332 



NATURE 



\yan. 3r, 1889 



FRIENDLY SOCIETIES AND THEIR FUNDS} 

 ly/r DE LAFITTE is the Vice-President of a Friendly Society 

 ■'■■'■• numbering some 150 members and of a somewhat 

 advanced type. He has evidently discharged his duty as Vice- 

 President with exemplary devotion to the work, and has extended 

 his studies and observations over the wider area covered by the 

 French Friendly Societies generally. From a Report of the 

 Minister of the Interior, it appears that the number of these 

 Societies on December 31, 1885, was just upon 8000, that the 

 average number of members in each was 136, and that, con- 

 sequently, the total number of members whose names were 

 inscribed in their rolls at that date was more than a million. 



The volume before us is professedly an elementary treatise on 

 Friendly Society finance. The author, in the opening chapter, 

 selects, as the typical Society, one which possesses no other 

 resources than the contributions of its members, and which, in 

 return, undertakes to provide three distinct benefits : viz. (i) an 

 allowance during sickness, (2) an old age pension to commence 

 at a specified age, and (3) a sum of money to be paid to the 

 relatives, on the decease of a member, to cover funeral expenses. 

 He deals, throughput the book, with the various conditions under 

 which contributions are levied and benefits conferred ; but as a 

 rule he assumes that new members are admitted at the age of 

 16, that the contributions cease at age 70 (or thereabout), when 

 members become pensioners, and that sickness allowances, so 

 far as money allowances go, are, at the same time, also 

 discontinued. 



The author, at the outset, urges the desirability of apportion- 

 ing the total contribution of each member into three parts, cor- 

 responding to the three kinds of benefits assured to the member ; 

 and of keeping an exact account of the fund accumulated, from 

 year to year, out of each part, i.e. of keeping an exact account 

 of the resources available, at any moment, for each kind of 

 benefit. 



He points out, what is indeed obvious enough, that the share 

 of contribution allotted to pensions must accumulate for many 

 years ; in fact, till the age for commencing pensions is' attained 

 by the members of the Society. He points out that, of the share 

 of contribution allotted to meet sickness claims, a fraction of it 

 only is required in the earlier years of life, when periods of sick- 

 ness are less frequent and less -prolonged, the remainder of it 

 forming a provision against the heavier disbursements of later 

 years, when the periods of sickness have become more frequent, 

 more protracted, and more costly. Also, he points out that with 

 the share of contribution intended to secure funeral moneys, there 

 is likewise a gradual accumulation going on from' the earlier 

 years of life, when deaths are fewer in number, to the later years 

 of life, when they are doubly and trenly as numerous. In respect 

 of all three kinds of benefits, theA, each member of the Society, 

 during his years of active membership, has an increasing interest 

 in the adequate accumulation of the funds of the brotherhood. 

 These funds are trust funds, a collection of deposits confided to 

 the Society by its members, and for which it remains accountable 

 till the time arrives for restoring them, in the shape of aid to the 

 members in sickness, or old age, or to the relatives upon the 

 occurrence of decease. The preceding considerations show that 

 every Society has not only accumulating funds fed by unused 

 portions of the contributions received year by year, but also, 

 and on the other hand, growing liabilities, and it has therefore 

 to take care that the liabilities do not grow faster than the funds 

 accumulate. 



Every Society renders accounts year by year, but they are of 

 the usual form, and that is not enough : at the same time that it 

 exhibits its resources, it should know how to calculate with 

 exactness its actuarial liability under current contracts with its 

 members. By actuarial liability we mean the obligation of the 

 Society to gradually accumulate a fund out of which future 

 benefits may be paid as they mature. By inserting the amount 

 of such actuarial liability in its balance-sheet, the Society 

 completes its statement of liabilities and assets, and shows 

 conclusively whether its accumulated funds are more or less than 

 they should be. Such a balance-sheet, if the liabilities and assets 

 are shown separately for each of the three kinds; of transactions 

 — sickness allowances, pensions, and death payments — is a perfect 

 balance-sheet. It should be made out every year, and carefully 

 studied by those responsible for the management of the Society. 

