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PROVINCE OF BRITISH COLUMBIA Report of THE ROYAL COMMISSION on Societies which pay a Death Benefit derived… British Columbia. Legislative Assembly 1947

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 PROVINCE OF BRITISH COLUMBIA
Report of
THE ROYAL COMMISSION
on Societies which pay a Death
Benefit derived in Whole or
in Part from Assessment
VICTORIA, B.C. :
Printed by Don McDiarmid, Printer to the King's Most Excellent Majesty.
1947.  CONTENTS.
Page.
Commission     5
List of Societies under Investigation and Representatives     5
Summary of Legislation     7
Early History of Societies in British Columbia     8
Method of carrying on Investigation  10
Individual Societies—
The British Columbia Mutual Benefit Association  11
Membership Statistics  15
Empire Home Benefit Association  15
Membership Statistics  21
Canadian Mutual Benefit Association  21
Membership Statistics  27
The Family Assurance Society (formerly Family Beneficiary Society)  27
Membership Statistics  33
The Interior Mutual Benefit Association  33
Membership Statistics  42
Pacific Mutual Benefit Association  43
Membership Statistics  51
Provident Mutual Benefit Association  51
Membership Statistics  54
The Trail and Rossland Fifteen Hundred Club  55
Membership Statistics  57
The Fifteen Hundred Club of Victoria District  57
Membership Statistics  58
Western Canada Mutual Benefit Association  58
Membership Statistics  60
The United Home Security Association  61
Membership Statistics  67
Two Thousand Benefit Association  67
Membership Statistics  71
Western Mutual Benefit Association :  71
Membership Statistics  85
Schedule 1:   Showing Date of Incorporation of each Society, Total Amount of
Claims paid, and Number of Members as at December 31st, 1945  87
Schedule 2:  Showing Current Assets and Claimed Surplus of each Society  88
General Findings—
Summary of Methods of Operation  89
Authority for Incorporation  90
Soundness of Plan or Methods  91
Financial Stability  92
Recommendations  94  Report of the Royal Commission appointed to inquire into Societies
which pay a Death Benefit derived from Assessment.
To His Honour the Lieutenant-Governor of British Columbia in Council:
COMMISSION.
By Royal Commission dated November 4th, 1944, issued under the provisions of
the " Public Inquiries Act," being chapter 131 of the " Revised Statutes of British
Columbia, 1936," I was appointed sole Commissioner " to inquire into the operation
within the Province of certain clubs sometimes called Life Insurance Clubs, and without
restricting the generality thereof to inquire into and report upon:—
(a.)  The plans or methods of operation of, and the conduct of their business
by, the societies incorporated under the ' Societies Act,' which may pay
upon the death of a member a benefit derived in part or in whole from
assessments:
(b.) The soundness of such plans or methods and the financial stability of
such societies;
and to make such  recommendations  in regard to the premises as he may think
advisable."
Simultaneously, George F. Cameron, barrister-at-law, was appointed counsel for
the conduct of the inquiry. He has been responsible for the preparation and presentation of the evidence. Owing to the tremendous number of documents and the complexity of the operations of some of the societies, this has been a most ardous task.
After consultation with the late H. G. Garrett, who was then Superintendent of
Insurance for the Province of British Columbia, and a perusal of his files, it was decided
that the investigation would be confined to societies which paid a death benefit of
over $300. It should be noted, however, that there are in existence a large number of
incorporated societies which pay a death or funeral benefit of less than $300. The
terms of the commission are wide enough to include these, but as they are expressly
exempted from any control under section 182 of the " Insurance Act," chapter 133 of
the " Revised Statutes of British Columbia, 1936," it was not considered necessary or
advisable to prolong this inquiry by placing them under investigation.
The first meeting of the inquiry was held at the Court-house, Vancouver, B.C., on
December 13th, 1944.    Due notice had been given by advertisements in the press of
Vancouver and Victoria.    The following were present:—
George F. Cameron, Commission counsel.
H.   G.   Garrett,   Superintendent  of  Insurance  for  the  Province  of  British
Columbia.
A. C. Des Brisay, K.C., appearing for the Canadian Fraternal Association.
SOCIETIES UNDER INVESTIGATION.
The following societies under investigation were represented as indicated:—
Name. Representative.
British Columbia Mutual Benefit Association.____ G. J. Vaux, secretary.
George A. Grant, counsel.
Canadian Mutual Benefit Association George W. Speirs, secretary.
C. C. Bell, counsel.
Empire Home Benefit Association Sidney J. Goodrich, secretary.
The Family Assurance Society Alex Mackenzie, secretary.
The Interior Mutual Benefit Association Alec Ogston, secretary-manager.
5 CC 6 REPORT OF THE ROYAL COMMISSION.
Name. Representative.
Pacific Mutual Benefit Association E. A. Dickie, counsel.
Provident Mutual Benefit Association W. H. Pym, secretary.
T. P. Elder, counsel.
Two Thousand Benefit Association H. E. Warburton, secretary.
A. L. P. Hunter, counsel.
The United Home Security Association C. R. Duffield, secretary-treasurer.
C. W. Tysoe, counsel.
Western Canada Mutual Benefit Association C. C. Bell, secretary-manager.
Western Mutual Benefit Association J. A. Bryant, manager.
H. P. Wyness, counsel.
The following societies were also under investigation, but were not represented at
the opening meeting:—
The Fifteen Hundred Club of Victoria District, Suite 104, Union Building,
Victoria, B.C.
The Trail and Rossland Fifteen Hundred Club, P. Hanley, P.O. Box 770,
Trail, B.C.
The above societies comprise all of the societies in British Columbia incorporated
under the " Societies Act " which pay a death benefit exceeding the sum of $300.
Procedure.—The procedure decided upon was as follows: The affairs of each
society would be investigated in turn. Any complaints received from persons who
were in any way aggrieved would be investigated after the details of the society had
been submitted. Upon the conclusion of the investigation of all the societies, general
sessions would be held, at which briefs would be submitted on behalf of any of the
societies and any other persons or corporations interested.
It was intended that sittings would be held daily until the inquiry was ended.
Owing to the fact that it was impossible to obtain competent reporters except through
the Official Court Reporter, this plan could not be followed. Arrangements were finally
made with him that he would supply a reporter two days a week, subject, however, to
cancellation if Court trials or other commissions having priority should intervene.
Many such interruptions occurred, with the result that the investigation has been unduly
prolonged. As it is, 106 public meetings have been held, occupying seventy-one full
days and thirty-six half days. All of these have been held in the Court-house at
Vancouver, with the exception of one day at Kamloops, one at Vernon, two at Penticton,
two at Trail, one at Nelson, and one at Kaslo. It was intended that a sitting would be
held at Victoria, but owing to the fact that the Victoria society was small and no
complaints were received from there, this meeting was cancelled and the secretary was
requested to submit his documents by mail.
In addition to witnesses called on behalf of the societies, Mr. Des Brisay asked
permission to call Sidney H. Pipe, a well-known consulting actuary of Toronto. He is
the actuary for many fraternal societies operating in Canada.
Arguments and Briefs.—At the first general session, after the completion of the
evidence, C. H. Locke, K.C., appeared on behalf of the following:—
British Columbia Mutual Benefit Association.
Canadian Mutual Benefit Association.
Empire Home Benefit Association.
Western Mutual Benefit Association.
Two Thousand Benefit Association.
The United Home Security Association.
Provident Mutual Benefit Association.
Western Canada Mutual Benefit Association.
Pacific Mutual Benefit Association. DEATH BENEFIT  SOCIETIES. CC 7
He submitted a verbal argument supporting the continuation of the associations.
A. C. Des Brisay, K.C., presented a written brief on behalf of the Canadian Fraternal
Association which was opposing the continuation of the associations. Alex. Mackenzie
presented a brief on behalf of The Family Assurance Society. At a previous session,
Alec Ogston had presented a written brief favouring certain changes and regulations.
Upon the conclusion of all of the above, George F. Cameron, Commission counsel,
summed up the various arguments and briefs. To all of the above I am deeply indebted
for their most comprehensive arguments and briefs.
SUMMARY OF LEGISLATION.
Before dealing with the societies in detail, it is necessary to review legislation
having to do with societies such as these under investigation.
Other Provinces.—Mr. Garrett, in the opening session, gave evidence that societies
which paid a death benefit obtained by assessment were prohibited in all Provinces of
Canada except British Columbia and Saskatchewan. In the latter, within recent years,
legislation had been passed forbidding the future incorporation of further societies of
such a nature, and placing those in existence (four in number) under strict control, by
Order in Council.
British Columbia.—The first British Columbia Statute having to do with such
societies was passed in 1871. Various changes and amendments were made over the
years, until in 1919, the following Acts were in force:—
" The Benevolent Societies Act," R.S.B.C. 1911, chapter 19, which provided in
part:—
2. Any number of persons may unite themselves into a society or corporation for
any one or more of the following purposes:—
(2.)  For making provision, by means of contributions, subscriptions, donations, or
otherwise, against sickness, unavoidable misfortune, or death, and for relieving
the widows and orphan children of members deceased.
and " Charitable Associations Act," R.S.B.C. 1911, chapter 36, which provided:—
2. (1.) Any number of persons may unite themselves into a society for making
provision, by means of contributions, subscriptions, donations, or otherwise, against
sickness, unavoidable misfortune, or death, and for relieving the widows and orphan
children of members deceased.
In 1920 the " Societies Act" was passed, and the " Benevolent Societies Act" and
the " Charitable Association Act " were repealed.    It provided that:—
3. (1.) Five or more persons may form an incorporated society under this Act to
promote objects of a national, patriotic, religious, philanthropic, charitable, scientific,
artistic, social, professional, agricultural, or sporting character or any useful object.
(2.) A society may make provision for the benefit of its members by means of
subscriptions against sickness, disability, unavoidable misfortune or death, and for
relieving their widows and orphan children, but shall not otherwise carry on the business
of insurance, and every society operating under this subsection shall notify the Superintendent of Insurance to that effect.
Section 45 of the Act provided for the continuation of societies then in existence.
In 1922 subsection (2) was amended by section 3 of chapter 66, as follows:—
3. Subsection (2) of section 3 of said chapter 83 is amended by striking out in the
third and fourth lines the words " widows " and " orphan children," and substituting
therefor the words " widows, children, or other dependents "; and by adding at the end
of the subsection the words " and furnish him with such information as he requires in
regard to such operations." CC 8 REPORT OF THE ROYAL COMMISSION.
In 1934 a further amendment to the same subsection was made by the " Societies
Act Amendment Act, 1934," chapter 59, section 2, which was as follows:—
2. Subsection (2) of section 3 of the " Societies Act," being chapter 236 of the
" Revised Statutes of British Columbia, 1924," is amended by striking out in the third
line the word " widows," and substituting therefor the words " husbands, wives."
No further amendments have been made, and section 3, subsection   (2), to-day
stands as follows:—
3. (2.) A society may make provision for the benefit of its members by means of
subscriptions against sickness, disability, unavoidable misfortune, or death, and for
relieving their husbands, wives, children, or other dependents, but shall not otherwise
carry on the business of insurance, and every society operating under this subsection
shall notify the Superintendent of Insurance to that effect, and furnish him with such
information as he requires in regard to such operations. A society required to be licensed
under the " Insurance Act " shall not commence or carry on its operations unless it is
licensed under and complies with that Act.
It should be pointed out here that Mr. Des Brisay contends that ever since the
1920 Act was passed a society could only be incorporated to promote " objects of
a national, patriotic, religious, philanthropic, charitable, scientific, artistic, social,
professional, agricultural, or sporting character or any useful object." He submits
that subsection (2) of section 3, which provides for a death benefit, is ancillary to
subsection (1), and that a society cannot be incorporated which has, as its sole purpose,
the providing of a death benefit.
EARLY HISTORY OF SOCIETIES IN  BRITISH COLUMBIA.
The early history of assessment societies in British Columbia is of some value in
forming an opinion as to their future. The minute-books of the early societies formed
in the Kootenay District have been preserved. They were produced and entered as
exhibits in the investigation of the United Home Benefit Association.
The first of the Kootenay societies was incorporated on May 8th, 1913, under the
name " Fifteen Hundred Club of Kootenay District." A perusal of the minutes indicates slow progress at first. One R. J. Steel seems to have been the moving spirit.
The auditors' statement for the year ending December 31st, 1916, is attached to the
minutes.    It indicates that the society was then paying the sum of $200 to beneficiaries.
In 1918 the membership was 361. At the end of 1920 the secretary's report states
that " the year 1920 was the banner year for our club, as from a membership of 682 it
rose to its full complement of 1,500 by the 17th November, or more than double the
membership in ten and a half months." At that time the mortuary fund showed over
$7,000 on hand in cash and Victory Bonds, while the general account showed $1,300
on hand.
With the success of this society, a number of new societies were formed in
rapid succession in that district. The Trail and Rossland 1500 Club was incorporated
on June 14th, 1921. The Creston and District 1500 Club was incorporated on
March 4th, 1922. The 1500 Club of Kaslo and District was incorporated on May 11th,
1922. The 1500 Club of Okanagan District was incorporated on June 13th, 1922.
This club is still in existence under the name of Canadian Mutual Benefit Association.
The 1500 Club of Grand Forks and District was incorporated on July 9th, 1923.
The 2,000 Club of Similkameen District was incorporated on December 6th, 1923.
This club now carries on under the name of Interior Mutual Benefit Association.
The Nelson Protective Association was incorporated on December 15th, 1923, and
the 1500 Club of Fernie and District on March 22nd, 1924. About this time certain
clubs were also incorporated in the Vancouver district.
The Kootenay clubs then entered into a period of prosperity. The memberships
filled rapidly, and they were exceedingly popular.    The minutes indicate that for the DEATH BENEFIT  SOCIETIES. CC 9
most part they were running as community concerns, considerable numbers of people
attending the annual meetings and competing for the various offices. Expenditures
were small, the secretaries only being paid a moderate salary. Substantial balances
were accumulated.
In 1925 the minutes mentioned rumours of legislation concerning such societies.
One Kenneth Campbell was sent to Victoria. His letter, dated November 23rd, 1925,
is made part of the minutes of the 1500 Club of Kootenay District and is reproduced
herewith.
Nelson, B.C.
Nov. 23 1925.
R. J. Steel, Esq.,
City, Sec'y Thousand Clubs Assoc.
Dear Sir: —
I beg to report herewith on my trip to Victoria in the interests of your association.
On my arrival there I found that no legislation had yet been framed, dealing with
the above Clubs. I had an interview with the Hon. the Attorney General at the very
earliest opportunity, but he could only spare me a very few minutes of his time then.
I gathered from his remarks, that he had been pretty much impressed from some
source or other, that there was a big possibility of the best regulated of the Thousand
Clubs going smash at any moment and that the only salvation was to put the Clubs
on an actuarial basis at once. He, however, told me that he would give me ample time
to present my side of the case before any legislation would be drafted.
From then on I lost no time in my endeavours to impress the members and the
cabinet, with the great harm that would follow, should the House pass legislation that
would bring about the bursting of the Death Benefit Clubs. At the same time placing
before them, the many cases of destitution that would have followed the death of the
breadwinner, only for these Clubs.
I spent the week end of Sunday 15th. in Vancouver in conference with Messrs. Ward
and Farrell, from whom I got some very valuable data.
On the night of Nov. 18, the Hon. Mr. Manson sent for me to further discuss the
matter I had on hand with him. I found his attitude towards the Clubs changed, it
would seem that he had thoroughly familiarized himself with the way the Clubs were
being operated. While he would not admit that the Thousand Clubs were working on
a sound basis, he assured me that " no legislation would be introduced which would
interfere with existing clubs, which were actively operating."
My expenses were $310.00, of this amount $250.00 was advanced before leaving
Nelson. Mr. Farrell of the 2500 Mutual Club, Vancouver, advanced me $20.00, leaving
an unpaid balance of $40.00.
Yours Respectfully,
KENNETH  CAMPBELL.
It is interesting to note that the " Insurance Act" was re-enacted in 1925, the
new Act coming into force on January 1st, 1926. Section 162 of that Act expressly
excludes " an existing society to which the ' Societies Act' applies at the commencement
of this Act." This is carried forward in section 182 of the present " Insurance Act." I
have no doubt that the visit of Kenneth Campbell to Victoria was responsible for the
exclusion of existing societies from the provisions of the " Insurance Act."
The various societies in the Kootenay District continued to prosper for some years.
The 1500 Club of Kootenay District, with headquarters in Nelson, actually had a
waiting list. The minutes disclose that they refused to take more than 1,500 members.
They paid the full death benefit of $1,500 for a considerable time. The Nelson Protective Association, which was formed by the same Mr. Steel, did not have the same
success. It appears to have had its hey-day in 1929 and 1930, when it had 515 members.
From then on ite members gradually declined, until in 1933 it amalgamated with the
Kootenay a^d District Association. The Fernie and District 1500 Club had a similar
experience.    It was absorbed by the British Columbia Mutual in 1931.
In the meantime the membership of the Kootenay and District Association had
begun to decline.    The amalgamation with the Nelson Protective Association staved CC 10 REPORT OF THE ROYAL COMMISSION.
off the evil day, but in 1935 negotiations began for the amalgamation of it with the
1500 Club of Kaslo and District. In April, 1935, a special meeting of the latter
association was held " for the purpose of considering and accepting an offer of the 1500
Club of Kootenay District to amalgamate with and turn over their membership and
assets to the 1500 Club of Kaslo and District." Attached to this notice is this note:
" If this amalgamation goes through, it will make one club of between 1,200 and 1,300
members."
I might say that the Kaslo and District Society, which was incorporated in 1922,
had developed rapidly. In 1926 its membership was full. By 1930 it had begun to
decline. In 1933 negotiations were commenced for amalgamation with the 1500 Club
of Grand Forks and District. This was ultimately carried into effect. The decline
Of the club was staved off for a while, but the membership continued to decrease. The
amalgamation with the 1500 Club of Kootenay District gave it a temporary boost, but
the decline in membership rapidly continued. By 1937 the membership had declined
to approximately 1,000, and by 1943 it had declined to 442. When it was moved to
Vancouver, the name was changed to the United Home Security Association.
The experience in the Kootenays bears a great similarity to the experience of
assessment societies in other parts of Canada and the United States; a period of rapid
expansion, then a period of prosperity followed by a slow decline. The age records of
these associations were not available, but the evidence of several of the old members
of the Kaslo and District Association was taken at Kaslo. Henry Beck, a retired
roadmaster of the Canadian Pacific Railway, was one of the first members to join the
Kaslo and District Society. At the time of his examination in October last he was 80
years old. When asked for suggestions as to the steps which should be taken, he said:
" Well, if you are going to keep a club going, you have to charge young members less
than old ones. You can't charge a young man of 20 the same as an old man of 85.
I don't think that is fair."
It should be noted that the Kootenay clubs seem to have been run most economically.
For a time they paid nothing for obtaining new members. In other words, they
depended on their members to' increase the membership. Later they paid $1 per
member, and at the end they were paying $2 per member. They, of course, were not
run as commercial concerns. In my opinion, they were run in exactly the manner
contemplated by the " Societies Act." The fact remains that they were not successful,
and they have not continued to exist in their respective localities. The only one being
operated in its original district at the present time is the Trail and Rossland Society,
a full report of which will be given later in my report.
The early history of the societies in the Vancouver district will appear in the
reports on the various societies. It will be noted that their development follows to
a certain extent the pattern set by the development of the Kootenay societies. First
the organization period, then the rapid expansion followed by a period when the membership remains approximately the same, then a slow decrease in membership. Some
of the Vancouver societies have already commenced that phase, but the majority are
still more or less in the period where the membership remains approximately the same.
METHOD OF CARRYING ON  INVESTIGATION.
I now propose to deal in detail with the various clubs investigated. At the outset,
after consultation with Mr. Cameron, the Commission counsel, I decided that I would
only examine the records of the last ten years. We were of the opinion that that would
give a sufficiently true picture of their finances and methods of operation, and the
soundness of their plan of operation. I did not make a personal examination of their
account-books, but merely required the production of their auditors' statements, and DEATH BENEFIT SOCIETIES. CC 11
in almost all cases the attendance of the auditor himself as a witness. In addition, the
secretary or manager appeared as a witness and submitted summaries taken from
their records. No attempt was made to check the accuracy of these statements.
Minute-books,  however,  were produced whenever possible,  and examined by me.
INDIVIDUAL SOCIETIES.
THE BRITISH COLUMBIA MUTUAL BENEFIT ASSOCIATION.
Incorporation.—This society was incorporated under the provisions of the " Societies Act" on the 7th day of May, 1924, and Certificate No. 1365 was issued to it by
the Registrar of Joint-stock Companies.    The objects were as follows:—
(a.) To make provision by means of subscriptions for relieving the widows,
orphan children, or other dependents of members, but not otherwise to
carry on the business of insurance, and not to conduct a trust business,
or a trade or mercantile venture, or for purposes of commercial gain.
(&.)  To obtain a full membership in the association in order that the benefits
to members may be as large as possible, and for this purpose to canvass
and solicit, or have canvassed and solicited, eligible parties to become
members of the Association,
(c.)  To settle forms to use for the purpose of the said association.
(d.) To determine the form of management of said association, or method of
election of officers thereof,
(e.) To determine how the assessments of moneys received from its members
shall be safeguarded until required to be paid out under its rules.
The operations of the society were to be "chiefly carried on in the City of Vancouver."
Early History.—The moving spirit in the promotion of this society was Thomas
Hudson Farrell. He organized a sales force and proceeded to obtain members as
quickly as possible. The first minute-book of the society was entered as an exhibit.
It indicates that there were no deaths in the first year of operation, and by the time
the first death occurred, the society by resorting in part to the general fund was able
to pay the full sum of $2,500 as a death benefit. I have not examined in detail the
records of these earlier years, but I have seen enough to indicate that the society
expanded rapidly under a systematic sales campaign.
Mr. Farrell's Contract.—By-laws 18 and 19 of the constitution provide for the
appointment of a permanent secretary-treasurer who shall also be business manager.
He may only be removed " for cause, namely fraud, mismanagement or inability to
perform his duties." Shortly after the incorporation of the society on October 8th,
1924, Mr. Farrell entered into a contract with the society. It was produced and entered
as an exhibit. Amongst other provisions, it provided that he should be the permanent
secretary-treasurer and business manager of the society. He was empowered to employ
agents and organizers " for the purpose of securing members of the association and
to pay such organizers and agents a sum not exceeding five dollars for each member
secured " out of the initial membership fee of $10. He was to be paid the sum of $2
per member per year, including new members. Out of this he paid all the expenses
of the society. His duties were defined in the agreement, and as long as he performed
them, he could engage in any other business that he wished. Further, the agreement
contains a most unusual clause, which gave him the right " to dispose of his interests
as Secretary-Treasurer and Business Manager or any part thereof to any person or
persons; it being understood that any assignment of his interest or any part thereof
shall be subject to the consent of the Association or its directors, which consent shall
not be unreasonably withheld.    In the  event of such assignment being made, the CC 12 REPORT  OF THE  ROYAL COMMISSION.
assignee or assignees shall have the same rights and be under the same duties and
obligations as the party of the second part hereby enjoys or is subject to."
