and the war caused a fall in membership of over 30,000 – about 27 per cent. Losses since then have been at a lower rate – below 2 per cent per year. The problem for the societies has been their inability to attract new members in sufficient numbers to cover losses by deaths and withdrawals.
Various attempts have been made to make the benefits more attractive and, in response to such requests, Parliament has enlarged the scope of the Friendly Societies Act to permit societies to operate holiday homes, convalescent homes for the aged, credit unions, and life insurance for members. The provision of life insurance for members was a natural extension of the original death benefit but, except for one society, the results from these extensions of activities have been small.
The decline in membership has not, however, been accompanied by a decrease in the funds of the societies. Total accumulated funds have increased from £5,280,000 in 1938 to £11,522,254 in 1963. This increase has been due to the extension of insurance activities and to increased earnings from interest during the past decade. Most of the funds are invested on first mortgage, although societies have recently been authorised to invest up to 5 per cent of their funds in company securities. In the light of the present situation, it seems inevitable that the New Zealand friendly societies will gradually disappear as the “Welfare State” widens the scope of its activities. Whether the organisations that remain will survive to carry on other functions or whether they will become insurance societies will probably not be clear for some years at least.
by Ian Gordon Lythgoe, M.COM., Chief Research Officer, the Treasury, Wellington.
- Annual Reports, Registrar of Friendly Societies
- Report and Minutes of Evidence, Friendly Societies Consolidation Bill Committee (1908)
- Voluntary Action, Lord Beveridge (1948).