 The author's chief object in writing the present treatise is to 



^ " Essai d'une Th^Drie Rationnelle des Societ^s de Secours Mutuels," par 

 Prosper de Lafitte. (Paris : Gauthier-Villars et Fils, i888.) 



give tables of actuarial liability, and to enunciate, prove, and 

 illustrate rules by which such liability may be calculated. He 

 proposes to explain to Friendly Societies how two or three of 

 their constituted officials, in the course of an afternoon, may 

 determine the liability of the Society with precision, and without 

 possessing any preliminary knowledi^e other than that of the 

 elementary rules of arithmetic, such as are taught at the 

 primary schools to children of between ten and thirteen years 

 of age. 



Considering the labour usually expended on actuarial valua- 

 tions, and the special knowledge and skill usually regarded as 

 indispensable in such investigations, these are brave words. 

 Impressed, as we are, with the immense amount of good that 

 would accrue from the accomplishment of the author's design, we 

 wish him whatever success is possible. There is nothing so 

 much needed for the stability of Assurance Companies as well as 

 Benefit Societies as a fuller acquaintance on the part of the public 

 with the nature of actuarial liability. If such knowledge were 

 general, we should hear little more of the insolvency of such 

 associations, and see little more of the sad spectacle of a group 

 of dependent and helpless persons finding in sickness or old 

 age that the savings of long years of self-denial have been 

 sacrificed. 



In the calculations of Friendly Societies the average mor- 

 tality and sickness found to have been experienced under more or 

 less similar conditions must form the basis of all reasoning, and 

 the effect of compound interest, combined with mortality and 

 sickness, must, in some form or another, be introduced as further 

 necessary preliminary information. The author lays before us, 

 as giving such necessary preliminary information, several tables. 

 In addition to two tables of mortality, viz. the table of the 

 Caisse des Depots et Consignations, and the table of the English 

 Institute of Actuaries, known as the H^^ (healthy males) 

 table, and a sickness table, showing the average number of days 

 of sickness per head at each year of age, we have two tables of 

 a somewhat unusual kind for the present purpose. These tables 

 embody new rates of the Caisse Nationale des Ketraites pour la 

 Vieillesse, of whom pensions are bought, and show, for any 

 present age, the amount of deferred annuity, to commence at 

 age 50, 55, 60, or 65, corresponding, in the first table, to a 

 paynient, cash down, of 100 francs, and, in the second table, to 

 a piyment of 10 franr 4.1 year until the pension commences. A 

 table of the present values of temporary annuities, terminable 

 at any one of the four ages first mentioned, completes the group 

 of fundamental tables. 



The fact that both the above-named tables of mortality are 

 frequently used in one and the same solution is, as the author 

 appears to be conscious, open to criticism ; and so is the fact 

 that contributions are sometimes assumed to be payable at the 

 beginning of the year and sometimes at the end of it. In a 

 particular case, instanced by the author himself as showing that 

 the consequent error is insignificant, the error amounts to 4 per 

 cent, of the true figure, and this is hardly to b- regarded as an 

 insignificant difference. With respect to the tables them- 

 selves, they display appreciably different rates of mortality, and 

 if one is found to be suitable for a particular Society, the other 

 can hardly be suitable also. The H^ is a table of which 

 English actuaries are justly proud ; but a record of the mortality 

 experienced by the middle and upper classes of this country is 

 hardly to be accepied as a measure of the mortality to be ex- 

 pected amongst the artisans and mechanics and the mechanical 

 and agricultural labourers of France. It might not, possibly, be 

 inapplicable to some of the rural districts of that country, but if 

 so, it would probably not be applicable to the districts of the 

 large towns and the cities. Strictly speaking, no one table of 

 mortality is suitable in all the varying conditions of locality and 

 occupation to be found within the boundaries of French terri- 

 tory ; and herein lies an obvious objection to the application of 

 stereotyped results, such as those prepared for general use by 

 the author, to the circumstances of all the Friendly Societies of 

 an entire country, indiscriminately. 



In selecting a sickness table on which to base the calculations 

 of sicknessliability, the author very properly observes that sickness 

 tables, when compared one with another, often present discordant 

 results. This is explained to be due to the limited number of 

 observations or individual experiences on which the tables are 

 based, and partly to the difficulty of saying exactly when a 

 period of sickness begins or ends— of drawing, with precision, 

 the line of demarcation between positive sickness and mere in- 

 disposition ; besides, chronic and incurable maladies have been 