Not content with this, on June 29th, 1926, a supplementary agreement was
entered into between the society and Mr. Farrell, giving him the right to dispose of
his " interests as permanent Secretary-Treasurer and Business Manager of the Association or any part thereof, under any last Will and Testament, codicil or testamentary
writing executed by him." The minutes disclose that both of these agreements were
regularly approved by the directors.
In considering agreements such as these, one is forced to the conclusion that the
incorporation of this society was a commercial venture by Mr. Farrell. This conclusion
is amply borne out by the fact that six years later Mr. Farrell actually disposed of his
secretaryship for the sum of $20,000 cash. On December 1st, 1932, the society, G. J.
Vaux (the present secretary-manager), and Mr. Farrell entered into an agreement
whereby the society appointed Mr. Vaux permanent secretary-manager on exactly the
same terms as Mr. Farrell's former agreement. Mr. Farrell in turn assigned his
interest to Mr. Vaux and waived any rights which he had under the agreement. No
mention is made in the agreement of the consideration passing between Mr. Vaux and
Mr. Farrell, but Mr. Vaux admitted on cross-examination that he had paid $20,000
cash to Mr. Farrell for the appointment.
Agents.—The rapid increase in membership of the club was due to the industry
of Mr. Farrell and to the employment of agents. W. H. Pym, now secretary-manager
of the Provident Mutual Benefit Association, was one of the agents. The minutes of
October 25th, 1925, disclose that he was appointed to assist the secretary in organizing
and appointing agents, " in order that the second unit of 2500 members be obtained
as quickly as possible." George W. Speirs, at present secretary-manager of the Canadian Mutual Benefit, was another. The minutes indicate throughout that there was a
well-organized sales force operating in the Province, and it is safe to draw the conclusion that the rapid expansion of the society was due to their efforts.
Agents' Commission.—The minutes indicate that for a time $5 per member was
paid in commission. In addition to this, Mr. Farrell, the secretary-manager, received
$2 from each new member. Figures were not produced to show the amount of commissions paid, but they would amount to a very considerable sum of money. Later the
minutes show that the agents' commissions were increased to $10 per member, the
whole of the joining fee and the first year's dues. Out of this the secretary-manager
received nothing unless he himself procured the member. Evidence filed by the auditor
shows that up to September 30th, 1945, 13,518 persons joined the society; the exact
amount paid in commissions can only be estimated—it would probably amount to
$80,000. By far the greater portion of this undoubtedly was paid to men who were
agents making their living out of the selling of memberships.
Groups.—Up to the year 1942 this society only had one class of membership.
Under the by-laws of the society the beneficiary would receive $2,500 if there were
2,500 or more members; if less, then $1 for each member. All members paid the
same assessment irrespective of age. This is now known as the $2,500 group, and it
comprises practically the whole membership of the society. The membership certificate
in use at the present time was filed. The wording of it is somewhat obscure. It states
that the beneficiary " shall receive a specified sum under said certificate, namely the
sum of $1.00 per member from each and every member in good standing at the time of
death of such member, and that if and when the membership exceeds 2500 the said
beneficiary shall receive a specified sum from each and every member in good standing
as aforesaid, namely the proportion of $1.00 which 2500 bears to the membership of the
Association in actual numbers." DEATH BENEFIT SOCIETIES. CC 13
The by-laws, which are printed on the back of the certificate, provide that this
specified sum shall be paid from the mortuary trust fund, and thereupon each member
shall be assessed in the manner provided for. It should be noted that neither the certificate nor the by-laws say that the beneficiaries shall receive merely what is collected.
I would construe the certificate as a covenant to pay a sum which must be calculated
in the way laid down. The fact, of course, is that over 13,000 people have joined this
society and received the society's certificate of membership. A total of 1,032 members
have died, and in every case their beneficiaries have received the sum of $2,500. Mr.
Locke, in his argument, referring to this certificate, states that it is not a contract
for a lump sum of money. That, of course, is true, but it is a contract to pay a sum
of money calculated in a certain way. The amount paid does not depend upon the
amount received from the assessment.
In 1942 a new group was authorized and the by-laws amended accordingly. Under
the resolution authorizing the group, members paid quarterly assessments according
tO age, as follows:  per Quarter. Per Year.
15-25 years  $1.50 $6.00
26-30 years     1.75 7.00
31-45 years     2.50 10.00
The directors, of course, reserved the right to vary the assessment. These rates
have the appearance of level premiums. The circular announcing the formation of this
group bears out this idea.   Exhibit 9-B states:—
Thirty to sixty days after the membership certificate has been issued and every three
months thereafter assessment calls will be made according to the schedule following and
all such calls must be paid within thirty days from the date of such notice.
Then follows the schedule set out above. The evidence of Mr. Vaux regarding the
fixing of these rates is at page 168 of the transcript, and is as follows:—
Q. On what basis was the amount of these so-called assessments fixed?
A. Well, they were arrived at by studying similar amounts that had been charged by
Insurance Companies for a similar protection, and also, Mr. Commissioner, they are
approximately the same amounts for the same age groups as were already being charged
by other mutual benefit associations before this $500 group was formed.
Q. Might I ask who fixed those amounts or those classifications?
A. The Directors of the Association.
Q. Was any investigation made by them prior thereto?
A. No, Mr. Commissioner, I looked into the matter some, and reported to my Directors as to what I thought would be a proper assessment to make, which I felt would yield
sufficient money over the year to carry out the object of the $500 group.
When the certificate is examined, it reads that until the membership is 500, the
amount paid on death will be " a sum equivalent to the sum of $1.00 multiplied by the
number of members of the said $500.00 group in good standing at the time of the
death." It will be seen from this that the amount paid bears no relationship whatever
to the amount paid quarterly by the members. This, therefore, is a very great departure from the method used in the original group.
Membership.—Attached hereto is a table showing the change in membership.
From this it will be seen that in the last ten years alone the rate of death compared to
the membership has been increasing. The same table shows the increase in the cost
per member. Mr. Vaux very frankly admitted on several occasions during his examination that the society had to have a lot of new members drawn from the younger age-
group.    I have examined the exhibit showing the ages of the members of this society.
On March 31st, 1945, there were 3,503 members whose ages were over 50. This
represents 86.2 per cent, of the membership. The death rate at these ages is such that
the management of the society must view the situation with alarm. CC 14 REPORT OF THE ROYAL COMMISSION.
Finances.—A detailed examination was made of the finances of the society over
the past ten years. I have no hesitation in saying that the secretary-manager has been
meticulous in the*handling of his accounts. There can be no criticism whatsoever concerning them. There is an adequate accounting system, and the more or less continuous audit keeps all matters up to date. The investments of the society have been well
handled. A substantial profit has been made in any bond transactions, and the present
inventory of bonds is excellent. The arrangement whereby the securities are held
with the bank and can only be released upon written instructions of two directors and
the auditor is to be commended. There was some doubt in my mind as to whether or
not it was proper to apply the interest received from the Mortuary Trust Fund investments to the Contingency Fund. I would have thought that the interest should accumulate in that fund. However, this is adequately disclosed in the auditor's report,
and the membership can be taken to have approved of the arrangement.
Audit.—The more or less continuous audit maintained by the auditor is an excellent arrangement. He checks all the death claims and lapses. His report is most
complete and his practice of attending at the annual meeting and presenting his report
•himself is an excellent one.
I do not agree, however, that in preparing his balance-sheet he should show as an
asset " Claims paid but not assessed." It is true that the assessments always are paid
and his allowance for unpaid assessments is adequate. If this is shown as an asset,
certainly claims, proof of which have not yet been completed, should be shown as a
liability. It is true that a claim is not payable until proofs are completed. In my
opinion, it would be much better practice to show the one as a contingent asset and the
other as a contingent liability. In 1945, for instance, no less than sixteen claims of
$2,500 each, amounting to $40,000, were paid for deaths occurring in 1944. Yet the
balance-sheet contains nothing to indicate that there was this liability, contingent or
otherwise, facing the society at the end of the 1944 fiscal year.
Claims.—Payment of claims and the length of time elapsing between notice of
death and actual payment was thoroughly canvassed. Having in mind the difficulties
in obtaining succession duty releases, it does not seem that the delay was unreasonable.
The returns filed with the Registrar show the number of claims paid in the years following.    From 1939 on they are as follows:—
1939 claims paid in 1940  16
1940 claims paid in 1941  17
1941 claims paid in 1942  10
1942 claims paid in 1943  15
1943 claims paid in 1944  20
1944 claims paid in 1945  16
Certainly there can be no suggestion that there was any deliberate postponement
of payment of claims.
Annual Meeting.—Notices of annual meetings are sent by mail to all members.
In addition, it is advertised in the newspaper. Despite all of this, only a handful of
people turn up at annual meetings. Proxies are not allowed. As stated before, the
auditor attends at all annual meetings and personally presents the report. In my
opinion this is a desirable practice to follow. In view of the fact that these are said
to be co-operative concerns and being run for the members, it is surprising that more
people do not attend at annual meetings.
Conclusion.—In conclusion I have no hesitation in saying that in my opinion this
society is honestly run by the present secretary-manager and the board of directors.
No doubt there is criticism from certain quarters that new members are not being
obtained. Mr. Locke, in his argument, attributed this to the war, and the fact that
they did not write younger members who would be subject to military call-up. DEATH BENEFIT  SOCIETIES.
CC 15
My conclusion is that the main deterrent to obtaining new and younger members
is the fact that the rates are too high to attract them. This, of course, has been
brought about by the gradual increase of deaths without a substantial increase of new
members. Mr. Vaux is satisfied that with the end of the war and an active campaign
for membership this difficulty can be overcome. Certainly, unless the membership is
increased, this Society will go the same way as the Kootenay societies.
Complaints.—No complaints have been received against this society. One or two
inquiries were made by letter as to why the annual fees had increased. Such complaints would indicate that the members do not realize the basis on which the assessments were made. In other words, despite the wording of the certificate of membership and the publicity given to such societies, members persist in thinking that the
yearly cost should remain constant.
Statement of Membership for Fiscal Years Ending at December 31st
in each Year.
$2,500 Group.
Year.
Members
Beginning
of Year.
New
Members
joined
during
Year.
Lapsed.
Died.
Members
at End
of Year.
Claims
paid.
Claims
carried
over.
Annual
Cost per
Member.
1938	
4,380
4,361
4,251
4,223
4,200
4,070
4,040
246
297
298
140
111
80
65
207
350
254
163
241
110
8
58
57
72
69
77
80
70
4,361
4,251
4,223
4,200
4,070
4,040
4,027
39
49
44
48
61
18
16
23
25
29
19
$33.60
1939	
36.90
1940	
37.40
1941	
40.70
1942	
42.00
1943	
1944	
52.40
48.20
1945	
$500 Group
.
1942	
1943	
48
42
51
7
8
3
13
48
42
50
1944	
1945	
EMPIRE HOME BENEFIT ASSOCIATION.
Incorporation.—This society was incorporated on March 31st, 1924, under the name
of " The Home Guardian Club." The objects were: " To cultivate and encourage among
its members and others a more healthy and sane home-life, and to resist and discourage
the modern tendencies towards such frivolities and excesses as are undermining the
foundations of society, and thus promote a more sound and stable citizenship within the
Empire, and to make provision for an Insurance Fund for the benefit of the dependents
of deceased members."
In August, 1926, the name was changed by extraordinary resolution to " Empire
Home Benefit Association," and in September, 1928, the objects were amended by adding
the following to clause (2) : "And for the benefit of its members by means of subscriptions against disability and unavoidable misfortune and for relieving their widows,
children or other dependents." CC 16 REPORT OF THE ROYAL COMMISSION.
In July, 1938, clause (2), as amended was struck out, and the following substituted:—■
"(2.) The objects of the Society are: To make provision for the benefit of its
members by means of subscriptions, against sickness, disability, unavoidable misfortune
or death and for relieving their husbands, wives, children or other dependents."
By this amendment the society became a benefit association, and nothing else. As
a matter of fact, the society had never made any pretence of being anything but a
benefit association, and the amendment merely brought its objects in line with the
actual policy.
By-laivs.—The by-laws of the society originally were very simple. They contemplated an association which, on the death of a member, would collect $1 from each of the
surviving members and pay it over to the beneficiary of deceased member. Gradually,
however, they were changed. Clause (42) was passed, which provided: "If in any
year the death claims are higher than expected, the Directors may at their discretion
pay claims out of the balance in the Mortuary Trust Fund instead of making an
assessment on the members."
At the same time provision was made to assess a proportionate part of $1 when the
membership exceeded 2,500.
Ultimately, clause (42) was re-enacted to read in part as follows: " The Directors
may pay any claim for death benefits directly out of the Mortuary Trust Fund at any
time they may deem it advisable so to do and not make any assessment on the membership in regard thereto or they may within one year of such payment, in order to restore
to the Mortuary Trust Fund the amount so paid, make an assessment on the membership
on the said claims so paid, if and when, including such assessment, the number of death
assessments during that year are not greater than the usual and ordinarily expected
number during that period."
In 1938 power was taken to establish " Limited Benefit Membership " and to divide
them into age-groups.
Certificate.—The original certificate of membership corresponded to the by-laws.
When the by-laws were amended, the form was changed and to-day it states in part as
follows: ". . . the Association doth hereby agree to pay subject to the conditions,
provisoes and stipulations hereinafter mentioned ... an amount not to exceed the
sum of Twenty-five Hundred Dollars ($2500.00) and being the amount to be actually
received by the Association from the membership of the Association existing at the date
of the death of the said member on an assessment to be made by the Association on the
said membership as provided by the By-laws of the Association."
In my opinion this form is undesirable, owing to the fact that the woi'ds and figures
" Twenty-five Hundred Dollars " are in large, black, heavy-face type, while the words
" not to exceed the sum of " are in very small type of the same kind as the rest of the
certificate. As long as the society is actually paying $2,500, there will be no criticism
from the membership, but if it should fall below that amount, there would be complaints.
Numerous persons have complained to me, both by letter and by oral testimony, stating
that they have been misled by the form of such certificates in societies where they are
not paying the maximum amount.
The certificate of the Limited Benefit members—e.g., the $1,000 and $500 groups—
are similar in form to the above, and the same criticism applies to them.
Membership.—This society originally started out with only one form of membership, which would pay a maximum of $2,500 as soon as the membership reached 2,500.
In 1938, when the membership had reached some 3,200, the by-laws were amended to
give the directors power to form Limited Benefit groups and to levy such assessments
" as the Directors shall from time to time determine." The directors thereupon formed
the $1,000 group. The following is quoted from Exhibit 16, a circular issued by the
society:— DEATH BENEFIT  SOCIETIES. CC 17
Plan No. 2.—$1000.00 Benefit.—Cost to join $5.00. Costs thereafter based on past
experience.    Rates fixed as follows: Quarterly Rate,
including Dues.
Ages 16-30  $2.50
„     31-40     3.00'
„     41-50     3.75
Another pamphlet issued in 1944 and filed as Exhibit 17 states as follows:—
The $1000.00 Plan.
Up to a few years ago our plan of protection was conducted entirely along the lines
of assessing members $1.00 or less per death according to the number of members.
Under our New Plan, the directors, due to past experience, have now set a schedule of
assessments which they believe adequate to meet all claims. These assessments are
payable quarterly and include dues. A further improvement is the dividing of applicants into age groups and rating the assessments accordingly, thus giving the younger
members a lower rate.
A similar pamphlet, Exhibit 19, was published at the same time with respect to the
$500 group. The above quotation appears in it. The cost schedule is different. It is
as follows:—
Age-group. Quarterly Rate.     Total Yearly Cost.
16-25  $1.50 $6.00
26-35     1.75 7.00
36-45     2.00 8.00
46-55     2.50 10.00
56-60     3.00 12.00
Immediate success followed the formation of these groups.    The $1,000 group
formed in 1938 now has 1,152 members.    The $500 group formed in 1942 now has
639 members.
One would think from reading the above-quoted Exhibits 16, 17, and 19 that the
rates set out therein were for the purpose of raising a fund to pay the anticipated claims
in each of the different groups.    Such is not the case;   the money collected from each
group in each quarter is used to assist in paying the death claims in the $2,500 group.
Death claims in the $1,000 and $500 groups are now in fact paid out of the reserve,
although power is taken to assess the $2,500 group for them.
Mr. Goodrich quite frankly explains that the reason for forming the $1,000 and
$500 groups was to assist the  $2,500  group.    Extract from direct  examination  of
Mr. Goodrich by Mr. Cameron (page 436) :—
Q. Now, Mr. Goodrich, you told us that the amount assessed against the members of
the $2,500 group is not sufficient to cover the death benefits payable in respect of such
assessment?
A. That is right.
Q. Why don't you assess sufficiently to cover these death benefits in full?
A. The whole purpose of the group was to alleviate the $2,500 members by way of
payment assessments.
Q. In other words, your purpose of bringing the $1,000 and $500 group into existence
and carrying them on was to help carry the members of the $2,500 group.    Is that right?
A. Yes.    They are younger members, and the only way to get younger members in.
Q. You couldn't get them in on the $2,500 set-up?
A. No.
Later on he explains how these claims are handled.    They have never assessed for
a $500 claim, although all have been paid in full.    They are paid from the reserve.
At one time the $1,000 claims were partially assessed against the $2,500 group, latterly
they also have been paid from the reserve.
This peculiar system seems to be working well at the present time, but even with
the help from the smaller groups, the cost per member of the $2,500 group is creeping
up.    The figures are shown on the schedule attached.    Ten years ago the cost was CC 18 REPORT OF THE ROYAL COMMISSION.
$25.25, last year it was $35. The statements filed do not segregate the figures for the
different groups, and, in fact, the funds of the different groups are not kept separate.
If the funds of the different groups were segregated and each group bore the cost
of its own deaths, it would be found that the cost to the individual member of the
$2,500 group would be much more than it is at present. A perusal of Exhibit 52 shows
that in 1944, if the funds from the smaller groups had not been used to implement the
funds of the $2,500 group, the latter's annual assessment would have been approximately $4 more per year. On the other hand, the funds collected by way of assessment from the two smaller groups is now considerably more than sufficient to pay
their deaths. This would be justifiable if the money realized from these groups was
being accumulated for the purpose of paying the increased cost in later years. However, these funds, as above stated, are being utilized to assist in paying death benefits
to the $2,500 group.
The fact is that the rates or assessments of the $1,000 and $500 groups bear no
relationship whatever to the deaths either in their own groups or in the society as a
whole. It is contended on behalf of this society that it is an assessment society, pure
and simple. So far as the two smaller groups are concerned, this is not the case. On
the other hand, so far as the $2,500 group is concerned, it is on an assessment basis;
but the assessments in its own group are not sufficient to pay the death benefits, and
it resorts to the funds received from the other groups. At the present time this system
is working satisfactorily, owing to the fact that the deaths in the $1,000 group and
$500 group are comparatively small. It is inevitable that the proportion of deaths will
increase, despite the fact that they are obtaining new members in these groups. Age
charts filed show that the average age in the $2,500 group increased from 54.84 to 55.62
in 1943. In the $1,000 group it increased from 40.71 to 40.78, and in the $500 group
from 48.79 to 49.94; this despite the fact that during the same period there was an
increase in members in the $1,000 group of 210 and in the $500 group of 140. The
$2,500 group showed no increase whatsoever. The schedule attached shows in detail
the membership and changes in membership from 1935 to 1945, inclusive, in all groups.
I have shown in the different columns the membership at the beginning of the year,
new members obtained, lapses, deaths, membership at the end of the year, and the cost
per member for each year. It will be seen from this schedule that during the past six
years the membership of the $2,500 group has remained practically the same. On the
other hand, the deaths per thousand steadily increased, with the exception of last year,
when there was a sudden drop. The cost per member, however, has shown a steady
yearly increase.    In eleven years it has gone from $25.45 per member to $35.
The $1,000 and $500 groups present a different picture. The one organized in
1938 and the other in 1942, they have grown steadily. The death-rate per 1,000 during
the past four years has been less than half that of the $2,500 group. As previously
noted, these groups have not been run as assessment groups. They both have paid the
maximum payable on their membership certificates—namely, $1,000 and $500—irrespective of the number of members in them. They are still vigorous and growing, and,
as in the case of such societies, they have no apparent difficulties until their membership ceases to grow. The rates' or assessments payable by the members are graduated
according to age. Mr. Goodrich states that the age at joining governs the rate that
is payable; the member is not transferred from one group into another as the age
increases. This, of course, increases the similarity to " level premiums." When one
considers that the funds paid in in the younger ages are not accumulating to pay the
claims at the later ages, one is forced to the conclusion that this system is unsound and
unfair to the member. At the moment the system is working, and may work for another
ten or fifteen years if a vigorous membership drive is maintained.    The static state DEATH BENEFIT SOCIETIES. CC 19
reached by the $2,500 group in this society should be sufficient proof to the directors
that ultimately the $1,000 group and $500 group will reach the same stage.
Finances.—A thorough examination of the finances was made over the last ten
years. The system adopted for the keeping of the accounts is adequate. In this society, as in the B.C. Mutual, the auditor is a chartered accountant. He is more or less
continuously in touch with the society. He presents a quarterly report to the directors
and attends their meeting for the purpose of explaining the details. He prepares the
annual statement and attends the annual meeting for the purpose of presenting it to
the shareholders. He checks all claims and examines the proofs submitted, including
the death certificates.
So far as the annual balance-sheet is concerned, the same practice is adopted in
this society as in the B.C. Mutual. Claims paid, but not assessed, are shown as an
asset. As stated before, I do not agree with this, but Mr. Campbell, the auditor of the
B.C. Mutual, and Mr. Jackson, the auditor of the Empire, insist that this is good
accounting practice. However, Mr. Jackson shows on the liability side a contingent
liability of the claims carried over at the end of the fiscal year. In the administration
account, which is really a receipt and expenditure account, all the assessments are
lumped together. In my opinion it would be much better to show what is received
from each group separately, in the same way as the annual dues are shown. Similarly,
in the death benefits paid, the totals for each group should be shown. This would show
the members of each group what is being done with their payments. I do not believe
that at present the members of the smaller groups realize that their payments are
utilized to pay the claims of the $2,500 group.
Exhibit 82 gives the details of the cost of running the society. These costs are
exceedingly modest. The secretary has been employed upon a graduated scale of
salary, and his salary has gone from the sum of $1,800 per year in 1935 up to $3,375
per year in 1945. This is the maximum that he can receive under the terms of his
contract. The directors, including the president, received a total of approximately
$600 per year in 1945. All other expenses are in proportion. The reserve, or the
Mortuary Trust Fund, has steadily increased, and at September, 1945, stood at
$126,903.30. Of this amount, $66,371.96 is invested.in bonds. Approximately $55,000
is in the different bank accounts, and the balance has been utilized for paying claims
in advance of assessment. It will be seen from the above that the society is in excellent shape and its finances have been extremely well handled.
Agents.—This society has always employed agents to solicit members and, in addition, has used the membership of the society to solicit. Exhibit 81, which is a distribution of the commission account from 1935 to 1944, inclusive, shows that a total of
$39,602.95 has been paid in commissions. The usual method of paying commissions
has been followed. The agent merely retains the joining fee and a portion of the first
yearly dues which are payable on application. The amount retained is $8 for a $2,500
membership and $5 for the $1,000 and $500 memberships. This society does not appear
to have had the difficulties that some of the other societies had with their agents. This
is probably due to the fact that the same agents have stayed with the society for some
years. It is, of course, admitted that the society could not function without a continual flow of new members.
Claims.—This society has always paid its claims promptly. It is noticeable that
there was a sudden jump in 1943 in the number carried over into 1944. This has been
attributed to the difficulties of obtaining Dominion succession duty releases. The
Dominion " Succession Duty Act " came into force on June 14th, 1941, and it is possible
that this may have had something to do with the delay in paying claims. Other societies
have had a similar experience. In any event, no complaints have been received by me
concerning this society as to any delay in payment.    Neither have any complaints been CC 20 REPORT OF THE ROYAL COMMISSION.
made of this society refusing to pay claims for minor infractions of the by-laws. A very
considerable leeway seems to have been given in the payment of annual dues and assessments. There does not seem to have been very much difficulty with misrepresentation
of health or age on joining. One or two cases have been brought to my attention, but
I have no hesitation in saying that under the circumstances I would have taken the
same action as the society. In all cases the assessments and dues were returned to the
beneficiary of the deceased member.
Dependents.—No particular investigation is made as to whether or not the beneficiary is a dependent. The application form requires that the relationship to the
applicant of the beneficiary shall be shown. In most cases it is, of course, either the
husband, wife, or a child. No cases have been brought to my attention where a payment has been refused on the ground that the beneficiary named was not a dependent.
In the two smaller groups a number of persons who are under age have been
accepted as members. In the $500 group there are thirty-five members 20 or under,
and in the $1,000 group there are twenty-eight. Some are even under 14 years of age.
It is quite obvious that the beneficiaries of these cannot be " husbands, wives, children
or other dependents." In my opinion this offends against the provisions of the " Societies Act," and the practice of soliciting and taking members of such ages should not
be continued.
Annual Meetings.—Notices of annual meetings are mailed to all members. The
attendance at meetings has been small, unless some controversial question was going
to be discussed. Proxies are not used, and more or less the same persons have been
elected as directors for many years. The auditor is appointed at the annual meeting,
and usually attends to give the auditor's report or to answer questions.
Complaints.—No complaints of any kind have been received against this society.
There was a suggestion that in earlier years the society had not been particular about
the state of health of one or two applicants. In later years, however, this was remedied,
and there is no evidence of any kind which would indicate that the society is accepting
memberships from persons who could not ordinarily qualify.
Conclusion.—After a most complete investigation of this society and of its method
of operation, I have no hesitation in saying that I believe that the society, as such, is
honestly and efficiently operated. Every possible check is made, and the books and
records are properly kept. The cost of operation is low; salaries, if anything, are
below the average. The surplus or reserve which I have already referred to shows how
well the society has been run.
As to the soundness of the plan of operation, I have already commented on this.
In my opinion, the $1,000 and $500 groups are not being run on the assessment plan
at all. Their assessments bear no relation whatever to the number of deaths in their
own groups or in the society as a whole. An analysis of the figures shows that the
assessments are much too large if they are to pay for the deaths in their respective
groups. On the other hand, if they are to bear pro rata the share of the deaths in all
groups, then the rates are too small. Furthermore, the fact that the funds realized
from the assessments in the smaller groups are used to pay the assessments in the
larger groups seems quite unfair to me. The fact that the rates of assessment are set
according to age at joining also seems wrong, unless the money paid in is accumulated
in the particular groups for the purpose of paying the claims at a later time. It is
true that the reserve is steadily increasing. The auditor, however, points out that this
reserve would be wiped out if there was in increase of from twenty-five to thirty claims.
Mr. Goodrich frankly admits that the $2,500 group would have difficulty in operating if the funds of the other groups were not used to help out. It would appear to
me that this group has more or less run its course and, like the $2,500 group in the
B.C. Mutual, will start on the down-grade of increasing assessments and decreasing
membership.   The two smaller groups are young and vigorous and, at the moment, are DEATH BENEFIT SOCIETIES.
CC 21
on the up-grade.    The records available are not sufficient to form any conclusions as
to the length of time they will be able to operate.
Statement of Membership for Fiscal Years ending September 30th in each Year.
$2,500 Group.
Year.
Members
Beginning
of Year.
New
Members
joined
during
Year.
Lapsed.
Died.
Members
at End of
Year.
Annual
Cost per
Member.
1935	
2,484
2,817
3,028
3,229
3,511
3,659
3,624
3,632
3,676
3,655
3,655
3,605
389
396
526
612
459
273
262
216
122
118
65
38
159
299
291
283
267
140
132
95
66
80
18
26
26
39
28
41
39
40
48
52
35
2,817
3,028
3,229
3,511
3,659
3,624
3,632
3,676
3,655
3,655
3,605
1936	
$25.45
25 55
1937	
1938	
24.40
1939	
27.05
1940	
28.35
1941	
30.25
1942	
29.20
1943	
31.00
1944	
34.00
1945	
35.00
1946	
$1,000 Group.
Members
Beginning
of Year.
New-
Members
joined
during
Year.
Lapsed.
Died.
Members
at End of
Year.
Annual Cost per Member.
Year.
Age
41-50.
Age
31-40.
Age
16-30.
1938	
38
192
349
490
645
788
998
1,120
38
182
199
216
257
220
292
253
28
42
75
98
73
78
125
4
4
4
6
38
192
349
490
645
788
998
1,120
$15.00
15.00
15.00
15.00
15.00
15.00
15.00
$12.00
12.00
12.00
12.00
12.00
12.00
12.00
1939	
$10.00
1940               	
10.00
194-1	
10.00
1942	
10.00
1943	
10.00
1944	
10.00
1945                  	
10.00
1946	
$500 Group.
Members
Beginning
of Year.
New
Members
joined
during
Year.
Lapsed.
Died.
Members
at End of
Year.
Annual Cost per Member.
Year.
Age
56-60.
Age
46-55.
Age
36-45.
Age
26-35.
Age
16-25.
1942        	
270
408
548
626
276
175
168
123
5
36
25
42
1
1
3
3
270
408
548
626
$6.00
12.00
12.00
12.00
$5.00
10.00
10.00
10.00
$4.00
8.00
8.00
8.00
$3.50
7.00
7.00
7.00
$3.00
1943                       	
6.00
1944            	
6.00
1945	
6.00
1946                    	
CANADIAN MUTUAL BENEFIT ASSOCIATION.
Objects.—This society was incorporated on June 13th, 1922, under the provisions
of the " Societies Act " as it then was. The name was " The Fifteen Hundred Club of
Okanagan District."    The society, according to the original declaration as filed, had CC 22 REPORT OF THE ROYAL COMMISSION.
only one object, as follows: " The object of the Society is to make provision by means
of subscriptions against death, for relieving the widows, orphan children or other
dependents of members, but shall not otherwise carry on the business of insurance and
shall not be considered as a trading or mercantile venture or for the purposes of commercial gain."
It is pointed out that the object above quoted is almost identical with subsection (2)
of section 3 of the " Societies Act," as amended in 1922. Strictly speaking, under the
" Societies Act" as it was then, this was not an object for which a society could be
incorporated, but was a power which a properly incorporated society could exercise.
Early History.—At the time of the incorporation, all the signatories to the declaration resided in Summerland, B.C., and for the first seven years of its existence it was
purely a local organization carrying on business in a very small way. In 1929 it only
had a membership of 91.
In 1929 George W. Speirs became identified with this society. This is the same
man who was employed by the B.C. Mutual as a salesman in its early years; in fact,
the records of practically all of the early societies show that he at one time or another
was a salesman for them in their early years. However, on September 19th, 1929, he
was appointed permanent secretary-treasurer of this society. At the same time, the
name of the society was changed to the " Canadian Mutual Benefit Association." This
name has continued to the present day. By-laws were amended and the head office of
the association was moved from Summerland to Vancouver. A year later, in October,
1930, the by-laws were further amended to provide that the permanent secretary-
treasurer should also be the business manager of the association and that he could only
be removed " for cause, namely fraud, mismanagement or inability to perform his
duties." Later on the by-laws were further amended to provide for an assistant
secretary-treasurer who would automatically become the permanent secretary-treasurer
upon the death or resignation of the present secretary-treasurer. It is significant that
Mr. Speirs' son is the assistant secretary-treasurer.
The terms of the engagement of Mr. Speirs were set by a meeting of the board of
directors held on December 12th, 1929, at which the minutes provided " That the balance of fees received from members after placing $2.00 in the mortuary trust fund be
used first, to pay all expenses of the Association, and secondly, the remainder to be paid
to G. W. Speirs, permanent Secretary, as remuneration for his services to the Association." On November 12th, 1931, this arrangement was changed to provide " that he be
paid $3.00 of each member's annual dues and the $5.00 membership received from new
members in full of his services, out of which he has to first pay all the expenses of
operating the Association for the ensuing year."
Membership.—The membership rapidly increased. As stated above, in 1929 the
membership was ninety-one. In October, 1930, it was over 1,300. In 1934 the new
group known as Group B, with a maximum of $1,000 payable on death, was formed.
The existing members with a maximum of $2,500, payable on death, were known as
Group A. In 1936 Group A passed the 2,500 mark. In 1940 it reached its largest
membership of 3,462. Since then it has declined, until at the end of 1945 the membership was 3,065. Group B reached its peak in 1940 when it had 1,747 members. At the
end of 1945 it had 1,346.
Satisfactory records have not been kept of the age of members. However, a graph
was filed giving the ages as of March, 1943. It showed that of 3,207 members in
Group A at that time 2,427 or 79.9 per cent, were over 50 years of age. Group B, with
a membership of 1,403, had 1,347 or 96 per cent, over 50 years of age.
As the membership has decreased since then, it is safe to say that the percentage of
members over 50 has increased rather than decreased. DEATH BENEFIT SOCIETIES. CC 23
By-laws.—The by-laws of this society have been examined in detail. They have
been kept up to date, and every change in the organization of the society has been
preceded by a change in the by-laws. In the first few years after the move to
Vancouver the by-laws were amended yearly. Latterly, however, there have been
few changes. The policy of printing the by-laws in the certificate of membership is to
be commended. However, there was some criticism of the method used in amending
the by-laws. I refer particularly to the amendment in 1942, which cut out disability
benefits. A Mr. Rambert appeared before me and complained that By-law No. 23,
which gave a right to claim for total disability, was in his certificate when he joined.
In 1944, when he contracted Parkinson's disease and was totally disabled, he applied
for the disability benefit. He was told that clause 23 had been struck out in 1942, and
that all claims for disability contracted after October 29th, 1942, were barred. Evidence was given that the notice of intention to propose the amendment at the annual
meeting had been sent out, but no notice had been sent out after the annual meeting
advising that the amendment had carried. The certificate of membership states on
the face of it that it is given " not only subject to the Constitution and By-laws of the
Association as they now exist, but as the same may be lawfully amended from time
to time." There is no question but what the association properly amended the by-law.
No doubt they were strictly within their rights in not sending notice to all the
members after the by-law was amended. It is questionable, however, whether or not
this sort of thing is fair to the members. I am aware that section 82 (2) of the
" Insurance Act," " Revised Statutes of British Columbia, 1936," chapter 133, authorizes
such practices in regard to fraternal societies; but nevertheless it offends against my
sense of justice that a contract of the importance of a membership in a society such as
this can be amended without the actual consent of one of the parties.
By-law No. 12 is of questionable validity.    It is as follows:—
12. When a member shall have completed 20 years of continuous membership in the
Society, he shall be entitled to a pro rata share of any surplus set aside by the Board
from the mortuary trust account accumulated by the society, and made available by the
Board for distribution among the members.
In my opinion section 5 of the " Societies Act" makes this by-law ultra vires.
This section provides that a society shall not declare any dividend or distribute its
property amongst the members during the existence of the society.
Attention should be drawn to the misuse of this section in advertising put out by
the society. They are advertising pamphlets which were circulated throughout the
membership and were given to the agents to distribute when canvassing for members
(transcript, page 650).    This exhibit contains the following paragraph:—
Twenty Year Plan. At the expiration of 20 years in the Association a member shall
be entitled to a pro rata share of the surplus reserve fund and shall receive same either
in cash or apply same to meet future dues and assessments.
It is pointed out that the above quotation is not in accordance with By-law No. 12.
Actually, of course, no sum has been set aside by the directors, and although there are
persons who have been members for twenty years, they do not participate in any fund.
Misleading statements such as these in advertising literature are to be strongly
condemned.
Certificate of Membership.—Some criticism can be made of the certificate of
membership. I deprecate strongly the practice of this society and others who set out
in large black-face type the maximum amount of the policy with the preceding words
" to receive an amount not in excess of " in small type. So long as the society is paying
the maximum amount there is no criticism. But a number of complaints have been
received against smaller societies, due to the fact that the applicant was misled by the CC 24 REPORT OF THE ROYAL COMMISSION.
large black-face type and believed that he was receiving a certificate which guaranteed
the maximum amount.
A further criticism of the wording is that the certificate purports to be payable
to the executors, administrators, or assigns of the registered member in case the
beneficiary has predeceased the member and no change of beneficiary has been registered
with the society. This clearly contravenes section 3, subsection (2), of the " Societies
Act," as the only persons who can be protected in a society such as this are the husband,
the wife, children or other dependents of the members.
Finances.—So far as the accounting system is concerned it seems adequate. Every
possible precaution is taken to see that the funds are placed in their proper accounts.
I understand that none of those handling the money of the society are bonded. This,
I think, should be remedied. I do not agree with the policy of utilizing funds from
the mortuary trust account to pay expenses of the society. This, of course, is properly
covered by the by-law and is a matter of internal management. I would point out that
originally all expenses of the society were to be paid out of the portion of the annual
dues allocated to the secretary-manager (see page 22). This, however, was changed,
and now the directors' fees and expenses, medical fees, auditors' fees, legal expenses,
office furniture and depreciation, books of record and account, and the cost of investigating and settling claims are all paid out of the mortuary trust account. This amounts
to a considerable sum. In 1942 it amounted to over $4,000. From 1932 to 1944 these
costs totalled over $44,000.
I also do not agree with the method in which the remuneration to the secretary-
treasurer or business manager is paid. Under By-law No. 6, $2 of the annual dues
of Group A members is paid into the mortuary trust fund, and the balance of $4 is to
be paid into a general account to the credit of the association. Under the resolution
of the directors, Mr. Speirs is paid " $10.00 from each new member of Group 'A' of the
Association, and $3.00 out of the subsequent annual dues of Group ' A', in addition
to the membership fees received from the new members of Group ' B ', and $2.00 out
of each member's annual dues of Group ' B ', in full of his services as Business Manager,
out of which he will first pay all the expenses of operating the Association during the
ensuing year, with the exception of those expenses set forth in By-laws Nos. 5 and 22
which are charged on the mortuary trust fund."
The matter is further complicated by the fact that By-law No. 7 provides that
" the directors may in their absolute discretion use up to 50 per cent, of the interest
earned on the reserve fund for advertising purposes for the benefit of the Society."
The result is that there is a continual juggling of the accounts. For instance, all
advertising is apparently charged to the mortuary trust fund and at the end of the
year 50 per cent, of it is charged back to Mr. Speirs or the General Account. The
directors, instead of exercising their discretion as intended by the by-law, simply allow
Mr. Speirs the full 50 per cent.
It seems to me that the method adopted by the Empire Home Benefit is much
better. There the secretary-manager is paid a salary depending upon the membership.
All other expenses of the society are paid out of the General Account and there is no
confusion as to whether or not the expenses are those of the society or those of the
secretary-manager. In the case of this society the secretary, Mr. Speirs, in 1944
charged up travelling and automobile expenses amounting to $3,140.50. The total
of new members obtained during that year was eighty-four, of which Mr. Speirs
obtained six in Group A and two in Group B. In cross-examination he could give no
explanation of why he expended such a large amount in automobile and travelling
expenses. I have no doubt that the truth of the matter is that he kept no track of his
expenses whatsoever and simply drew as much as the traffic would bear.    I have not DEATH BENEFIT SOCIETIES. CC 25
checked back on other years, but I have no doubt that the same situation has prevailed
in at least the last four years.
The method adopted for the assessment of claims is to allow a number of claims
to accumulate and when the proofs have been completed to send out the notice of
assessment, the method followed being to number each claim and in the notice of
assessment to give the names of the deceased members. This system is to be commended and the publication of the names of the deceased members shows exactly
where the money is going. However, it should be pointed out that the number of
claims unpaid at the end of each year is increasing. In 1944, which is the last year
in which the figures are available, twenty-two claims in Group A were unpaid. This
is twice the number that there ever had been paid. In Group B there were ten claims
unpaid. This, however, was not unusual, as the number had varied from eight to
eleven in the last six years.
In considering this matter of carrying over claims it also should be pointed out
that the practice in this society has been to carry forward as assets the amount paid
on disability claims. At the end of September, 1944, this amounted to $16,450. This
means that this amount has not yet been assessed. If one adds this amount to the total
amount of claims unpaid, it amounts to a very large sum of money. It would seem to me
that this society and other societies would be much better off if they assessed as soon as
possible and, in addition, showed on their balance-sheets as contingent liabilities the
amount of the claims on hand which had not yet been proved or assessed. As it is now
the societies go along from year to year putting off the evil day of showing a full
amount of their probable liabilities.
Appended herto is a schedule showing the yearly amounts paid by the members
in each group over the last ten years. Group A runs from $11 in 1930 to $41.55 in
1944. Group B runs from $6 in 1935, which was the first year of its existence, to
$30.45 in 1944. However, it would probably be fairer to compare the years during
which the membership has remained very much the same. For instance, in the year
1937 the membership at the end of the year was 3,001. The cost in that year was
$31.60. In 1944 the membership was 3,108 and the cost $41.55, an increase of
approximately one-third. In Group B the membership at the end of 1938 was 1,638
and the cost was $17.10. At the end of 1943 the membership was 1,425 and the cost
was $20.60. At the end of 1944 the membership was 1,294 and the cost was $30.40.
In this group the increase has been more marked.
Annual Meetings.—The practice has been to hold annual meetings at various places
throughout the Province. Vancouver, West Summerland, Nelson, Kamloops, Chilliwack, and Penticton have all been selected as the place for the annual meeting. There
has been some criticism of this due to the fact that when the meeting is held " up-
country " it is practically impossible for any person from Vancouver to attend. On
the other hand, however, when the meetings are held in Vancouver the attendance is
even smaller than that at the " up-country " meetings.
It is surprising that the attendance should be so small. Two interpretations
could be put on this, one that the members as a whole are satisfied with the management
and the other that, as expressed by one man, the president and secretary have control
of the association by virtue of the proxy which is included in the application for
membership. It is worded as follows: " If admitted to membership, I agree to abide
by the rules and By-laws of the Association and I irrevocably appoint the Secretary-
Treasurer and/or President my proxy to vote in my absence."
As pointed out by Mr. Cameron in his argument, this proxy is of doubtful validity.
However, the president quite frankly admits that prior to an annual meeting he selects
proxies from members who reside in Saskatchewan or elsewhere out of the Province and CC 26 REPORT OF THE ROYAL COMMISSION.
takes these along with him to the annual meeting, so as to ensure that he would have
control of the meeting in case there should be an attempt to oust the management.
I have no doubt at all that the president, in adopting these tactics, believes that
he is acting in the best interest of the society. As a matter of fact the proxies
have never yet been used. It is a very debatable point whether proxies should be
allowed in any event. Certainly they should not be included in the application for
membership. If they are allowed, the members should be free to sign one for each
annual meeting and no compulsion should be placed upon them that in joining the
society they must appoint the president or secretary-treasurer as their proxy.
Directors.—The directors are elected at the annual meeting. It is noticeable that
there have been very few changes in the personnel during the years under review.
Attention, however, should be drawn to the fact that E. N. Haworth, who is an employee in the office of the association, was elected a director in 1942. No complaint
has been made as to the carrying out of his duties. I do not, however, agree that in
a society such as this a paid employee should be director, especially when under the
terms of Mr. Speirs' contract he personally is liable for the payment of the salaries
of the office staff.
Complaints.—The one serious complaint against this society has already been
noted. Several inquiries were made and some criticism has been advanced against the
large expense account of the secretary-treasurer. This is a matter of internal management, but when it reaches the figure of over $25,000 in ten years the membership as a
whole should be apprised of it. There would not be much criticism of the account
whilst the membership was increasing. However, ever since 1940 the membership has
been decreasing whilst the expense account has increased.
Conclusion.—So far as this society is concerned there can be no criticism of the
way in which the records of the society are kept. The by-laws are up to date, the
office staff is efficient, and so far as I could see the method of keeping the records was
excellent. I have already drawn attention to the fact that the sums paid to Mr. Speirs
for salary and travelling expenses are out of all proportion to the services that he is
rendering- at the present time. He, of course, justifies his extravagant habits by
pointing out that he was the person responsible for the development of the society.
It was admitted both by Mr. Speirs and Mr. Bell that they have had a considerable
amount of difficulty with agents. This, no doubt, is due to the method of paying them
and also to the class of person who, as a rule, is willing to sell memberships in these
societies.
The figures would indicate that there has been a gradual increase in the amount
of assessments payable each year and a corresponding increase in the percentage of
deaths. Group B, of course, owing to the high age-group, is rapidly increasing. Its
assessments have gone from $10 in 1936 to $30.45 in 1944. Further increases unquestionably will be experienced.
Mr. Bell was quite frank in saying that the continued existence of the society
depends upon the continual obtaining of new members. Mr. Speirs, the secretary-
treasurer, claimed that with the ending of the war he would be able to get good agents
again, who in turn would obtain the necessary new members. It is noted that in
societies operating on these principles there must be a continual fight for new membership.    In my final remarks I will deal with this aspect more fully. DEATH BENEFIT SOCIETIES.
CC 27
Statement of Membership of Fiscal Years Ending September 30th in each Year.
Group A.
Year.
Members
beginning
of Year.
New
Members.
Reinstatements.
Deaths.
Disabilities.
Lapses.
Members at
End  of
Year.
Cost per
Member.
1936
1937	
2,320
2,758
3.001
3,365
3,462
3,217
3,004
3,078
2,913
3,108
768
1,114
566
720
542
195
148
129
84
77
50
24
109
231
418
41
22
29
28
53
34
43
41
40
45
47
2
4
4
1
4
9
3
1
306
867
170
569
799
380
139
484
262
176
2,758
3,001
3,365
3,462
3,217
3,004
3,078
2,913
3,108
3,003
$25.00
31.60
1938	
30.80
1939	
36.20
1940    .     .
34.75
1941	
36.50
1942	
37.00
1943.   .     .
40.70
1944	
41.55
1945	
GroupB.
1936..
1937..
1938..
1939..
1940..
1941..
1942..
1943..
1944..
1945..
382
694
1,109
1,638
1,747
1,561
1,394
1,511
1,425
1,294
366
690
653
527
162
60
85
47
40
38
1
53
13
262
19
105
40
378
19
45
322
112
33
306
156
31
93
5
31
107
13
42
142
17
35
72
694
1,109
1,638
1,747
1,561
1,394
1,511
1,425
1,294
1,242
$10.00
14.00
17.10
22.40
27.70
24.60
26.80
20.60
30.45
THE FAMILY ASSURANCE SOCIETY.
(Formerly The Family Beneficiary Society.)
Name.—This society was incorporated pursuant to the provisions of the " Societies
Act" on May 13th, 1924, under Certificate of Incorporation No. 1368. The name at
that time was the " B.C. Beneficial Club," and its operations were to be carried on
chiefly in the City of Vancouver, in the Province of British Columbia.
On the 19th of November, 1925, the name of the society was changed to " The
Family Beneficiary Society." It carried on under that name until the 18th of July,
1945, when the name was changed to " The Family Assurance Society."
Objects.—The original objects of this society were: " The object of the Society is
to stimulate, encourage and foster amongst its members clean healthy living, amusements and recreation; to promote sobriety and good citizenship; to resist all modern
tendencies leading to destroy the home life of the people; and to make provision for
insurance fund for the benefit of the dependents of deceased members."
On the 25th of January, 1926, the objects of the society were changed to the
following:—
"(a.)  To make provision for the educational advancement of deserving students in British Columbia, in the fields of the arts, science and music,
by establishing from time to time scholarships, prizes and nominations
for competition and award;
"(b.) To disseminate among the members from time to time authoritative
information on the conservation of health and life;
"(c.)   To make provision by means of subscriptions against sickness, disability,
unavoidable accident or death, for the benefit of its members and for CC 28 REPORT OF THE ROYAL COMMISSION.
relieving their widows, children or other dependents; but not otherwise
to carry on the business of insurance and for this purpose to divide the
membership into various classes or groups with various rights and
privileges."
These objects have remained the same until the present date. Mr. Mackenzie,
the manager and secretary-treasurer, when asked if the society had at any time carried
out or taken steps to carry out the objects mentioned in (a) and (b) above, stated
that the society had not. It had only provided for death benefits and had not at any
time paid benefits for sickness or disability.
The society has always carried on its business in the City of Vancouver. Originally
a Mr. Grassett was the secretary and manager. He carried on as such until 1942
when Garfield King, barrister and solicitor, was appointed for a short period. In
April, 1943, Alex Mackenzie, the present manager and secretary-treasurer, was
appointed.
Directors.—Dr. D. A. Dunbar was elected president in 1928 and he has remained
in that office ever since. There were few changes in the directors until 1943, when at
a special meeting a complete new board, with the exception of Dr. Dunbar, was elected.
They are all paid for their services, the total amount paid to all per year being between
$400 and $500.
By-laws.—There have been few changes in the by-laws of the society, the last
printed copy being issued on May 4th, 1942, and revised up to that date. These by-laws
have not been changed since then.
The by-laws provide that there shall be an assessment " payable in advance by
each member for every death among the members." The mechanics whereby the
above-mentioned clause is worked out are as follows: Each member pays assessments
in advance in the amount of $5. They are credited to each member's assessment
account and they are not used for any other purpose other than the payment and
settlement of claims. Under the provisions of the by-law, the manager determines the
time at which the advance assessment shall be made. In 1945 this system was changed
to provide for a voluntary payment of a full year's cost in advance. The amount
necessary was set at the sum of $25. Apparently a large number of the members took
advantage of this and paid their dues and assessments in that manner. The by-law,
however, was not changed and the advance payment should still be credited to the
member's assessment account.
The by-laws further provide that the proceeds of each assessment shall be paid
to the beneficiary, but the total amount shall not exceed the sum of $2,500. The by-law
further provides that a certificate of membership shall be issued to each member and
that such certificate shall provide, " that upon the death of such member, the beneficiary
named therein shall be paid by the Society the amount as provided in clause 6 (a)
hereof." Clause 6 (a), as already stated, merely provides that the proceeds of the
assessment shall be paid to the beneficiary but shall not exceed the sum of $2,500.
Certificate of Membership.—It should be observed that originally the certificate of
membership provided that the beneficiary would receive $1 for each member but not
to exceed $2,500. This, however, was changed, and now it provides, " on the death
of the said member while a member of this Society in good standing, there shall be
paid to the beneficiary named herein the sum of $2,500.00." It will be observed that
this is a departure from the membership certificates of the other societies. In fact
this is the only society in which there is a definite sum payable. This society, however,
is completely divorced from the argument submitted by C. H. Locke, K.C. Mr.
Mackenzie in his evidence admits the difference and in his brief maintains that their
system is adequate and quite workable. DEATH BENEFIT  SOCIETIES. CC 29
It should also be noted that this society has a provision in its by-laws whereby a
member, after having completed ten years' continuous membership in the society, shall
be entitled to a pro rata share " of any surplus set aside by the Board from the reserve
fund accumulated by the Society and made available by the Board for distribution
among the members." It is admitted that no sum has ever been set aside. It should be
observed that this provision in the by-laws offends against section 5 of the " Societies
Act."
Groups.—In 1938 the by-laws were amended to provide for a " limited benefit "
group. The sum payable to the beneficiaries of the members of this group should not
exceed the sum of $1,000. Special certificates of membership were issued to the
members of this group which were identical with those of the other group, except that
the amount payable was limited to $1,000. Membership in this group has never been
large. At the end of 1939 there were only forty-eight members and in 1945, ninety-
three.
Membership.—The membership of this society has never been large. In 1935
there were 1,362 members. December, 1945, there were 1,981 Group A ($2,500) members and 93 Group B members. The peak of membership was reached in 1941 when
it had 2,192 members in good standing at the end of the year. Mr. Mackenzie, the
manager, is not familiar with the policy adopted by the previous manager, Mr. Grassett,
in obtaining members. At the present time, however, he is extremely strict. The
age-limits are from 15 to 47 for both groups. He states that if there is the slightest
indication of anything irregular in the application he refers it to Dr. Dunbar. The
applicant has to fill in a medical form and this is gone over by the doctor. In certain
cases the doctor will insist upon a physical examination. If the applicant is outside of
the city, the applicant may have to go to a doctor for a report, in which case the report
is referred to Dr. Dunbar. In the majority of cases, in addition to the medical report,
a report from the Retail Credit Bureau is also obtained. This is the same organization
which gives reports on applications for insurance in regularly constituted companies.
It will be observed that in this society practically all of the safeguards that the ordinary
insurance company utilizes are utilized here. This society, therefore, is not serving
those who cannot obtain insurance with ordinary companies.
At the present time no agents are being employed owing to the fact that the
company did not wish to put on a membership campaign during the course of this
investigation. In the past, however, agents have been employed and they were paid
in some cases the $10 joining fee and in other cases $8. A member of the society who
sends in an application form receives $7.
With this society the present manager insists upon the payment of the membership
fee to the office. He then actually pays the agent. Under previous management this
was not the case. This is one of the few societies where this practice is insisted upon
and they are to be commended for it. The point that Mr. Mackenzie makes is that
if the money comes into the office and the membership is refused, the payment is simply
returned and the agent receives nothing. In many other societies where the agent
retains the joining fee and then the application is refused, the money is repaid to the
applicant out of the funds of the society and charged up to the agent. In the majority
of cases this is a dead loss to the society, as the agent does not reimburse the society.
Finances.—The method of handling the assessments and the accounting system
set up by the auditor is good. At the time of the first hearing I expressed some criticism of the fact that there was no control account. At the hearing on February 12th,
1946, Mr. Mackenzie stated that this had been corrected and that now it was possible
to obtain an accurate balance irrespective of the number of deaths and lapses. I did
not make a personal examination of the office records, but I was impressed by the CC 30 REPORT OF THE ROYAL COMMISSION.
evidence given by Mr. Mackenzie and I have no doubt that the records are meticulously
kept.
I understand that during the regime of Mr. Grassett he was paid the sum of $3
out of each member's annual dues and he had to pay out of that the operating, office,
and secretarial expenses. This unquestionably was an expensive way of operating the
society. In 1942, which was Mr. Grassett's last year, the cost was $11,649.35 and the
excess of revenue over expenditure was only $1,547. In 1943, during the time that
Mr. King was secretary, the cost was $8,957.54 and the excess of revenue over expenditure was $4,123.42. In 1944 and 1945, during Mr. Mackenzie's tenure of office, the
excess of income over expenditure was $3,615.74 and $3,871.62 respectively.
As mentioned before in dealing with other societies, I am of the opinion, and the
above figures show, that it is much better from the standpoint of the society to employ
the manager on a regular salary basis and pay all expenses from the funds of the
society.
In 1945, with the inauguration of the new system of advance yearly assessments
of $25 instead of an advance quarterly assessment of $5, a situation has developed
which should be rectified. In the auditor's statement for the year 1945 he differentiates
between assets of the society and trust funds. For instance, on his balance-sheet he
shows trust funds of $39,521.90, on the liability side he shows " advance assessment
trust account, $39,521.90," and underneath that he has the following note: "Note:
There are seven claims pending with a maximum liability of $10,000.00." In the
balance-sheet as published by the society and delivered to the members the above-
quoted note is omitted. The president, in his statement, states, " Our reserve stands
at $94,267.49." This is not in accordance with the auditor's report. His report shows
that the general reserve is $54,415.59. The president has added the trust funds to
this amount, thus making up the total of $94,267.49.
Mr. Mackenzie, in his evidence taken in February of this year, did not seem to
appreciate the difference between reserve funds belonging to the society and advance
assessments which actually belong to the members. He stated on page 6261 of the
evidence that if the advance assessment was more than sufficient to pay claims the
balance remains in the reserve account. If it is the intention of the society to adopt
this practice By-law No. 5 should be amended, for as the by-laws stand the advance
assessment is credited to the member and presumably any surplus at the end of the
year belongs to the member.
Furthermore, the society should not publish what purports to be the balance-sheet
of the society and leave off it the very pertinent note which the auditor appended to
his signed statement showing that there were seven claims pending with a maximum
liability of $10,000. It is true that this amount is shown under the item " 1945 claims
paid " as a balance awaiting Succession Duties release, but it is not shown on the
balance-sheet which purports to be the one issued by the auditor although the auditor,
as stated above, in his signed report appended the above-mentioned note.
Claims.—There can be no criticism of this society of the manner in which they pay
their claims. A certain number must necessarily be carried over. In 1942 there .were
eight carried over at the end of the year. This was reduced to five in 1943 and remained at that number in 1944. There is no question but what these claims were
simply awaiting Succession Duties releases and the society was not allowed by law
to pay them. Payment of claims, therefore, is prompt and every assistance is given
the claimant.
Annual Meetings.—Attendance at the ordinary annual meeting is small. On two
occasions, however, matters of importance came before the meetings, in which case
there was a comparatively large turn-out of members. Proxies are used and are sent
out with the secretary's report.    They are in blank and are in the proper form.    Un- DEATH BENEFIT SOCIETIES. CC 31
doubtedly at at least one meeting there was an attempt to gain control of the meeting
and a very large number of proxies were used. The use of them, however, is permitted
by the by-laws and it has been the practice for some time to send out a proxy with
the notice of the annual meeting.
Advertising.—This society has recently embarked on a comprehensive advertising
campaign.    Circulars were issued, quotations from which appear below:—
$2,500.00
LIFE INSURANCE
for less than 50 cents per week.
Facts :
1. Over half a million dollars paid beneficiaries.
2. It is insurance at cost, not operated for profit.
In another circular they stated as follows:—
Facts :
Our $2,500.00- policy costs $25.00 per year, which is less than 50 cents per week.
That is the total amount you pay.    There have been no other charges for assessments
over the average of $25.00 per year since we inaugurated this plan many years ago.
In another circular they state that each member contributes by periodic assessments
to a trust fund which is used only for the payment of death claims, and which provides
$2,500 to the beneficiary of a deceased member.    Expenses and administration are
covered by the small annual dues of $5, of which $2 goes into a reserve fund.    At
another place in the same circular appears this:—
This is insurance at cost; no policy holder has ever lost money or any of the savings
in this Society, for if forced at any time to drop the policy, the member so doing has
received value for every cent it has cost him. He has received $2,500.00 protection for
every year it has been in force at a minimum of cost.
The above quotations are given to show the type of advertising that is issued by
this society. It emphasizes the fact that it is selling life insurance. The fact that
it is insurance by assessment is played down but the fact that it costs $25 per year is
played up.
When Dr. Dunbar and Mr. Mackenzie were questioned about this advertising and
the method that is used, they both entered into a long tirade against actuaries. Dr.
Dunbar went so far as to say that actuarial statistics were not based on actual figures
and that the tables which had been accepted for years are wrong. When asked how
they made their assessments, he stated at pages 6254 and 6255 as follows:—
THE COMMISSIONER: Yes, but every actuary says, and I am inclined to take
their word for it, that you cannot get any proper death mortality table on the exposure
of 2,000 members.    They want hundreds of thousands of people.
DR. DUNBAR:   All right.    We simply charge on what the mortality is.
THE COMMISSIONER: No, as far as I can see, you are deciding yourself the
actuaries are wrong and you are right, and you are setting up your rates accordingly.
So far that has worked satisfactorily.
DR. DUNBAR: We assess—and I leave it to Mr. Mackenzie there if I am not
right—we assess on .actual mortality rate.    We know the mortality rate.
THE COMMISSIONER:   Well, on what rate;  on the rate of the year before?
DR. DUNBAR: The death rate of the year before is taken, yes, and we set up an
advance assessment which is used for nothing less than paying death rates. We cannot
use it for anything else. We are tied. Those accounts are kept separate and when we
charge that amount, he has got his credit there. It is not used up, only on the death
rate whatever it may be.    Is that not right, Mr. Mackenzie?
MR. MACKENZIE: That is right.
I must take it that Dr. Dunbar is speaking for the society and that the method of
setting their advance assessment or rate, as he calls it, is as he states. Logically this
system is ridiculous. It takes no account of the fact that each year each member is
one year older. Whether Dr. Dunbar believes in mortality tables or not, he surely
must admit that a group of older people will have more deaths than a group of younger CC 32 REPORT OF THE ROYAL COMMISSION.
people. Peculiarly enough, the experience of this society, if I am to accept their
records as correct, indicates that this has worked up to the present. Since 1940 the
membership has remained practically the same, between 1,900 and 2,100. The deaths
have been as follows:—
1940  13 1943  26
1941  18 1944   15
1942  22 1945  14
During these years the cost to the member and in fact for the past ten years has been
$25 per year, with the exception of 1943 in which the cost was $30. However, despite
the figures of this society, the march of time is inevitable. Each year the age has gone
up. , In 1942 out of 2,189 members, 1,617 or 78 per cent, were 45 years of age and over.
There has been very little change in membership since then so that accordingly
78 per cent, of the membership are now 49 years or over. There is no doubt in my
mind that with the age of the members going up, the rate of mortality will go up and
this society will have a real difficulty in paying the $2,500 for which they are liable.
It should be observed here that this society is in exactly the same position as
fraternal societies were in some thirty years ago. This society has a contract or a
certificate of membership under the terms of which it agrees to pay the sum of $2,500
upon the death of a member. They are, in addition, collecting advance assessments
which they state in their advertising is sufficient. The management repudiates completely mortality tables which have been recognized for years. The management claims
that it can base their fees on the mortality for the preceding years. So far they have
succeeded, but death is inevitable and as the group grows older there is no question
but what the cost must go up. It is true that if large numbers of younger members
are brought in, temporary relief may be given, but with a membership certificate
guaranteeing a fixed amount the day must come when it is impossible for this society
to carry on.
It should be mentioned that Garfield King, who was for many years the solicitor
for the society and for a short period was secretary, was called as a witness. Owing
to the fact that he is not now on friendly terms with the present board of directors of
the society, I probably should not attach as much weight to his evidence as I ordinarily
would have. However, his evidence is that during his term of office he drew the attention of the directors on several occasions to the fact that a difficult time would be ahead
for the society unless their methods were changed. The directors, therefore, cannot
plead ignorance of the inevitable result which will follow if they persist in their
present methods.
Conclusion.—After a thorough examination of the books and records of this association, I am satisfied that at the present time it is being run honestly. As stated
before, I did not agree with their method or scheme under which the society operates,
but I have no hesitation in saying that the management is sincere in their, what I
might call mistaken, beliefs and certainly they are honest in the actual operation of the
society.
Considerable evidence was given and figures were uncovered which would indicate
that prior to the appointment of Mr. King and Mr. Mackenzie the society was formerly
run for Mr. Grassett, the secretary-manager, and not for the members. If the same
efficient management had been given the society in its early years so large a surplus
would have been accumulated that there would be no difficulty in converting the society
to what I would call a sound basis.
As pointed out before this society enters into a definite contract to pay to each
of its members the sum of $2,500. As they have some 1,900 members they have a
definite liability of over $5,000,000. To meet this they have a reserve in cash and
bonds of $54,415.19 and $39,521.90 of advance assessments.    This from any point of DEATH BENEFIT  SOCIETIES.
CC 33
view is totally inadequate, especially when the age of the members  is taken  into
consideration.
Statement of Membership for Fiscal Years ending December 31st in Each Year.
Year.
Members at
Beginning
of Year.
New
Members.
Lapses.
Deaths.
Members
at End
of Year.
Cost per
Member.
1935.
1936.
1937.
1938
1939
1940
1941.
1942.
1943
1944
1945
1,362
1,468
1,562
1,636
1,941
2,096
2,090
2,192
2,135
2,092
91
132
6
215
109
12
199
115
10
410
94
11
450
267
12
191
229
14
318
199
17
138
174
20
108
131
20
83
30
17
54
23
14
1,468
1,562
1,636
1,941
2,096
2,090
2,192
2,135
2,092
2,060
1.981A
93B
20.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
30.00
25.00
25.00
Note.—The above figures are taken from Exhibit 78 and have been cheeked with Exhibits 62 to 71.    It is impossible to reconcile them.    The figures for 1945 are taken from Mr. Mackenzie's letter to me of February 7th, 1946.
THE INTERIOR MUTUAL BENEFIT ASSOCIATION.
Name.—This society was incorporated on December 6th, 1923, under the " Societies Act." Certificate of Incorporation No. 1337 was issued on that date. The
name was originally " The 2000 Club of Similkameen District," and the locality in
which it purported to carry on its operations was Penticton, B.C. On June 15th, 1936,
the name of this society was changed to " The Interior Mutual Benefit Association."
The locality of its operations was changed from Penticton to the City of Vancouver on
the 12th day of January, 1937, where it has carried on ever since.
Objects.—The objects of the society originally were as follows: " The objects of
the Club shall be to obtain full membership and to furnish protection to the beneficiaries of its members by means of subscriptions, but not otherwise to carry on the
business of insurance. It shall not be conducted as a trading or mercantile business,
nor for the purpose of commercial gain, and shall in no way be connected with any
secret society."
These objects were changed on December 23rd, 1938, to read as follows: " To
make provision for benefit of its members by means of subscriptions against sickness,
disability, unavoidable misfortune or death, and for relieving their husbands, wives,
children or other dependents, but not otherwise to carry on the business of insurance."
These objects are in force at the present time.
At the time of incorporation all of the original incorporators resided in the City
of Penticton, and operations were carried on there until 1937, when the head office was
moved to Vancouver. Originally a Charles Cordy was the secretary. He continued
as such until 1936, when Alec Ogston succeeded him. He is the present secretary-
manager.
The society was only carried on in a very small way until Mr. Ogston took over the
secretaryship. In 1936, at the time he joined, it had a membership of 150. From
then on it gradually increased until in 1943 it reached its peak of 2,771 in all groups.
By-laws.—Like all of these societies, the by-laws were originally very simple. They
provided that the joining fee should be $4 plus dues for the current year. The certificate of membership provided for payment to the beneficiary of the deceased member
" an amount equal to the sum paid into the mortuary fund on the last assessment." CC 34 REPORT OF THE ROYAL COMMISSION.
The secretary-manager was to be appointed by the directors and only to be removed for
cause at a general meeting called for that purpose. The by-laws further provided that
no officer other than the secretary-treasurer could be paid for his services.
Many amendments have been made in these by-laws since 1936. They were
amended in June, 1936; again in December, 1936; again on December 16th, 1937; in
April, 1938; December, 1938; December, 1939; December, 1940; July, 1941; then
in August, 1943, there was a complete consolidation of the by-laws. These are still in
existence without any further amendments.
Under the by-laws as they exist at the present time the membership is divided into
three groups: Group 1, in which the claim under the certificate of membership is
limited to the sum of $2,000; Group 2, in which it is limited to $1,000; and Group 3,
in which it is limited to $500. These latter two groups were formerly known as 2 (a)
and 2 (b). In Group 1 the age is from 18 to 51; in Group 2, from 18 to 56; and in
Group 3, from 18 to 60. In all of the groups the beneficiary of the member is expressly
limited to such person as is under the " Societies Act " entitled to receive benefits.
Proof of age must be submitted by the member within two years of the date of his
certificate, and if this proof is not submitted, the certificate of membership is cancelled.
Payments by the members are divided into the application fee, the quarterly dues,
and assessments. Application fee for all is $10. The dues vary according to the
group: Group 1, $1.25 per quarter; Group 2, $1 per quarter. Assessments also vary
according to the group.    All, however, are payable quarterly.
Group 1 has an unusual provision.    It is as follows:—
19. ... the Directors, taking into account the claims paid for which no assessment
has been levied and the claims likely to be paid during the next succeeding quarter, shall,
before the end of each quarter, determine the number of claims for which an assessment
shall be made and the rate of assessment per claim for the next succeeding quarter, and
the members liable therefor and when the membership is divided into groups and classes
shall determine the respective rates of assessment for the several groups and classes.
A special assessment not exceeding $1.00 per member in any quarter in addition to
assessments to pay claims may be levied on and shall be paid by all members at any time
if, in the opinion of the Directors, the financial position of the Society or group makes
such an assessment necessary or desirable.
In actual practice Mr. Ogston states that the directors, prior to sending out a
quarterly notice of assessment, decide how many claims are likely to be completed during the next quarter and they assess for those claims. In other words, an assessment
is never made to pay a specific claim. The money, when it comes in, may be used to
pay a totally different claim. In an assessment society one ordinarily thinks that the
assessment is made to pay a particular claim or claims. Under the by-laws of this
society, this is not the case. There has been some criticism that assessments have been
made for certain claims and then the claims disallowed. Under the by-laws as now
drawn, this, of course, is perfectly legal, but it does not seem to me that it is a proper
method of carrying on what purports to be an assessment society.
Group 2 has a different arrangement.    It is as follows:—
The members in this group shall be divided into age brackets according to their
respective ages at the date of their enrolment as members of the Association, and quarterly assessments including dues shall be payable by the members in each age bracket
as follows:
Age Bracket, Quarterly Assess-
Years of Age. ments Payable.
Under 26   $2.50
26-35 inclusive    2.75
36-45 inclusive      3.10
46-50 inclusive     3.60
Over 50      4.20
Provided, however, that the Directors may decrease or, in the event of the assessment
so fixed not proving sufficient to meet claims and expenses payable, may increase the DEATH BENEFIT SOCIETIES. CC 35
quarterly assessment for any age bracket for such period and for such amount as they
may consider necessary to meet the applications of the Association in this group . . .
A special assessment not exceeding $1.00 per member in any quarter in addition to the
above quarterly assessment may be levied on and shall be paid by all members in this
group at any time if, in the opinion of the Directors, the financial position of the group
requires it.
The amount payable on each death claim shall be the amount of an assessment of
$1.00 per member of this group at the date the claim is approved for payment by the
Directors, but not exceeding the sum of $1,000.00-.
It will be observed here that quarterly payments are made by the members according to the age-group in which he or she happens to be. The amount payable to the beneficiary, however, is not a fixed sum, but it is an amount calculated at the rate of $1 per
member of the group, not at the date of death, but at the date " the claim is approved
for payment."
In 1944 there were 79 members in Group 2 at the commencement of the year and
147 at the end of the year. There were no deaths. Presumably, however, the amounts
that were paid in are accumulating for the purpose of paying future claims. This has
all the appearance of term insurance, with a further provision that the directors may
make any further call or assessment that they see fit. In fact, Mr. Ogston, at page
2291, states:—
Q. Is it insurance at all?
A. Yes, it is insurance.
Q. But it is not insurance under the " Insurance Act "?
A. It is ordinary insurance such as the ordinary insurance under the " Insurance Act."
Q. You mean this assessment business?
A. Long term.
Q. Term?
A. Yes.
Q. Then you say you are term insurance?
A. Yes, on the basis	
Q. Then why should you not be under the " Insurance Act "?
A. There is no reason why we should not be. I am talking entirely about the Interior
as it has been organized. I have spent years creating this thing on this basis and have
gone just as far as possible to make it term insurance on a quarterly basis.
The danger, as I see it, in the by-laws such as I have quoted, the member is at the
mercy of the directors. The member is liable to be assessed not only for deaths but
" if the financial position of the Society or Group makes such assessment necessary."
The ordinary assessment groups such as those that we have already examined provide
specifically that the assessment shall not be more than $1 for each member for each
death. Here the amount payable to a beneficiary is not more than $1 per member, but
the amount payable by the member may be anything.
Group 3 is on still another basis. It is divided into two classes, those under 45
and those over 45. The former are assessed at the rate of 60 cents per claim and the
latter at the rate of $1 per claim. There is, however, this further clause: " The Directors shall have power to increase or decrease the rate of assessment for each class of
member and particularly to reduce the rate of assessment when the number of members
in this group exceeds 750." In addition, the same clause is added as in Group 2 providing for a special assessment of $1 per member at any time if, in the opinion of the
directors, the financial position of the group requires it. In this group, however, the
amount payable on each claim is 60 cents per member if under 45 and $1 per member
if over 45, but the full amount payable shall not exceed the sum of $500.
It will be seen from the above that the members in this society can never be sure
of what assessments will be made. Mr. Ogston maintains that the affairs of the
association are run by the directors in the interests of the members and that no action
would be taken by them which would be detrimental to the members.    Nevertheless, it CC 36 REPORT OF THE ROYAL COMMISSION.
would seem to me that the member joining this society is completely in the hands of
the directors. Mr. Ogston claims that this is no different from an insurance company
being able to change its rates. I would be surprised to learn that a contract of insurance could be changed without the consent of the insured.
In passing, I feel that I should point out that the by-laws above quoted, giving the
directors the right to make such assessments as they see fit, changes completely the
liability of members who joined prior to August 24th, 1943. Up to this date the
member could only be assessed for the purpose of paying a death claim. This, therefore, is a good example of the changing of the liabilities of members of a society by
passing an amendment to the by-laws. It is true that the certificate of membership
states " this certificate is issued subject to the Constitution and By-laws of the Association, not only as they now exist but as the same may hereafter be lawfully altered from
time to time." As stated before in my report, I do not consider that contracts should
be allowed to be altered in this manner.
Certificate of Membership.—The same criticism applies to these certificates as to
the certificates of other societies. The gross amount payable is in large black-faced
type. In small letters immediately preceding it on a different line are the words " not
to exceed the sum of." Comments which have been made regarding this practice in
other societies apply to this one also. The certificate provides that in Group 1 the
beneficiary will receive " an amount not to exceed $1.00 for each and every member of
the Association paying the assessment providing therefor, as set forth in the By-laws
of the Association."
In Group 2, the beneficiary receives " an amount not less than $1.00 for each and
every member enrolled and in good standing in Group 2 of the Association at the date
the claim is approved by the Directors."
Membership.—The membership in this society increased rapidly up to 1943. In
1944 and 1945 there was a distinct drop in membership in Group 1. Group 2, on the
other hand, increased substantially, and in Group 3 the membership dropped from 94
to 84. Mr. Ogston attributes the loss in membership in Group 1 to the vindictiveness
of a discharged agent, a Mr. Egan.
The age of the members in this society has been given in detail. If other societies
had produced comparable records, a satisfactory study could have been made and comparative statistics prepared showing the age-groups of both new members and lapsed
members. It should be observed that in 1939 in Group 1 approximately 70 per cent,
of the membership were over the age of 45. In 1940 approximately 78 per cent, were
over that age. This, of course, is to be expected owing to the fact that new members
were not coming into this group. A sufficient length of time has not elapsed to bother
making an analysis of the smaller groups.
Agents.—In this society, agents were utilized for the purpose of building up membership. The usual practice was followed of allowing them the full amount of the
joining fee. Mr. Ogston frankly admits that he has had a lot of trouble with agents.
One woman, a Mrs. Anna Twiss, appeared before me complaining that she had only
received $251 on a policy, as she called it, for $1,000. She stated that when the agent
sold the policy to her husband she was present, and he said that she would receive
$1,000 if her husband passed away. She admitted that she had not read the certificate
of membership, but that she went solely on what the agent stated. The certificate of
membership was for membership in Group 2 and provided that the beneficiary, Mrs.
Anna Twiss, should receive " An amount not less than $1.00 for each and every member
enrolled and in good standing in Group 2, of the Association, after the date the claim
is approved by the Directors, the said beneficiary to receive an amount not exceeding
the sum of $1,000.00." The words and figures " $1,000.00 " are in large black-faced
type.    At the date of the death there were only 60 or 70 members in this group.    The
I DEATH BENEFIT SOCIETIES. CC 37
certificate of membership was perfectly plain and a careful reading of it would disclose
that the beneficiary was not entitled to $1,000 but simply $1 per member. She, however, claimed to rely on the representations of the agent who had stated that the sum
of $1,000 would be paid. This incident is cited as an example of complaints made on
numerous occasions, not only of this society, but other societies; namely, that the
agents misled them. Furthermore, Mr. Ogston admits at page 2401 that he had found
a considerable number of cases where the age given in the application form had been
deliberately falsified by the person that took the application. Here again the experience in other societies has been the same. Actually this society takes every precaution
possible to check up on the information as given in the application form. As stated
before, they now require proof of age within two years from the date of application.
Finances.—This society seems to have had a difficult time financially. From 1936
on there have always been yearly deficits in the General Account. These have been
recouped out of the Mortuary Trust Fund. In 1936 the Mortuary Trust Fund owed the
General Fund the sum of $267. This was due to a deficit in the operations of the
society. The yearly deficit steadily increased until in 1942 the General Account owed
the Mortuary Trust Fund the sum of $6,269.35. In the balance-sheet this debt owing
by the one account to the other was listed as an asset of the Mortuary Trust Fund.
The only assets which the General Account had was the sum of approximately $1,600
in the bank and moneys owing by agents amounted to approximately $3,000. This
latter item was listed as an asset despite the fact that it was well known that the
accounts could never be collected from the agents.
In addition to the deficits above listed, there was a further liability of the General
Account to the Mortuary Trust Fund. This arose from the fact that under the by-laws
of the society, after the society had reached a membership of 1,500 members, 25 per
cent, of each member's annual dues were to be paid into the Mortuary Trust Fund, and
35 per cent, after the membership reached 2,000. The membership actually passed the
1,500 point in 1939. The provisions of the above-quoted by-law were disregarded, and
no portion of the membership dues paid into the Mortuary Trust Fund.
Furthermore, no mention was made in the auditor's report of the fact that this
clause in the by-laws had been disregarded. On page 2583 of the transcript Mr. Tom-
linson was questioned as to why it had not been mentioned.    His answer was:—
Probably it should.   It would have meant closing up the office if they had endeavoured
to do that.
Later on Mr. Ogston was asked about it. He stated that this provision had been placed
in the by-laws on the insistence of Mr. Macnaghten, who was then treasurer of the
society. Mr. Ogston was always opposed to the provision, but it remained in the
by-laws until July, 1941, when it was struck out. The fact remains, however, that
during the time it was in, it was completely disregarded.
In 1942 the financial affairs of the association, as described by the auditor's report,
were in a precarious condition. The balance-sheet of the Mortuary Trust Fund showed
a surplus of $11,000-odd. This was made up of $6,800 of cash in the bank and bonds.
This, together with the $6,269.35 which I have already mentioned as owing from the
General Fund, made up the total assets. The liabilities to beneficiaries were shown as
some $2,000, thus leaving the supposed surplus of $11,000. The auditor, however, in
his statement appended to the report, stated that an assessment had been made on
September 1st, 1942, to pay three claims subject to completion of satisfactory proofs.
At the time of the audit the proofs had not yet been submitted, and the auditor stated
that there was a contingent liability of $4,940 in the Mortuary Trust Fund. In other
words, $5,000 of the money which was in the bank had been collected on assessments
which had not been paid out to beneficiaries.    The following year two of these claims CC 38 REPORT OF THE ROYAL COMMISSION.
were paid, but three others were assessed and not paid.    Mr. Ogston was asked concerning these, and he answered as follows:—
Q. Have you ever had a case, Mr. Ogston, where you had assessed and then for some
reason or another had not paid?
A. Yes. That was one of the reasons why we adopted our method of assessment.
We have considered a claim likely to be paid, and so as not to have any delay in assessments to keep up our death claims, we have included it, and if we consider our claim
good, we included it in our assessments.
Q. Did you have many of those?
A. We had four of those which at the time we made the assessment we had no reason
to believe it would not be a good claim. We have specifically set out in the notice if any
of the claims are rejected the amount received from the assessment would be credited to
the Mortuary Trust Fund.
Q. So your next assessment would be reduced by that amount?
A. No, it would not be reduced.    We put it into accumulated funds.
Looking at the balance-sheets of both the General Fund and the Mortuary Trust
Fund, it is quite obvious that the moneys obtained from these unpaid assessments were
used to cover the deficit in the General Fund. It is true the General Fund was shown
as owing the Mortuary Trust Fund, but the General Fund had no assets to repay the
amount which it owed.
Reorganization of Finances.—As could be readily anticipated, a drastic reorganization of the financial affairs of the society was necessary. In 1943, this was done.
Exhibit 53 " D " shows the adjustments which were made at December 31st, 1943, when
the reorganization finally took place. The old funds or accounts were wiped out and
three new funds were set up. These were the Assessment Fund, the General Fund, and
the General Reserve Fund. The transfer from the old system to the new had the
result of wiping out the amount which the General Fund owed to the Mortuary Trust
Fund.
Mr. Tomlinson, the auditor, was questioned regarding this at page 2727. I asked
the following questions:—
Q. Now are you not absorbing the loss or what was owed by the General Fund by the
assessment?
A. Well, I have an amount owing by the General Fund to the Mortuary Trust of
$6,553.70. That is the same item, but slightly changed at the end of December, and I can
tell you how that is disposed of.
Q. How was that disposed of?
A. There is a journal entry debiting the Mortuary Fund and crediting the surplus,
or deficit.
MR. CAMERON: Q. Which is exactly as the Commissioner suggests. Is that not
wiping it out at the expense of the Assessment Account?
A. Just a moment. Let me follow that through. Yes, that is what happens. The
assessment fund—it is charged to Mortuary Trust Fund and credited to surplus or
deficit which is exactly what you have stated.    It is absorbed in the new balance.
THE COMMISSIONER: Q. So that the effect of that was, the assessment went to
pay the deficit in the General Fund?
A. That would be the effect, yes.
It should be remembered that the by-laws were changed on August 24th, 1943.
These different accounts were authorized by section 34 of the revised by-laws, dealing
specifically with that.    I am quoting this section in full:—
The funds of the Association shall be allocated by the Directors to three accounts,
namely, the Assessment Fund, the General Fund, and the General Reserve.
The Assessment Fund, derived from assessments shall consist of cash in a special
account in one of the chartered banks of Canada and shall be maintained at all times in
such an amount as the Directors are advised to be sufficient to meet the average number
of claims payable by the Association during assessment period but shall not be less than
the amount, if any, prescribed by the " Insurance Act." Out of this fund shall be paid
all claims, whether before or after assessment, approved for payment by the Directors.
J DEATH BENEFIT SOCIETIES. CC 39
The General Fund shall be the operating account of the Association and shall be
credited with such sums as are authorized by the By-laws or are by resolution of the
Directors transferred from the General Reserve for payment of expenses of managing
and operating the Association. Out of this fund shall be paid all expenses of the
Association.
The General Reserve shall comprise all assets of the Association not specifically allocated to the assessment fund or to the General Fund.
The Directors shall have power by resolution to transfer credits from the General
Reserve to the Assessment Fund and to the General Fund and from the General Fund to
the General Reserve.
The above accounts for each group shall be kept separately.
The Directors may in their discretion invest any portion of the General Reserve in
trustee securities from time to time.
It will be recalled that up until 1943 that there have been no reserve funds as such.
The only funds that had purported to be accumulated were those in the Mortuary Trust
Fund. Those showed a surplus at November 30th, 1940, of $11,001.58; $6,269.35 was
made up by money owing from the General Fund. Without going into any further
detail, this new system of accounting wiped out all deficits in the General Fund. It
should be remembered that this deficit did not include 35 per cent, of the annual dues
which, according to the by-laws, were supposed to be paid into the Mortuary Trust
Fund. Actually, of course, it was only by having funds on hand from assessments
which were not paid out that made this juggling possible. Whether all this was
explained at the general meeting which passed the amendments of 1943, I do not know.
Certainly, the statements which went out to the members would not mean much to any
person except a trained accountant. Apparently it was this episode which was exploited
by an agent, and which caused a drastic loss of membership. Mr. Ogston at page 2397
was questioned about the four claims which were not paid.
MR. CAMERON: Q. Don't you think that also might have caused suspicion in the
minds of some of the people who paid that assessment?
A. Well, there was a man who was taking memberships and who deliberately tried
to put that into the minds of a lot of members that we were pocketing the money.
I cannot help but be extremely critical of this transaction, even though the changes
were authorized by a general meeting. Continued deficits in operating were paid out
of the Mortuary Trust Fund. Ultimately these were covered by assessments which
were made for deaths the claims being afterwards rejected. One can only draw one
conclusion, and that is that it was impossible to operate the society on the funds allowed
by the by-laws. Money was used for expenses which could only come from the Mortuary
Trust Fund; in other words, in some manner which is not apparent, Mortuary Trust
Funds were placed in the General Account. The auditor stated that he did not detect
any transfers. There is no doubt that moneys were deposited in the wrong account at
the time that they were received. It may be said that this is a matter of internal
management, and that as long as the by-laws are changed in order to justify the
changes, there can be no further responsibility. I do not agree. Some 2,000 people
were depending upon the directors to run the society in accordance with its by-laws.
If the directors cannot be trusted to carry on in accordance with the by-laws, then it is
time drastic regulations were introduced which would authorize periodic inspections
by our Government auditors.
The operation of the society since the change in by-laws has not been any more
successful than prior to the change. The balance-sheet for the period ending December
1st, 1943, shows an excess of expenditure over revenue of $597.49. This is in the
revamped general funds. In spite of the loss on the operating account, the directors
still receive their fees, amounting to $620. In 1944 the situation was even worse. The
statement of revenue and expenditure, which is Exhibit " B " in the auditor's report for
that year, filed as Exhibit 54 on the hearing, shows a decidedly worse picture.    It shows CC 40 REPORT OF THE ROYAL COMMISSION.
as revenue, arrears of dues amounting to $679.50. After taking that into account, there
is still a deficit of $973.13. As in the year 1943, the directors' fees were paid, amounting
to $700, and, in addition, directors' expenses amounting to $410 were paid.
After the reorganization of the finances and the establishment of an assessment
fund, I would have thought all assessments would have been paid into the assessment
fund, and the only money paid into the general fund would be the dues. However, that
is not the case. Assessments are apparently paid into the general fund, and disbursed
from that fund. The assessment fund is simply cash in the bank account. It originally
was established out of the unused assessments which I referred to before. Another
sum of $2,000 was transferred in 1944. The report does not disclose where this money
came from. Furthermore, I would point out that the moneys assessed for the Loo See
Kwong and the C. C. Haubold claims, amounting to $4,000, remained in the General
Reserve Account. These two claims will probably never be paid; the Haubold claim
because there are no dependents, and the Loo See Kwong claim because the dependents,
if any, reside in China. The Loo See Kwong claim is shown as a liability of the funds,
but the Haubold claim, is not. The deficits in the General Account caused by over-
expenditure for current expenses is charged against the general reserve. It would seem
to me, therefore, that the policy of charging deficits in the general funds to moneys
received from assessments is continuing.
Auditors' Report.—I have already quoted sufficient from the examination of Mr.
Tomlinson to show that he was exceedingly lax in his audit. I have quoted from page
2583 as to his reason for not disclosing in his report that the 35 per cent, of dues had
not been taken into the Mortuary Trust Account. Furthermore, at no time in his report
was any criticism made of the fact that assessment moneys were being used for the
genera! expenses of the society. At no time did these accountants seem to accept their
responsibility to the members of the association. They merely prepared their reports
for the directors.
The auditors filed a special letter, dated June 26th, 1945, in which they made their
position clear as to the contingent liability with regard to unproven and unpaid claims.
They state at the end of the letter: " In our opinion in an association of this nature, the
financial statement should be as clear and simple as possible and in conformity with the
By-laws. The inclusion of contingent assets and liabilities in a balance sheet is more
likely to confuse than to inform the average person." I agree thoroughly with all that
is stated here. I cannot, however, agree that the balance-sheets produced by this firm
of auditors are either clear or simple. They are in conformity with the by-laws. The
trouble is that the by-laws have been amended so as to provide for the situation which
now exists. I have found it extremely difficult to understand the different transactions
and different transfers that have taken place in the various accounts of this society.
I therefore believe it would be utterly impossible for any member to get a clear picture
of the present position of the society from the balance-sheets as distributed to the
members.
Claims.—I have already dealt with the situation which has existed in this society
where assessments have been made for claims and the claims afterwards rejected.
This situation, of course, has been changed by the fact that the by-laws now contain a
provision whereby assessments are not made for any particular claims, but merely for
the claims which the management believes will have to be paid within the next quarter.
Mr. Ogston very cleverly justifies this by-law. Logically there can be no criticism of it.
However, it does seem a peculiar situation where the management merely checks over
the claims, and draws them out of a hat as it were. Probably the only justification for
such a procedure is the unusually large number of claims which have been rejected.
Exhibit 82 which was filed shows that in Group 1 a total of 122 claims have been filed
up to December 31st, 1944.   These have been disposed of as follows:— DEATH BENEFIT SOCIETIES. CC 41
Settled   1
Rejected  23
Disabilities paid  4
Part paid on disability and balance at death  1
Death claims paid in full  93
Total  122
In Group 2 there has been only one claim. It was paid. In Group 3 there have
been six claims, of which two have been rejected. This, I believe, is an unusually large
number of rejections. I can only attribute this to two causes: (1) That extremely
poor agents were employed who encouraged persons to apply who should not have applied
at all; (2) to the meticulous observation by the management of the provisions of the
" Societies Act," " Insurance Act," and the by-laws. There can be no criticism of the
management for this. However, I have no doubt that this has caused considerable
criticism of the society. For instance, the society strictly adheres to the fact that a
beneficiary must be " The husband, wife, child or other dependent of the deceased
member." Other societies do not examine this clause too carefully. It is quite unfair
to criticize this society for observing the letter of the law. However, this society has
been adversely criticized for the very strict interpretation of the provisions of the
" Societies Act." It would be much better if other societies were forced to make the
same strict interpretation.
The payment of claims in this society is extremely slow. For instance, on June
26th, 1945, there were two 1944 claims still undisposed of and eleven 1945 claims. The
method adopted by the association lends itself to the carrying forward of an increasing
number of claims. The progressive increase in the number of deaths carried forward
the following year justifies my criticism:—
Year. Carried Forward.
1940     1
1941     3
1942     6
1943     8
1944 to June, 1945  13
Annual Meeting.—The annual meeting is always held in Penticton. This goes back
to the fact that the society was originally incorporated there and for some years carried
on there. I cannot see what justification there is for holding the meeting there. It is
expensive, and certainly the majority of members do not reside there. In this society,
by notice given January 12th, 1937, the locality in which it chiefly operated was changed
to the City of Vancouver. It seems to me that it is only reasonable that under those
circumstances the annual meeting should be held there.
Under the by-laws, proxies are allowed. No person can act as proxy for more than
fifty other persons, and he must himself be qualified to attend and vote at the annual
meeting. The evidence is that only at one meeting were proxies really used; that
apparently was the meeting at which Mr. Bell and Mr. Speirs of the Canadian Mutual
Benefit Association were defeated. This was a matter of internal management, and
I do not think it necessary to pursue the matter further. Mr. Ogston, however, states
that he has not used proxies since that date.
Complaints.—Several complaints have been filed against this society. I have
already mentioned that of Mrs. Twiss. Mrs. McElroy, of Kamloops, appeared before
me and complained that when she applied for membership in the society her true age
was given. This was altered by the agent who took her application. When proof of age
was demanded, this falsification of age was discovered.    The society then asked for CC 42
REPORT OF THE ROYAL COMMISSION.
proof of insurability. Mrs. McElroy by this time was unable to comply. The matter
was finally settled by the repayment to Mrs. McElroy of the amounts paid by her. This
seemed a fair method of settlement. Another complaint was filed by Mr. Murfitt, of
Penticton. Here there was apparently direct misrepresentation as to the state of
health of the applicant. The only criticism that could be made of the society here is the
fact that owing to the misplacing of the documents of claim in the society's office a
delay of several months ensued. There is no doubt in my mind that the action of the
society in disallowing the claim was justified.
Conclusion.—I cannot help but be extremely critical of the conduct of the affairs of
this society. The continued overexpenditures for the operations of the society are to me
an indication of either poor or extravagant management. There is no justification
whatsoever for the payment of directors' fees when there is a deficit in carrying on the
operations of the society. From 1929 to 1944, inclusive, directors' fees amounted to
$3,480; directors' expenses amounted to $2,557.65, making a total of $6,037.65. It was
pointed out that the fees were voted by annual meeting. The expenses were voted by
directors' meeting. If members of the society took such a little interest in its operations as to allow that sort of thing to continue, regulations should be enacted to prevent
such things.
I also feel it my duty to criticize severely the changes in the by-laws which validated
the improper carrying-on of the affairs of the society. I am referring now to the
change which wiped out the 25 and 35 percentages of annual dues which were supposed
to have been paid into the Mortuary Trust Fund after the membership reached 1,500
and 2,000 respectively. As stated before in my report, these payments were never
made, and it was never drawn to the attention of the society that the payments had not
been made. The auditors did not disclose it. In 1941 this was wiped out by a
general meeting.
If proper notice was given in the notice calling the general meeting and a full
explanation given at the meeting, the steps taken would have been correct. However,
I doubt if that was done. Certainly no evidence was submitted to me which would
indicate that a full disclosure had been made.
Statement of Membership of Fiscal Years ending December 31st in each Year.
Group 1.
Year.
Members at
Beginning.
New
Members.
Lapses.
Deaths.
Members at
End of Year.
Cost per
Month.
1936         	
150
240
607
1,158
2,053
2,303
2,477
2,604
2,446
90
447
583
1,035
608
548
463
75
»     83
120
75
27
132
344
360
319
212
278
308
5
5
8
14
14
17
21
20
28
240
607
1,158
2,053
2,303
2,477
2,604
2,446
2,231
1,840
1937	
$9.00
1938    	
6.00
1939    	
12.00
1940	
14.00
1941    	
17 00
1942                     	
18 00
1943                      	
1944	
25 00
1945	
Note.—1945 figures do not check with previous years.    They were submitted by letter January 31st, 1946. DEATH BENEFIT SOCIETIES.
CC 43
Statement of Membership of Fiscal Years ending December 31st in each Year—
Continued.
Group 2.
Members at
Beginning.
New
Members.
Lapses.
Deaths.
Members at
End of Year.
Cost per Month.
Year.
Charged Flat Rate according to Age at Enrolment.
1939    	
18
18
31
14
22
70
323
3
9
5
6
2
13
1
18
33
55
64
79
147
428
Age.
18-25
26-35
36-45
46-50
51-55
$10.00
1940	
18
33
55
64
79
11.00
1941	
12.40
1942	
14.40
1943	
16.80
1944               	
1945    	
Group 3.
Year.
Members at
Beginning.
New
Members.
Lapses.        Deaths.
Members at
End of Year.
Cost per
Month.
1941	
27
80
8
5
27
1
3
7
10
13
1
4
26
103
103
94
84
1942   	
26
103
103
$3.00
1943	
4.00
1944   	
8.00
1945   	
Note.—1945 figures do not check with previous years.    They were submitted by letter January 31st, 1946.
PACIFIC MUTUAL BENEFIT ASSOCIATION.
Name.—This society was originally incorporated under Certificate No. 382, dated
August 20th, 1924, as " The Greater Victoria 2000 Club." On May 20th, 1929, it was
changed to the " Pacific Mutual Benefit Association," under which it still carries on.
Objects.—The original objects have never been changed. They are as follows:
" The object of the society is to make provisions by means of subscriptions against
death, for relieving the widows, children or other dependents of members, but shall not
otherwise carry on the business of insurance, and shall not be conducted as a trading or
mercantile venture, or for the purpose of commercial gain."
The locality in which the business was chiefly to be carried on was in the City of
Victoria, and the Municipalities of Oak Bay, Saanich, and Esquimalt.
Early History.—James Edward Rice, the secretary-manager, who is a very old
man, was called to give evidence of the early history of the society. He stated that in
1928 he was instrumental in organizing a society known as the " Vancouver Mutual."
After they had the society incorporated, they were advised by the Superintendent of
Insurance, Mr. Doherty, that they would not be allowed to have more than 400 members.
This was not satisfactory, as they wished to have a very much larger society. From
information received from Mr. Garrett, the Registrar of Companies, Mr. Rice contacted
the officials of the Greater Victoria 2000 Club. Mr. Rice's evidence at page 2805 is
as follows:—
Then, when that came up, I went to Mr. Doherty and Mr. Garrett and through their
information we located this other company. Mr. Patton, I think, had the handling of
it in Victoria. I went down and seen him and made arrangements and paid all expenses
in connection with it, and had a meeting and transferred the head office to Vancouver,
and put in the different records.    We had a general meeting.    This was all obtained by CC 44 REPORT OF THE ROYAL COMMISSION.
Mr. Garrett.    It was all done through him and Mr. Patton, and that is the company we
are working under now.
There is an item carried as an asset in the balance-sheet described " Charter
$928.00." I presume this is the amount that was paid. No evidence was obtained as
to whom this amount was given. At the same time as the name was changed, the
locality in which the operations of the society were to be carried on was changed to the
City of Vancouver.
By-laws.—The by-laws provided for yearly dues of $5 and " Total disability dues,
an additional $2.00 at option of member."
Curiously enough, although the clause dealing with total disability immediately
follows the object clause in the constitution and by-laws, the object clause is as quoted
above, and does not provide for disability. Paragraph 8 of the constitution and by-laws
provides for the contents of the certificate of membership. It states that the beneficiary " shall receive a specified sum under said certificate, namely the sum of $1.00
for each and every member in good standing at the time of death of such member."
After the membership reached 2,500, the assessment was reduced.
The certificate further provided " That by means of additional subscriptions, those
members so contributing shall be benefitted against total disability and unavoidable
misfortune."
Clause 10 of the by-laws goes into details of how the total disability will be proved,
and how payments will be made. Members were to be between the ages of 14 and 55.
There was a provision, however, that 2 per cent, of " to the nominal membership limit "
could be over the age of 55 years. Not less than $2 of each member's annual dues were
to be placed in the Mortuary Trust Fund to create a reserve. The expenses of the association were to be paid out of the remainder of the annual dues. Several amendments
were made to the constitution and by-laws, the main one being in 1935. These are in
force at the present time, with the exception of a small amendment in 1941. The main
difference between those quoted and the 1935 amendment was that the amount of the
assessment, and the amount received by the beneficiary, would vary according to the
age of the member. Those up to 40 years of age would receive $1 for each member in
good standing, "At time of payment of claim." Those between 41 and 45, 85 cents;
between 46 and 50, 70 cents; between 51 and 55, 55 cents; between 56 and 60, 40 cents.
This ambiguous provision is interpreted as referring to the deceased man. In other
words, if the deceased member is 40 years or under, the beneficiary will receive $1
from each member of the association in good standing at the time of payment of the
claim, and so on. Apparently, if the deceased member is over 60, the beneficiary
receives 40 cents from each member. The clauses relating to total and permanent disability are carried forward in the newer by-laws which are in force at the present time.
Provisions relating to the payment into the Mortuary Trust Fund of not less than $2
remain, and are also in force at the present time. The salary of the secretary-treasurer
is .to be set by the board of directors after each annual meeting. The terms of his
engagement are to be set forth in the minutes of the directors.
There is also this following provision in the by-laws:—
53. At the expiration of 20 years from the date hereof, the member, if in good
standing, as a member of the society shall be entitled to a pro rata share of the surplus
in the Mortuary Trust Fund of the Society, and to receive the same either in cash or to
apply the same for future assessments.
The only change in 1941 of any importance was to make the annual dues payable
quarterly at the rate of $1.25 per quarter. The amendment also provided for a limited
benefit membership, but this is of no importance and was not implemented.
Certificate of Membership.—At one time the certificate contained the figures
" 2,500 " in large black-faced type.    This, however, has been cut out, and the certificate
l DEATH BENEFIT SOCIETIES. CC 45
now has a blank space in which is typed in the words "An amount according to your
classification." Inside the certificate the by-laws are printed in full and contain all the
clauses which I have cited before.
I found it exceedingly difficult to get complete information regarding this society.
J. E. Rice is over 80 years old, and his memory is not good. James Leo Rice, the son,
who is vice-president of the society, also appeared as a witness, but was unable to give
much of the information which we required. George E. Whittle, the auditor, from
Seattle, proved the best witness, but he was unable to give evidence regarding the
ordinary routine.
Details of membership during the different years from 1938 on were produced.
Apparently the society reached its peak in 1942, with a membership of 1,438. Since
then it has been declining, and at December 31st, 1945, it stood at 1,300 members.
Records of ages in five-year groups was filed, and in 1940, 78.9 per cent, of the membership were over 50 years of age. In 1945, 83.5 per cent, were over 50. It would
appear, therefore, that despite a small increase in membership the age-group is going up.
Agents.—The society at various times has employed agents. They get paid the
joining fee of $5 and the first year's dues. Mr. Rice admits that he has had a lot of
trouble with them. Expense money was advanced to them and never repaid. This
resulted from the fact that the agent simply retained the payment made by the applicant. In some cases he had previously received expense money and, of course, credits
were never built up by the agent in the hands of the society.
Finances.—Finances of this society are very loosely handled. J. L. Rice was
examined in detail regarding the handling of the accounts. Apparently, when the
assessments and dues are coming in, it is common practice for those in the office to
take whatever money they require and place I.O.U.'s in the cash-box. The I.O.U.'s are
then charged up. I formed the opinion that it was only through the efforts of the
auditor at the end of the year that the accounts were brought into shape.
In connection with finances, two matters of extreme importance should be noticed.
The first has to do with the payment of directors' fees. I have noted above the fact
that the only object of the society is to make provisions by means of subscription against
death for relieving widows or children, or other dependents of members, but shall not
carry on the business of insurance. Despite this limiting of the objects of the society,
the by-laws provide for a disability benefit, and the additional payment of $2 by those
who wish to have the disability benefit. Over the ten years in review a total of $5,041
has been paid for disability benefits. This amount, however, instead of going into
a disability fund or into the Mortuary Trust Fund, is paid to the directors as their
remuneration for their services.
J. E. Rice, when questioned regarding this at page 2825 of the transcript, stated
as follows:—
Q. In other words then, a member after he became a member, he paid his $10.00,
he paid $5.00 a year for his membership dues and in addition to that, if he wished to
carry on your total disability	
A. He pays $2.00 extra.
Q. Per year?
A. Per year.
Q. Regardless of age?
A. Well, no, up to age 60. We don't carry total disability on a man—the limit of age
60 is the total disability	
Q. But is that limit applicable to the attained age of the member or the age at
joining?
A. At the attained age.
Q. In other words your total disability ceases to be payable when a member reaches
60 years of age?
A. Correct.
THE COMMISSIONER:   Q. Is that still in force?
A. Oh, sure. CC 46 REPORT OF THE ROYAL COMMISSION.
MR, CAMERON:   Q. To obtain that coverage, a member paid $2.00 per year?
A. Yes,
Q. What happened to that money?
A. That $2.00 a year is paid to the directors. That is, outside of the office. That is
divided up among the directors. It runs, I think, to $400.00 or $500.00. No, I don't
think it runs that high.    The records will show.
Q. In any event, that money paid for this total disability is divided among the
directors as a bonus or an honorarium?
A. The directors are entitled to something.
I asked for production of the minutes verifying this arrangement, but no minutes
were produced. The minute-book only went back as far as 1936, and this arrangement
apparently was entered into prior to that.
The by-laws specifically provide that the annual general meeting shall fix the
remuneration of the directors. I have examined the minutes that were produced, and
at no general meeting has the remuneration of the directors been fixed since 1936.
In my opinion, this extraordinary arrangement for payment of directors is quite
wrong. In the first place, the objects of the society do not provide for payment of
disability benefits. In the second place, money paid for disability benefits should not
be utilized to pay directors' fees.
There is, however, another matter in connection with the payment of the secretary's remuneration that is even worse than this.
In all the auditor's reports filed, there was an item shown as a disbursement
headed "Reimbursements"; these total over a ten-year period $11,977.85. I now
quote from page 2988 of the transcript where Mr. Cameron cross-examined Mr. Whittle,
the auditor, on this:—
Q. Now, in connection with the statement of receipts and disbursements, I notice
an item, reimbursements $2,117.32.    What does that mean?
A. When a member lapses and they have been a member, say for 4 years, they have
$8.00 in reserve, put aside; that $8.00 if they are absolutely out as a member, that $8.00
then becomes the secretary-treasurer's, by charging the reserve and taking it out, because
he is no longer a member and entitled to it, and neither are the members entitled to it.
Q.  How is it the secretary-treasurer?
A. Well, that is the way it has been done; lapses and reimbursements have always
been for the secretary-treasurer.
THE COMMISSIONER:   Q. Was that in his contract?
A. That was in his contract, yes, sir. You couldn't exist on $3.00 a member, carry
on an office and pay yourself a salary and live on it, and if you figured up the present
membership that is in good standing and what they have got in there—one may be ten
years, another four or five—I will gamble right now to-day, if it was checked, we have
got more in bonds and cash in the bank than would pay them out, and it has always
been figured that the present members are the only ones entitled to any of the reserve.
They are out.
MR. CAMERON:   Q. This Society has now, I think you said, some 1,300 members?
A. Yes, sir.
Q. According to the last balance sheet, Exhibit 34, the period ending August 31st,
1944, at that time your reserve account showed roughly $20,000?
A. Yes, sir.
Q. Your membership was shown as 1,320?
A. Yes, sir.
Q. Do I understand you to say that if a 1,000 of those members dropped out that you
would take $2.00 for each of those members for each year in which that member has
been a member, charge it to the reserve account, and pay it to the secretary-manager?
A. That is the procedure; that has been the regular annual procedure. Of course,
there would be no such thing as 1,000 out of 1,300.
MR. DICKIE:   It is only an illustration.
MR. CAMERON:   It is only an illustration, but it carries out procedure which is	
A. It is like saying, Mr. Cameron, if everybody was to die all at once, the New York
Life would go broke, because they wouldn't have the money to pay it with, and that
would be true, wouldn't it?    It is just a ridiculous question. DEATH BENEFIT SOCIETIES. CC 47
Q. No, it is not a ridiculous question.
A. Yes, it is;   such a thing couldn't happen.
THE COMMISSIONER: Q. Take the principle of the thing; let us taken ten;
I suppose at least ten are dropped every year?
A. Yes, sir.
Q. And of those ten, the ten of them had each been in for 10 years?
A. Yes, sir.
Q.  So each one would have paid into reserve, $20.00?
A. That is correct.
Q. Now, the reserve account would be debited with $200.00, which would be credited
to Rice?
A. Credited to Rice, yes, sir.
Q. Now, there is a resolution covering that?
A. Yes, sir.
Q. Do the articles, provide for that?
A. I don't know.
The by-laws do not provide for any such arrangement. By-law 21 says specifically
that the sum of $3 of each member's annual dues shall be placed in the Mortuary Trust
Fund in order to create a reserve for the protection of members of the association.
The next by-law provides that until the membership reaches 3,000, $2 per member shall
be placed in the Mortuary Fund.    A further clause, No. 46, is as follows:—
60 per cent of all annual dues shall be placed in the Mortuary Trust Fund, thereby
creating a reserve to be dealt with by the directors.
This clause, in view of the one previously quoted, could hardly be taken to justify
the payment of the moneys in the reserve fund to the secretary when a membership
lapsed. From a practical standpoint, this method of paying the secretary is quite
wrong, as it puts a premium on lapsed memberships. The longer the member is in the
association, the more money the secretary will get if his membership lapses. Payment
of this is justified by the verbal statement that D. H. Rice, the predecessor of James E.
Rice in the position of secretary-manager, had an agreement with the society entitling
him to this as part of his remuneration. Neither the agreement nor minutes verifying
it were produced.
Another clause in the certificate which is quite wrong is clause 53, which provides
that after twenty years a member shall be entitled to a pro rata share of the surplus in
the Mortuary Trust Fund of the society, or, if he is over 60 years of age, is entitled to
a paid-up membership, not to exceed $1,000. The only advertising pamphlets which
were filed draw special attention to this. This, of course, offends against the provisions
of the " Societies Act " and, in my opinion, is illegal.
In the last balance-sheet filed—namely, that of 1944—cash on hand was $3,583.86,
and invested funds, $17,034.48. This was not checked, and the figures are taken as
being correct. The auditor stated that he or his employees checked both the cash and
the investments.    A list of the investments was not filed, although it was requested.
Another matter that I would criticize is the fact that in some cases assessments
come in after the final payment is made, and this money remains in the hands of the
society and is not paid to the beneficiary. The by-law provides that payment will be
made in accordance with the members in good standing at the time the payment was
made.
In many cases a member who has made default in payment reinstates his certificate and pays up arrears. If the final payment has been made to the beneficiary, this
money is appropriated by the society. This seems to me a very loose way of doing
business. Mr. Whittle, the auditor, was questioned about this matter at page 3013.
He stated that when a Miss Worth was there, she being the book-keeper and stenographer, they did not pay until they had everything in, and a very accurate account was
kept.    Since she has left, Leo Rice is doing the book-keeping.    There is a very con- CC 48 REPORT OF THE ROYAL COMMISSION.
siderable difficulty in finding out from the way he keeps the books what payments have
been received on assessment, and what payments are made. It should be recalled that
the assessments are of very varying amounts, depending on the age of the member at
the date of death. One assessment notice may contain three or four assessments, each
for a different amount. The amount of book-keeping involved in keeping track of the
assessments as they come in is considerable, and I doubt very much if Leo Rice,
with his limited experience at such things, is capable of making the proper records.
Considerable time was taken in trying to find out what happened to the extra money
received which was not paid to beneficiaries. Neither Mr. Rice nor the auditor could
show me in any of the reports where the money was. The best that Mr. Whittle could
say was that it was still in the bank.
With regard to the banking, it was difficult to get any coherent explanation of the
way their banking was carried on. They do not make a monthly cash reconciliation
with the bank deposit. As an example of the confused method carried on in the bookkeeping of the society, I quote from the cross-examination of James Leo Rice, at pages
3021 and 3021-A:—
JAMES LEO RICE resumes stand.
EXAMINATION CONTINUED BY MR. CAMERON: Q. Mr. Rice, dealing with
your system of recording your financial transactions, do you make a monthly cash reconciliation with the bank?
A. Well, there is always a cash statement comes back when we make deposits.
Otherwise I just carry on according to the auditor's orders.
Q. Well you do not make a cash reconciliation?
A. No.
Q. Now, we dealt yesterday with the question of the entries that go through the cash
receipt book and other books. Do you keep a record of all the moneys received from the
members which go to the Secretary-Treasurer?
A. No, excepting in the disbursements. There is nothing goes out of the office
except the odd cash for disbursements. Everything else is paid by cheque by J. E.,
except probably the odd light bulb, or something like that, and that is taken care of by
Whittle at the end of the year.
Q. Well then, money received by the society which goes to the Secretary-Treasurer,
does not appear in the records of the society as received or paid out to the secretary-
treasurer, does it?
A. Yes, it does, at the end of the year, yes.
Q. Where is that shown?
A. Well, it is shown—I will put it this way. We are merely working, you might
say, on a commission basis. We do a certain thing and we receive a certain remuneration for it. As far as the association is concerned, why, everything is put into the
records. All the moneys that we receive go into the records—and it is taken care of by
the auditor.
Leo Rice was examined in detail on the 1944 accounts.    I quote again from pages
3021-D, 3021-E, and 3021-F.    I quote this in detail to show the complete lack of system
which must exist%in the office.
Q. Then the items shown on this account represent all moneys received from the
members which go to the secretary-treasurer as a result of joining fees or annual dues?
A. That is correct.    That is all it contains.
Q. Is a separate account kept in this general ledger showing the amounts which go
to the secretary-treasurer as the result of lapses?
A. No.
Q. Is any separate account kept of such funds? anywhere?
A. No.
Q. What do the debit entries in this account represent?
A. In the majority of cases, the cheques drawn for maintenance of the office and
myself and J. E.;  at least we live together and keep an apartment together.
Q. In other words, it is the amount drawn by your father and you for your income
and your living and also for the expenses of the office, is that correct?
A. Correct. DEATH BENEFIT SOCIETIES. CC 49
Q. What do the credit entries represent?
A. They represent on that page, the amount shown, the amount that has been
received from the annual dues of the members.
Q. Which have gone to the secretary's account?
A. Yes. They don't agree at the present time, because I haven't had an opportunity
of straightening it out.
Q. I calculated those totals, those amounts. Will you tell me if those totals are
correct or incorrect?
A. I wouldn't doubt it. Of course, I use a machine down there when I do the
checking.
Q. A rapid calculation shows that the amounts received to the credit of this account
•amounted to $3,997.00 for the 12-month period.
THE  COMMISSIONER:   Is that a 12-month period—what dates?
MR. CAMERON:   September 5th, 1944, to August 31st, 1945.
Q. And the total of the items debited to the account which are the withdrawals,
amount to $4,618.25, which would be roughly a little over $800.00 more than the credits?
A. Yes.
Q. Are you prepared to say that is approximately correct?
A. As I say, I haven't checked it myself.    If you say it is correct, it is correct.
Q. All I say is those are what the figures say.
THE COMMISSIONER: You mean to say that account is overdrawn $800.00.
Is that how it works out?
MR. CAMERON: Yes. That account shows an overdrawal of $821.25 according to
those figures.
A. Of course, that only includes the amount paid in as annual dues.
THE COMMISSIONER:   Q. You would say he is still entitled to credit for lapses?
A. Yes, there is credit for lapses, and in the majority of cases it is taken care of all
the way through by Mr. Whittle. All I do is put the figures down as they come in.
I don't profess to know anything about book-keeping at all.
Q. How often is Mr. Whittle up there?
A. He comes up to get the annual statement out.
Apparently both Mr. Rice senior and junior take whatever money they need during
the course of the year. At the end of the year, due to the credit which is available
from memberships which have lapsed, the account is straightened out. Mr. Whittle,
when he makes his audit, works out the amount of credits in each membership which
has lapsed. This amount then is used to straighten out the overdrafts of the Rices
during the course of the year. Leo Rice was cross-examined fully on the authority for
transferring to the secretary-treasurer the amounts to the credit of lapsed memberships. He could not recall any meeting of the members which authorized such a procedure. He stated that at a directors' meeting in May, 1932, J. E. Rice was authorized
to carry on in the same manner as D. H. Rice. I quote again from the evidence at
pages 3021-S and 3021-T :—
Q. To summarize the situation then, is it correct to say that your evidence is that
you were at a meeting of directors in 1932 at which the directors passed some kind of
a resolution instructing J. E. Rice as Secretary-Manager, to carry on under the same
procedure and the terms as his predecessor?
A. Yes.
Q. Can you go any further than that?
A. No, I can't.
Q. And do you know, of your own knowledge, the exact terms upon which your
father's predecessor carried on as secretary-treasurer of the society?
A. Yes, I remember seeing an agreement with the directors of the association with
D. H. Rice setting forth the facts that he was to run the association, take care of all
the costs and everything else and was to receive the $3.00 plus whatever else was	
Q. What?
A. He was to put $2.00 for each year in the Mortuary Trust Fund for each member
in good standing.    That is as far as I can go.
Q. And those were all the terms agreed to that you can recall?
A. Yes, and I am positive of having seen that and I am quite sure I will find the
thing if I get a chance to get down there. CC 50 REPORT OF THE ROYAL COMMISSION.
It will be seen from the above that even he cannot give anything definite which
would authorize such procedure.
Payment of Claims.—It was quite impossible from either the records or the witnesses to get satisfactory evidence as to how payments were paid. Apparently an
advance is made shortly after the proof of death. The balance of the claim is then
paid, possibly within six months. In connection with this, I should point out that the
statement attached to Exhibit 34 shows that a death claim, No. 274, on the life of Mrs.
M. B. Rice, of 998 Thurlow Street, was paid to J. L. Rice, a son. Mrs. Rice was 76
years old, yet the sum of $1,300 was paid. This worked out at $1 per member. The
claim immediately before this, No. 273, J. H. Boos, shows a payment of $520. ■This
man was 68 years old. $520 works out at the rate of 40 cents per member, which is
the proper amount payable if the member is 60 years or over. Either the Rice claim
was an overpayment or the Boos claim was an underpayment. The by-laws do not
provide for anything in between.
Annual Meeting.—The minute-book filed covers meetings since 1936. In that
year ten were present at the annual meeting; in 1937 nine were present, five of them
being the same five who were present in 1936; in 1938 seven were present; in 1939
thirteen were present; in 1940 eleven were present; 1941 seven were present, one by
proxy; 1942 nine were present; in 1943 eight were present; and in 1944 six were
present. It will be seen from the above that the members take no interest whatsoever
in the operations of the society.
Complaints.—Several complaints have been received against this society; only
one presented evidence. This was a Mr. Cooper at Kamloops who appeared on behalf
of Mrs. Todd. Mr. Todd had originally joined a Winnipeg mutual association. This
association was transferred to the Pacific Mutual in 1936. Mrs. Todd complained that
she had only been paid at the rate of 40 cents per member. Her complaint was that
she received $540, which was at the rate of 40 cents per member for 1,350 members.
She produced a letter under the signature of Mr. Rice in which he stated that there
were between 1,600 and 1,700 in good standing in 1941. Mr. Todd died in 1941. Exhibit 31, which is the only statement issued by the auditor, as at August 31st, 1945,
showed that at that date there were 1,422 members. Referring to the auditor's statement, this claim was identified as No. 192 and was paid prior to August 31st, 1941.
This complaint shows conclusively that this society is not paying claims properly. The
exhibits filed show that at August 31st, 1941, the membership in good standing was
1,422. Stephen A. Todd's claim is shown in the same exhibit at $540. Mrs. Todd
should have received $568.80. The " joker " in the policy of being " in good standing "
at the date of payment technically may excuse the society. In my opinion, however,
it is quite wrong to make use of such a technicality.
Conclusion.—I have no hesitation in condemning in the strongest possible terms
the way in which this society carries on its business. Its records are improperly kept;
the cash receipts are improperly handled; disability fees are improperly collected, there
being no authority in the objects of the society to pay disability claims; the disability
fees, after having been improperly collected, are wrongfully paid to the directors as
their remuneration for services rendered. The money from the annual dues paid into
the Mortuary Trust Fund, " to create a reserve for the protection of the members of
the association," is wrongfully paid out to the secretary-treasurer as part of his remuneration when a membership is allowed to lapse. Over a period of ten years this
amounts to a total of $11,997.85. Furthermore, in the annual statements there is no
indication whatsoever that this has been paid to the secretary-treasurer. It is simply
headed " Reimbursements."
In addition to all of this, owing to the manner in which the certificate is drawn, the
beneficiary in many cases does not receive the full amount collected on the assessment. DEATH BENEFIT SOCIETIES.
CC 51
Statement of Membership for Fiscal Years ending August 31st in Each Year.
General Membership.
Year.
Members at
Beginning
of Year.
New
Members.
Lapses.
Deaths.
Members
at End
of Year.
1934-35	
763
832
811
1,484
1,503
1,383
1,404
1,422
1,409
1,313
292
216
895
553
312
322
235
170
149
59
219
225
207
517
413
275
190
145
209
38
14
12
15
17
19
26
27
25
36
29
832
1935-36	
811
1936-37	
1,484*
1937-38	
1,503
1938-39	
1,383
1939-40	
1,404
1940-41	
1,422
1,409
1941-42	
1942-43    	
1,313
1,305
1943-44	
Limited Benefit Group.
49
20
10
4
29
1942-43 .'	
1943-44	
29
19
19
15
* members from the Winnipeg Mutual Benefit.
PROVIDENT MUTUAL BENEFIT ASSOCIATION.
This society was incorporated on May 18th, 1922, under the name " Provident
Mutual Benefit Association."    It has retained that name ever since.
Objects.—Its objects as set out in the declaration are as follows: " The object of
the society is to make a provision by means of subscriptions for relieving the widows,
orphan children, or other dependents of members, but shall not otherwise carry on the
business of insurance and shall not be conducted as a trading or mercantile venture,
or for the purpose of commercial gain."
Under the terms of the declaration, the operations of the society were to be carried
on chiefly in the City of Vancouver and the municipalities immediately surrounding it.
Early History.—The society was more or less dormant for a number of years.
Early in 1926 William Hector Pym became the permanent secretary-treasurer and has
remained in that capacity ever since. Filed as Exhibit 76 is his original agreement
with the association. It provides that he should pay the society the sum of $500 for
his appointment. This amount was to be paid out of membership fees payable by new
members, $2 going to the society, the remainder going to Mr. Pym. On the payment
in full of the sum of $500, the resignation of the secretary-treasurer should take effect,
and Mr. Pym was to be appointed permanent secretary-treasurer. At the same time
Victor W. Odium, Archibald Z. DeLong, and A. McC. Creery, the directors of the association; W. Wylie Johnson, the manager of the association; and Charles J. Lennox,
the secretary of the association, tendered their resignations to take effect when Mr.
Pym had completed his payment of $500. Payment was completed, and Mr. Pym took
over. Mr. Pym was an experienced salesman of memberships in these societies. He
was one of the original salesmen of the B.C. Mutual Association and was largely instrumental in obtaining its large increase in memberships. At the time he took over the
secretaryship of the society, it had 21 members in good standing. In 1936 the membership was 1,145. In 1939 the membership began to increase rapidly, until in 1942
it reached the maximum of 2,363. Mr. Pym states that the big increase in membership
was due to the fact that in 1939 he began taking applications from people resident in
Saskatchewan.    He states that 75 per cent, of his new members were obtained from CC 52 REPORT OF THE ROYAL COMMISSION.
there. This has resulted in the present membership being approximately 70 per cent,
from Saskatchewan and only 30 per cent, in British Columbia.
By-laws.—There have been two changes in the by-laws of the society, the last revision being in 1942. The by-laws are straightforward and simple. The annual dues
are $5, $1 of which is placed in the Mortuary Trust Fund " to create a reserve for the
protection of the members of the society." I might point out here that this provision
is exactly the same as that in the Pacific Mutual. Mr. Pym, however, lays no claim to
any portion of this $1 if the membership should lapse. Assessments of $1 per member
are made for Group 1 until the membership exceeds 2,500. Group 2 limits the amount
to $1,000. At one time there was a disability clause in the by-laws, but this was struck
out in 1942, and no claims are now permissible for disabilities accruing after June 25th,
1942. One peculiar provision in the by-laws is that after twenty years' continuous
membership " the directors may thereafter remit his or her yearly dues."
The by-laws specifically provide that the membership shall be assessed " for each
death claim approved by the directors." Paragraph 4 provides that the directors may
levy " such additional assessment or assessments as the directors may, in their absolute
discretion deem necessary and advisable in order to increase the Mortuary Trust Fund
of the association so as to expedite the prompt payment of claims." Prior to 1945 all
assessments have been made after death occurred. In 1945, with the approval of Mr.
Garrett, the Superintendent of Insurance, the society commenced making assessments
in advance. This was done for the express purpose of expediting the payments of
claims. In actual practice it has reduced the time-lag in payment at least sixty days.
There is no question but that it is in the interest of the members to follow this procedure. Consideration, however, should be given as to whether or not this method is
actually justified by the by-laws.
Certificate of Membership.—The certificate is straightforward and in accordance
with the by-laws. It provides that the beneficiary shall receive $1 for each and every
member paying the assessment, not to exceed that set forth in section 2 of the by-laws.
Originally $2,500 was set out in black-faced type. This, however, has been changed,
and a slip is pasted over the $2,500.
Membership.—The membership in Group 1 of the society, as stated before, was on
the increase up until 1942. At the beginning of 1942 it stood at 2,363 members. It
has gradually declined since then, and as at December 31st, 1945, it stood at 1,897.
Group 2 commenced in 1939 and rose to a total of 863 at the end of 1943. This
has now declined, and on December 31st, 1945, it stood at 465.
Age of Members.—No yearly record of the attained age of members has been kept.
A graph and summary of membership was given as of October 18th, 1945. This shows
that 88.9 per cent, of Group 1 are over 45 years of age; 69.5 per cent, are over 50 years
of age.
In Group 2, 86.3 per cent, are over 45, and 78.1 per cent, are over 50. This is a
high percentage, although not as bad as some of the other societies. Deaths are increasing, and the cost to members is increasing—all of this despite an exceedingly
efficient method of handling the business of the society.
Agents.—Agents were employed for some years. At the present time none are
employed. A Mr. Lalande, who operates an assessment society in Saskatchewan, is
responsible for the large increase of membership outside of British Columbia. Latterly
the agents have been paid $10 for each new membership. This is $5 joining fee and
$5 for the first year's annual dues. The agent keeps the whole amount and does not
remit it to the society. Mr. Pym states that he has had no trouble with agents. He
issues a pamphlet for each group and insists that the agent utilizes this pamphlet and
nothing else so far as publicity is concerned. The pamphlet is straightforward and
states definitely that it is an assessment society. It does not give the membership, but
states definitely that until a membership of 2,500 in Group 1 or 1,000 in Group 2 is DEATH BENEFIT  SOCIETIES. CC 53
secured, the assessment will be $1 per member, and the beneficiary will receive that
amount.
Finances.—I was very favourably impressed with the methods used by this society
in handling its finances. Everything has been kept as simple as possible and there
seemed to be adequate controls and checks. N. M. Orr, the auditor, was called and
examined in detail. He is not a chartered accountant but has had considerable experience in accountancy. He gives more supervision to the books and accounts than
the average auditor, and I have no doubt that the efficient manner in which the accounts
were kept is largely due to his supervision.
Due to the different method of setting up the balance-sheet, I had some difficulty
in comparing the finances of this society with those of the others. Furthermore, I had
some difficulty in ascertaining what money belonged to the society and what to Mr.
Pym. The statements for the period ended May 31st, 1945, which were filed as Exhibit
36, do not show specifically the amount owing by the society to Mr. Pym. Sheet C, of
Exhibit 36, shows a surplus of $2,279.85. This, according to the auditor, Mr. Orr,
belongs to Mr. Pym. He agrees at page 4709 that there is no indication anywhere in
the statement that this amount is owing to him. Sheet A, which is the general balance-
sheet, shows as liabilities the surplus and deficiency accounts in both Groups 1 and 2.
Nowhere in the report is there anything to indicate that these moneys belong to the
secretary. Mr. Orr, the auditor, was asked to make a suggestion as to the clarification
of the financial statements and auditor's reports. It is to be hoped that these have
been carried through, for the reports up to and including 1945 are not clear. In my
opinion, the secretary's account or the general account of the society should be shown
as belonging to him. Under his contract with the society he is entitled to receive the
annual dues of each member, less $1 which must be deposited to the credit of the society. As the annual dues amount to $5, he receives $4 from each member, out of
which he pays all expenses except medical fees, audit fees, legal expenses, office furniture and fixtures. Up until 1943 he drew the full amount that he was entitled to, and
in some cases overdrew it by small amounts. In 1944 and 1945, however, he allowed
those to accumulate. The 1944 statement, Sheet C, showed " Balance to credit of secretary," the 1945 statement showed " Surplus for period." It was obvious from perusing these balance-sheets and statements that even though a society is operating with
the best intentions in the world, unless the yearly statements are made in a set form,
changes such as I have indicated above will creep in, resulting in the members getting
a totally wrong impression of the financial standing of the society.
In this society no particular attempt has been made to build up a large reserve.
At the end of the period May 31st, 1945, the Mortuary Trust Account, which is carried
to Reserve Account, showed a balance of $17,750.68. Of this amount, $6,126.45 was
shown as advance payments to beneficiaries. The new system which has been adopted
for advance payments of assessments will provide money to pay the claim more quickly.
Apparently, however, there were always ample funds in the Mortuary Trust reserve
for this purpose, and I cannot see any particular necessity for adopting the new system.
Auditor's Reports.—The auditor's reports require considerable clarification.
I have already touched on those, and very little more needs to be said. I am of the
opinion, however, that a proper balance-sheet should be prepared showing the Mortuary
Trust Fund, Advance Assessment Account, and General Fund separately. This could
be readily done, and the position of each fund could then be ascertained at a glance.
Claims.—Payment of claims has been reasonably prompt. I do not agree with the
method adopted of issuing a cheque, holding it in the office, and reporting the claim as
being paid. It is true the delay in these cases is caused by the facts that succession
duty releases have not been obtained. However, issuing the cheque and retaining it
is not payment of claim, and, in my opinion, this practice should cease. In view of this
practice the reports of claims paid as returned to the Superintendent of Insurance are CC 54
REPORT OF THE ROYAL COMMISSION.
of no value, and I cannot make any finding as to how many claims are carried over.
During the course of the inquiry when this practice was discovered, Mr. Pym was requested to give details of cheques issued but not forwarded in 1945. No less than
seven cheques had been issued. All but one were dated immediately prior to the end
of the fiscal year. In the case of one of the claims, that of Olson, the cheque had been
held since November 26th, 1940. Two of the cheques were issued on May 15th, 1944,
and had been held for over a year. The remainder of them were issued in 1945. All
of these claims had been reported as being paid in the returns sent to Victoria. It
would have been much simpler if the true facts had been given and the proper returns
filed. There can be no criticism of a society if the delay is due to the slowness of the
claimant in obtaining the necessary releases. In paying claims, Mr. Pym states that
no particular attention is paid to having the beneficiary prove that he or she is a
dependent. The vast majority of claims, of course, are payable to either the husband,
wife, son, or daughter, and Mr. Pym states that he makes no investigation nor requires
any proof of dependency, even if a person either than one of the above is named.
Annual Meeting.—Notices are sent to all members calling the annual meeting.
The attendance is very small. This, of course, is to be expected in a society which only
has a very small proportion of its membership in British Columbia. The actual figures,
filed as Exhibit 89, show that only 223 members in both groups reside in Vancouver.
The meetings are always held in Vancouver, and no suggestion has been made that the
meeting should be held in any place other than Vancouver. Proxies are allowed but
are not used.
Complaints.-—No complaints of any kind have been made against this society.
Conclusion.—I have no hesitation in saying that in my opinion this society is
efficiently operated. I do not like the form of balance-sheets, but that can be readily
rectified.
The unusually large proportion of members residing outside of British Columbia
places this society in rather a special class. Out of a total of 2,504 members, only 760
reside in British Columbia. I question very greatly the soundness of policy of employing an agent in another Province who operates a society there. It should be obvious
that the British Columbia society would receive all of the poorest applications. This,
I think, is reflected in the large proportion of members over 50 years of age. It is
also reflected in the unusual number of lapses. Exhibit 41-A shows that in ten years,
out of a total of 5,667, there were 3,745 lapses. Mr. Pym states that the majority of
these occur in their first year. When it is recalled that during the first year no annual
dues are received—the whole amount going to the agent who obtained the member—
it is obvious that this is not " good business."
Statement of Membership for Fiscal Years ending May 31st in each Year.
Group 1.
Year.
Members at
Beginning
of Year.
New
Members.
Lapses.
Deaths.
Members
at End
of Year.
1936	
1,145
837
676
1,040
1,776
2,168
2,368
2,337
2,090
1,957
170
57
507
1,231
924
607
496
292
195
43
469
202
123
474
509
392
489
507
287
47
9
16
20
22
23
20
33
32
41
31
1937	
1938	
1,040
1,776
2,168
2,368
2,337
2,090
1,957
1,922
1939	
1940	
1941	
1942	
1943	
1944	
1945	 DEATH BENEFIT SOCIETIES.
CC 55
Statement of Membership for Fiscal Years ending May 31st in each Year-
Continued.
Group 2.
Year.
Members at
Beginning
of Year.
New
Members.
Lapses.
Deaths.
Members
at End
of Year.
1939               	
25
113
277
593
868
590
25
90
209
319
300
61
40
2
42
3
20
331
130
3
5
8
5
25
1940	
113
1941	
277
1942	
593
1943	
868
1944	
590
1945	
495
THE TRAIL AND ROSSLAND FIFTEEN HUNDRED CLUB.
This society is the oldest society now existing in British Columbia. It was incorporated under the " Societies Act " on June 14th, 1921, under Certificate No. 1251.
Its operations were to be carried on in the cities of Trail, Rossland, and the surrounding
district.
Object.—The.objects are as follows: "The objects of this society have been to
make financial provisions for the beneficiaries of deceased members without being in
any way connected with any secret organizations. Members shall be limited to 1500,
the said provision to be obtained by means of subscriptions by members of the said
society."
Early History.—This society was incorporated in Trail, and as one of the members
stated, for the purpose of doing away with the practice which had existed in that district of " passing the hat around " when a fellow workman died. The situation, of
course, in Trail is rather unique, due to the fact that by far the greater majority of the
people in that city work for the same company. This society, therefore, was a community concern in every way.
Prior to incorporation, no less than 118 persons signed the letter agreeing to
become members of the society, if it was incorporated. A meeting was then held, the
proposed by-laws submitted to the meeting and passed. Directors were elected and
authority given to proceed with the organization of the society.
The original by-laws remained in force until 1931 when certain amendments were
made. Meetings of the society were well attended; actual elections took place, and in
the early days there was considerable rivalry as to who would be elected. Some difficulty was experienced with one of the secretaries, but since Mr. Wyatt was elected in
1929 there has been no further trouble. The membership of this society has never
been large. At one time, in 1931, it had approximately 1,100 members. Since then
the membership has declined and at December 31st, 1945, there were only 525 members.
This society has been carried on in the manner contemplated by the " Societies
Act." There have been no drives for membership and no attempts to move out of the
community or expand into other Provinces. The main method of obtaining new members has been through the membership.
By-laws.—The by-laws are simple and provide for payment of $1 per member upon
the death of each member. Ages of members at joining are from 18 to 60. The
secretary-treasurer is elected annually at the annual general meeting and his salary
is set at the annual meeting. The assessments are placed in the Mortuary Fund and
are not used for any other purpose. Death claims are due " and shall be paid within
thirty days after satisfactory proof of death has been received by the society." CC 56 REPORT OF THE ROYAL COMMISSION.
Certificate of Membership.—The certificate is in accordance with the by-laws and
provides that the society will pay $1 for each member in good standing at the time of
the death of the assured. The certificate has an unusual provision whereby the member
signed a printed form on the bottom of the membership certificate, as follows:—
I, the undersigned, do hereby declare that I am the person named as the insured in
the foregoing certificate issued by the Trail and Rossland 1500 Club, the terms and
conditions of which I hereby acknowledge, are fully known to me, together with the
By-laws, rules and regulations of the said society and to all of which I hereby expressly
agree and accept, and in the event of my not complying with all the provisions of the
said certificate and the By-laws, rules and' regulations of the said society I forfeit all my
rights, privileges, and interests under said certificate and in said society.
Membership.—Membership in this society has been steadily declining. In the
period from 1935 to 1945, inclusive, 53 new members have been obtained, 220 have
allowed their certificates to lapse, and 105 have died. The age of the members runs
from age 34 to age 82. Only 48 members out of the 532 are under 50 years of age.
In other words, over 90 per cent, are over 50. This is a serious situation and is
reflected in the number of deaths.
Agents.—Agents have not been employed for the purpose of obtaining members.
At one time a commission of $2 to any person bringing in a membership was paid.
Over a period of ten years only $105 was paid in commission.
Finances.—An excellent system of book-keeping is maintained and proper yearly
statements are printed and distributed to the members. The society has been excellently managed during the years that it has been in existence and has assets consisting
of cash in bank and bonds of over $11,000.
Claims.—Claims are paid promptly as soon as proofs are submitted. In some
cases they are paid within forty-eight hours. This, of course, is unusual, but due to
the fact that no succession duties are necessary there is no delay. The secretary stated
that the usual time for payment of claims was from two to four days. After the claims
are paid assessments are made and the fund reimbursed.
Annual Meeting.—At one time the annual meetings were largely attended.
At present they are not. The meeting is called by inserting notice in a daily or weekly
paper.    Proxies are not allowed.
Complaints.—Only one complaint was received against this society, and that was
because the society refused to pay to a beneficiary who was a sister of the deceased.
At that particular time the board of directors refused to pay, owing to the fact that
the " Societies Act " would not allow it. Latterly, with the new board of directors, the
statement was made that claims are paid to the named beneficiary without making any
distinction as to whether or not the person is a dependent.
Conclusion.—This society, despite excellent management, is definitely on the downgrade. No attempt is made to get new members and in fact new members cannot be
obtained in Trail, the reason being that group insurance policies of $1,000 can be
obtained through the Consolidated Mining and Smelting Company at a cost to the
individual of only 90 cents per month. With deaths running as they are the cost to
each member is at least $10 per year and the amount payable is only approximatelv
$500. DEATH BENEFIT  SOCIETIES.
CC 57
Statement of Membership by Fiscal Years ending December 31st, in Each Year.
Year.
Members at
Beginning
of Year.
New
Members.
Lapses.
Died.
Members
at End
of Year.
1935	
797
759
736
710
678
648
633
607
582
572
8
10
11
8
8
1
2
4
1
41
21
25
28
32
10
20
15
5
3
5
12
12
12
6
6
8
10
9
7
759
1936	
736
1937	
710
1938	
678
1939	
648
1940	
633
1941	
607
1942	
582
1943	
1944	
572
563
THE FIFTEEN HUNDRED CLUB OF VICTORIA DISTRICT.
Name.—This society was incorporated on September 3rd, 1924, under the above
name. It has never had a large membership, and owing to the fact that its membership at the end of 1945 was only 278, it was not thought necessary to hold a special
session for the purpose of submitting evidence. The Secretary, however, F. A. Willis,
of 618 Broughton Street, has submitted copies of the declaration and the by-laws. He
has also filed the annual statements and the summaries which we required. This report,
therefore, is compiled solely from such documents.
Objects.—The objects of this society are as follows: " The object of the society is
to make provision for the benefit of its members by means of subscriptions against
death and for relieving their husbands, wives, children and other dependents, but not
otherwise to carry on the business of insurance."
By-laws.—The by-laws are short and straightforward. The membership is limited
to 1,500 persons of either sex. The age on application must be between 18 and 50.
An assessment of $1 per member is made on each death, and the beneficiary received
$1 for each member in good standing at the date of the death of the member. A special
clause, section 12, is incorporated to take care of the situation if there is a deficiency
in the amount available for payment of the claim by reason of the non-payment by
members of an assessment. This allows the society to make up the deficiency out of
moneys in the Mortuary Fund that are not standing to the credit of some other death
benefit claim, and that upon payment of the amount available under the above provision,
the society shall be given a full and complete discharge of the claim.
The by-laws further provide that the board of directors shall be elected at the
annual meeting and that the auditor shall also be appointed by the members at the
annual meeting. Proxies are allowed, and a quorum is twenty members present either
in person or by proxy.
Certificate of Membership.—The certificate of membership clearly sets out that the
beneficiary will receive $1 for each member in good standing at the date of the deceased
member's death, subject to the provision for making up the deficiency as stated above.
The beneficiary must come within the class of person mentioned in the declaration.
Membership.—The membership of this society has never been large. In 1935 it
had 472 members. Since then it has progressively declined until at the end of 1945 it
only had a membership of 278. Apparently outside agents have never been employed
for the purpose of obtaining members. They have depended solely on members of the
society bringing in new members. The by-laws specifically provide for this by allowing
payment of a bonus to the member. CC 58
REPORT OF THE ROYAL COMMISSION.
Finances.—The society appears to have been very economically run. The secretary
has only been paid $30 per month. Apparently an office is not maintained, as there is
no charge for rent shown in the annual statement. During the time the society has
been in existence, a surplus of some $3,000 has been built up, this being invested in
Dominion of Canada bonds.
Conclusion.—So far as I can judge from the records and statements submitted by
this society, it has been run and operated within the spirit of the provisions of the
" Societies Act." Its progressive decline in membership is typical of societies where
there is not an active secretary or manager who depends for his livelihood upon the
success or failure of the society. The fact that this society has depended solely upon
its membership for increasing membership would indicate that it is exceedingly difficult,
if not impossible, to operate a society such as this unless an active campaign for members is continually carried on.
Statement of Membership as at December 31st in each Year.
Year.
Membership at
Beginning.
N
New
Members.
Reinstated.
Lapses.
Died.
Membership at End
of Year.
Cost per
Member
per Year.
1935	
472
431
414
394
350
331
334
327
318
311
298
6
9
5
2
8
10
6
2
2
3
1
1
38
20
19
38
23
4
8
6
4
9
13
9
6
6
8
4
3
5
5-
6
7
8
431
414
394
350
331
334
327
318
311
298
278
$20.00
1936	
14.00
1937	
1938	
1939	
14.00
18.00
10.00
1940	
1941	
8.00
12.00
1942	
12.00
1943 	
14.00
1944	
16.00
1945	
18.00
WESTERN CANADA MUTUAL BENEFIT ASSOCIATION.
This society was incorporated on March 18th, 1922, under the provisions of the
" Societies Act," with the name " The Kamloops-Revelstoke Two Thousand Club."
Its operations were to be carried on in the cities of Kamloops, Revelstoke, the town of
North Bend, and intervening places. In 1938 its name was changed to " The Kamloops-
Revelstoke Mutual Benefit Society." In 1939 it was changed to " Vancouver-Kamloops
Mutual Benefit Association." At the same time its locality of operations was changed
to include the City of Vancouver. In 1942 the name was again changed to the " Western
Canada Mutual Benefit Association."   It has carried on under this name ever since.
Objects.—The objects, originally, were: " The object of the Society is to make
provision by means of subscriptions against death for relieving the widows, orphaned
children or other dependents of members, but shall not otherwise carry on the business
of insurance and shall not be conducted as a trading or mercantile venture or for the
purpose of commercial gain."
Changes were made in the objects in 1939 and again in 1942. They now read as
follows: " To make provision by means of subscriptions against death for relieving the
husbands, wives, children or other dependents of members, but shall not otherwise carry
on the business of insurance and shall not be conducted as a trading or mercantile
venture or for the purpose of commercial gain."
C. C. Bell was called and gave evidence. He stated that he was the secretary-
manager. The society apparently carried on in Kamloops, with all its members residents
of Kamloops for some years. The earliest report filed is that of 1935, which showed a
membership of 571 as of March 31st, 1934.    During that year seven claims were paid, DEATH BENEFIT SOCIETIES. CC 59
amounting to $460 to $480. In 1939 the society moved to Vancouver. On March 31st,
1940, there were 580 members, of whom 33 were delinquent.
After Mr. Bell and his partner, Mr. Macnaghten, became associated with this
society it moved to Vancouver. Membership has increased; at March 31st, 1945,
Group A had reached a membership of 1,202 and Group B 207. A year later Group A
had decreased to 1,019 and Group B to 160. Mr. Bell attributes the loss in membership
to the lack of agents. This society has been carried on in more or less of a dual
capacity; although the head office has moved to Vancouver, an office is still maintained
in Kamloops, where fees may be paid. This, no doubt, is a very great convenience for
the Kamloops members, and due to this office, contact has been kept with the Kamloops
membership.
By-laws.—The by-laws originally were simple, and provided for assessments after
each death. The yearly dues were $2, and there was an assessment of $1 for each death.
Ages were limited to 18 to 50. In 1939 the by-laws were changed, increasing the
annual dues and providing for a proportionate assessment when the membership should
exceed 2,000. They also provided for the division of the society into groups—Group A
up to $2,000 and Group B to be $1,000. The by-laws were also extended and amended
in 1940. As they stand at the present time, they are clear and straightforward. One
power, however, is taken, which I might criticize, and that is that " the directors may,
in their discretion, admit to membership in Group 'A' persons over the age of 50 years."
The by-laws also provide that after twenty years' continuous membership the yearly
dues may be remitted by the directors.
Certificate of Membership.—The certificate of membership at present in use in
Group A provides for payment to the beneficiary of an amount not to exceed $1 for each
member paying the assessment, the full amount not to exceed $2,000. The Group B
certificate is similar, except the amount is not to exceed $1,000.
The by-laws provide for the division of the society into the different groups.
A special set of by-laws—namely, from 20 to 29, inclusive—apply specifically to Group B.
These, together with the remainder of the general by-laws, are all printed on the inside
of the certificate of membership. By-laws 12 to 19, inclusive, deal specifically with
Group A. They are incorporated in the Group A certificate and left out of the Group B
certificate.
Membership.—The membership in this society remained fairly constant until the
transfer to Vancouver. At March, 1935, the membership stood at 495; at March, 1939,
the membership stood at 430; at March, 1940, it stood at 580. The following year 459
new members joined, and 226 allowed their membership to lapse. This, with ten deaths,
left a membership of 803 at March 31st, 1941. In 1945 it reached 1,202 in Group A
and 207 in Group B. The year 1946 showed a loss again, of 244 lapses and 17 deaths in
Group A and 82 lapses and 5 deaths in Group B, leaving a membership of 1,019 in
Group A and 160 in Group B as at March 31st, 1946. Of this membership, 28 per cent,
reside outside of British Columbia, mainly in Saskatchewan. The majority of these
members were obtained by an agent by the name of Egan, who has written for other
societies also. Approximately 50 per cent, of the membership are 50 and over; 25 per
cent, are between 40 and 50, and the balance below that. Compared to some of the
societies, the age-group is not overly high. Deaths, however, have been remaining
fairly constant. The cost of membership in Group A, by fiscal years, runs all the way
from $7 per year in 1939 to $19 per year in 1945. In Group B it was $5 in 1944 and
$9 in 1945. The amount paid in the Group A policy for the year ending March 31st,
1946, varied from $973 to $1,138. In Group B it ran from $163 to $175. Group B, of
course, is expensive, and unless there is a sudden spurt of membership, it cannot
continue. CC 60
REPORT OF THE ROYAL COMMISSION.
Agents.—Agents are paid in the same manner as the other societies, namely, all the
joining fees and the first year's annual dues. In some years this runs to a considerable
amount, as, for instance, in the year ending March 31st, 1945, agents' commissions are
$4,351 in Group A, and $1,324 in Group B. This money, of course, is never received
by the society, but is simply taken by the agent when he writes the application form.
Finances.—The method of handling the accounts is satisfactory. Close watch is
kept on the various accounts, and there is a minimum chance of error. The auditor's
report is similar in form to that of the Canadian Mutual. The same firm of auditors
does both societies. C. C. Bell is secretary-manager of this society and president of the
Canadian Mutual. It is apparent, therefore, that the method of handling the office
routine is almost exactly the same. The principal difference between the two is that in
the Canadian Mutual the secretary-manager draws a large salary and has a large
expense account. In the society under review the secretary-treasurer's remuneration
is extremely small. In the 1946 report it was $411.08, in 1945 it was $1,041.25, in 1944
it was $925. In addition to this, the representative at Kamloops receives approximately
$400 per year.   The audit is fairly complete, and I have no comment to make on it.
Claims.—Claims are assessed as they occur. Notice of assessment goes out, giving
the number and name of the claimant, and upon receipt of the moneys, all of the money
is paid over. It takes approximately two months after the notice has gone out to make
the first payment. After that, payments are made at irregular intervals until the
whole amount is paid. Claims are not being accumulated and carried over into a
succeeding year.
Annual Meetings.—Notice of annual meeting is sent by mail, and on occasion
proxies have been sent out with the notices. Mr. Bell states, however, that the proxies
have never been used. The auditor is elected at the annual meeting, and the directors'
remuneration is paid by resolution passed at the annual meeting.
Complaints.—No complaints have been received against this society.
Conclusion.—This is another society which has moved from the Interior of British
Columbia and, with the use of agents, expanding considerably. Expenses have increased
enormously. Up to 1939 the highest cost for operating the society was slightly over
$1,000. In 1940, after moving to Vancouver, it jumped to $3,200; in 1941, to $6,481.
It is only fair to point out, however, that the greatest increase in cost was due to the
employment of agents and the payment of commissions. No doubt it can be said that
the end justified the means, for the amounts paid under the certificates of membership
have doubled.
As far as the future is concerned, Mr. Bell says quite frankly that it depends solely
upon getting good agents who will bring in a constant stream of new members.
Statement of Membership for Fiscal Years April 1st to March 31st.
Year.
Members at
Beginning of
Fiscal Yeae.
New
Members.
Lapses.
Died.
Membership at
End op Year.
Cost per
Member.
"A."
" B."
"A."
"B."
"A."
"B."
" A."
"B."
"A."
" ■__.."
"A."
"B."
1935	
571
495
380
430
430
451
580
803
733
735
1,151
1,202
Nil
188
207
12
8
50
16
42
154
459
190
105
445
431
189
111
81
115
4
14
15
23
226
260
103
29
366
191
1
86
74
7
3
4
2
6
2
10
10
9
14
17
1
6
5
495
380
430
430
451
580
803
733
$7.00
13.00
14.00
14.00
11.00
19.00
1936	
1937	
1938	
1939	
1940...	
1941	
1942	
1943	
7SK
1944	
1,151    |    188
1.202         207
1  019             160
$5.00
9.00
1945	
1946	
25
32 DEATH BENEFIT  SOCIETIES. CC 61
THE UNITED HOME SECURITY ASSOCIATION.
This society was incorporated on May 11th, 1922, under the provisions of the
" Societies Act." • The name under which it was incorporated was " The 1500 Club of
Kaslo and District." Its operations were to be chiefly carried on in the Kaslo and
Slocan districts of West Kootenay with head office at Kaslo, B.C. The society carried
on in that area under that name until July 27th, 1944, when its name was changed to
" The United Home Security Association." On March 27th, 1944, the head office of
the society and the area in which it was to carry on its operations was changed from
Kaslo to Vancouver. Since that date the operations have been carried on from the
latter city.
Objects.—The objects of the society originally were: "To make provision by
means of subscriptions for relieving the widows, orphan children or other dependents
of members but not otherwise to carry on the business of insurance and not to conduct
a trading or mercantile venture or for the purposes of commercial gain. Its membership shall be limited to 1500."
These objects remained the same until July 21st, 1944, when they were changed to
read as follows: " The objects of the society are to make provision by means of subscriptions against sickness, accident, disability and/or death (including expenses and
other losses resulting therefrom) for the benefit of its members and for relieving them
through husbands, wives, children and other dependents but not otherwise to carry on
a business of insurance, and for this purpose to divide the membership into various
classes or groups with various rights and privileges."
The society is carrying on under these objects at the present time with head office
in Vancouver.
Early History.—The early history of this society is typical of a number of them.
I have already referred to it at the beginning of my report. At Kaslo, B.C., several
of the chartered members appeared and gave evidence. One, Herbert Exter, was a
charter member of the society. He was the secretary from 1936 until the society moved
to Vancouver. He states at page 3846 when asked why the society was originally
formed:
Well, in the olden days when people died here, it was customary to pass the hat
around for the widow. That had a great deal to do with it and at the time this club
was organized we took in all these old people and did away with passing the hat around.
When the club was first organized they took in the first 100 members at an age up
to 65. The club was a purely local concern. The old minute books were filed and show
that a considerable number of persons would turn out at the annual meetings. There
would be competition for office. Even the secretary was elected at the first general
meeting, and his salary was set at the annual meeting for the ensuing year. By 1926,
1,500 persons had joined. This was all that was allowed under the by-laws. The
minutes disclose that there was actually a waiting list of people anxious to become
members. In 1930 the club began to decline. In 1933 negotiations commenced for
taking in or taking over " The 1500 Club of Grand Forks and District." This was
ultimately done and a temporary increase in members ensued. In 1935 the 1500 Club
in Kootenay District was also absorbed. It gave another increase in membership but
soon after the membership began to decline again. The Kootenay and District society
had previously absorbed the Nelson Protective Association. Mr. Exter was asked what
was the result of amalgamating with these other associations. At page 3852 he stated
as follows:—
It made the death rate much higher.
Q. It really was not any advantage to you, was it?
A. No, it was not. CC 62 REPORT OF THE ROYAL COMMISSION.
Q. Quite the opposite?
A. Yes, we had at one time 11 deaths waiting for benefits.
Q. That would probably be people from the other clubs?
A. Yes, nearly all of them.
Even after those amalgamations the membership continued to decline, until at the
end of 1943 there were 442 members of whom 72 were delinquent. In 1935, after
amalgamation with the 1500 Club of Kootenay District, it had liquid assets to approximately $16,000. These gradually declined until at the end of 1943 it had liquid assets
of approximately $7,000. The decline in the assets was due to the fact that the surplus
was continually tapped in order to reduce the assessments to the members. Apparently
they made it a rule never to assess for more than five persons at one time. The result
was that in practically every year, one or more death benefits were paid from the
reserve fund. At this time C. R. Duffield, of Vancouver, appeared on the scene. I am
quoting from page 3863 of Mr. Exter's evidence:—
Mr. Cameron: Q: In connection with the situation that faced your club in 1944,
what, in your opinion, were the causes of deciding to transfer the control of the society
to other management at Vancouver?
A. Well, we had reached a stage where it was impossible to get any more new
members in this district, and Mr. Duffield came here and explained his society to us
stating that with the sickness and accident payable, and his membership was clamouring
for Life Insurance and that brought him to Kaslo and he wanted to take us over for
that special purpose.
Gordon Dudley Bowker, another witness called at Kaslo, stated as follows:—
Q. What was your experience in connection with this Society and the events which
led up to this transfer to Vancouver?
A. That is rather a long story. There was no doubt in the directors' minds, especially mine, I was one of the chief instigators. I have tried to get something done in
order to build up the club. We figured it would not be so many years before the club
would naturally peter out. There were numerous old members who had been in the club,
charter members, and it was up to the directors to try and do something to protect these
men. They had paid in quite a lot of money. Later, the assessment ran to $30.00 for
about $400 or $500 insurance. I considered, and the rest of the directors considered, we
had to do something. We had one or two offers which were investigated and turned
down. This Employees Mutual Benefit Association, of which Mr. Duffield was secretary,
appeared to be the last straw the club had to save the club from becoming defunct, and
we considered it quite a lot. There was a certain amount of opposition to it. We had
a certain amount of investigation, and Mr. Duffield came up and he assured us that he
had a big group of young people in the Employees Mutual Benefit Association from
which he could fill up our club probably—and I think his words, I am not sure, within
a couple of years he could do so to at least 1,000 members. At that time things were
very good at the Coast, all kinds of employment and they had all kinds of money which
they couldn't spend, but that with a few high pressure salesmen he could get the club
up to where it should be. He created quite a good impression amongst the directors,
and we held a general meeting which was very poorly attended, and the resolution was
put through that we should amalgamate or turn the club over to Mr. Duffield.
By-laws.—The original by-laws were simple and almost identical with those of
the Trail and Rossland society. They provided that on the death of a member, the
beneficiary should receive $1 from the society for each member in good standing in the
society " at the time of payment of certificate." It also provided for assessment following the death of a member: "The amount paid in on this assessment shall be the
amount paid to the beneficiary." The yearly dues were $2 per year, $1 of which was
paid into the Mortuary Fund.
In 1944, after moving to Vancouver, the by-laws were drastically amended and the
whole reprinted. The new by-laws are short and simple. They were drawn under the
capable direction of C. W. Tysoe.    Several points, however, may be noted. DEATH BENEFIT SOCIETIES. CC 63
The membership dues were increased to $5. The dues and assessments are payable
thirty days after the date of mailing of the notice. Upon default in payment within
thirty days, without any notice, the member automatically loses his membership. Upon
the death of a member an assessment of $1 is payable, and the beneficiary is entitled to
be paid by the association the amount received from the assessment of $1, not exceeding
the sum of $1,500. If the number of members exceeds 1,500, the directors may reduce
the amount of assessment so that the amount realized will yield sufficient to produce the
sum of $1,500. The directors further have the power to pay a claim from the reserve.
It may be noted here that the original by-laws did not provide for such a payment, and
it is possible that a number of the payments made prior to this amendment were not
justified under the terms of the by-laws as they were then.
Special attention may be drawn to paragraph 5, Article No. 3. It provides that if
at the time of the death of the member the named beneficiary is dead, " the death
benefit shall be payable to the personal representative of the deceased member if he is
by law entitled to receive it." Mr. Tysoe explained that at the time the by-laws were
revised Mr. Garrett objected to payment to the personal representative, pointing out
that under the " Societies Act" the beneficiary, if other than the husband, wife, or
child, had to be a dependent. This clause was finally drafted in the form it now is in
order to get around the objection of Mr. Garrett. Presumably it was left to be decided
at the time payment was made whether the person was entitled to receive it.
The secretary-treasurer is appointed by the directors. He may or may not be a
director. The board of directors sets his salary or remuneration and also their own
directors' fees. The directors under the by-laws are given full power to assess for
deaths, to make settlements of claims, to levy advance assessments in amounts not
exceeding $5, and to levy special assessments should the dues or other moneys payable
by the members be found inadequate to meet the requirements of the association.
It will be seen from the above that the new by-laws greatly increased the power of
the directors. Under the old by-laws the directors could only collect $2 dues and assess
$1 for each death. Under the new by-laws, they not only can assess for the deaths that
have occurred but they can assess for them "in advance." Furthermore, they have the
very drastic power of assessment " should the dues or other moneys payable by the
members or any group or groups of members be found inadequate to meet the requirements of the association."
The necessity of a by-law such as this no doubt was brought about by the fact that
after they moved to Vancouver the annual dues were not sufficient to pay the expenses.
Reference to this situation will be made further on in my report.
Certificate of Membership.—The original certificate of membership was drawn in
accordance with the by-laws and provided for the payment of $1 per member in good
standing at the time of payment. The new certificate, which was issued after the
transfer to Vancouver, is even clearer and might well be a model for certificates of these
societies.   A copy of the first page of it is attached hereto.
GROUP "A"
Certificate of Membership
No. A	
THE UNITED HOME SECURITY ASSOCIATION
Incorporated Under The Societies Act of The Province of British Columbia.
The United Home Security Association.
Hereby Certifies as Follows:
That, subject to the representations, declarations and answers contained in his application for membership in the Association and made by him in the course of his medical
examination (if any such medical examination was had) being true and exact in every
respect, 	 residing at
is a member of Group "A" of the Association.
That, subject to the said member being and continuing to be a member of Group "A"
of the Association in good standing and to all the provisions of the By-laws of the Association as they exist from time to time and to the terms, conditions and provisoes set
out herein, the Association will within ninety (90) days after proof of the fact and cause
of death of the said member satisfactory to the Directors of the Association has been
received by the Association pay to the beneficiary named in this Certificate of Membership at the time of the death of the member, if such beneficiary be living but not otherwise, the amount received by the Association from an assessment to be made by the
Association on the members in good standing of Group "A" of the Association as provided by the By-laws of the Association but not in any event to exceed the sum of
Fifteen Hundred ($1500.00) Dollars.
Should the said beneficiary predecease the said member, the Association will, within
ninety (90) days after proof of the fact and cause of death of the said member and of
the title of the person claiming to be the personal representative of the said member
satisfactory to the Directors of the Association has been received by the Association, pay
the death benefit to such personal representative if he is by law entitled to receive it.
PROVIDED that should the death of the member be caused directly or indirectly by:
(a) self destruction while sane or insane, or
(&)  the use of intoxicating liquor or narcotics, or
(c) war or any act of war or should the death occur while the member is in
military, naval or air force service nothing shall be payable to either the
beneficiary or the legal personal representative aforementioned.
IN WITNESS WHEREOF the Association has caused its President and Secretary-
Treasurer to sign this Certificate of Membership this day of ,
19 , but this Certificate shall not be in force until countersigned by a duly authorized
Certificate Clerk. ., w> c> j0NES »
President.
Countersigned at " C. R. Duffield "
Vancouver, B.C. Secretary-Treasurer.
Duly Authorized Certificate Clerk
NAME AND ADDRESS OF BENEFICIARY
On the inside pages of the certificate certain extracts from the by-laws are given.
A copy of the application for membership is also reproduced on the inside of the
certificate.
Membership.—I have already referred to the membership in the society, but would
add that since coming to Vancouver in the year 1944, 193 new members were obtained,
81 allowed their membership to lapse, and during the year 29 died, leaving a membership of 493. In 1945 the figures given by Mr. Duffield were as follows: Group 1, new
members 131, lapses 93, deaths 18, leaving a membership of 510. Groups C and D were
started in this year and they had a membership of 43 and 2 respectively. I might say
that the figures given and the statements filed are unsatisfactory in that they do not
balance. The figures given above are as corrected by me from information given in the
evidence.
The membership is extremely old. In 1943 out of 440 members only 34 were under
50 years of age. In 1944 out of 490 members 62 were under 50 years of age. No
figures were given or asked for the year 1945. Originally the society only had one
group. At the time of Mr. Duffield's examination he contemplated dividing the society
into groups, an older group from 55 to 65 and a younger group under 55. His views
with regard to membership in these societies are interesting. I quote from pages 3408,
3409, and part of 3410:
THE  COMMISSIONER:   Q. Then do you expect to be able to keep on increasing
your membership when you have a group of that age to take care of?
A. Yes, we have increased 196 last year. DEATH BENEFIT  SOCIETIES. CC 65
Q. It is costing really $34 a year for approximately $500 insurance?
A. That is right, which is a very high rate of insurance.
Q. Which is a high rate for any young person?
A. We have discussed forming groups; for instance a Group B. My thought there
is people over 50 or 55 from now on will be put in this other group with the older
members and new members under 50 will be put in group B, say. That is what we had
in mind.
MR. CAMERON: Q. Even if you do that, how do you propose to get anywhere
with it?
A. With this group.
Q. Forming your new group?
A. How do you mean?
Q. How is that going to save the situation?
A. Help the A group?
Q. Yes.
A. We have still got a lot of aplications from the older people, 55 to 65. We will
put them in this other group.
THE COMMISSIONER:   Q. Which group?
A. Group A, the older members group, and we will build that up as an older members
group.
MR. CAMERON:   Q. How can you build it up.    Death is.going to cut it down?
A. So will sales lob it up every time death lobs it down. As long as you can get
your sales and keep them coming—it won't increase certainly more than 30 deaths
a year—you should increase by 200 or 300 a year new members which over a period of
time will bring that up unless a catastrophe overtakes the new members coming in.
THE COMMISSIONER:   Q. But they all have to die?
A. Yes.
Q. Death is inevitable?
A. True, but the amount of deaths won't be anything like the amount of members
coming in and the group will increase to 1500 and no reason why it shouldn't be kept
there.
Q. You take it as a sales proposition, purely and simply?
A. That is right. If the increase of members is 200 a year, in five years you have
increased 1,000 members and if only 30 or 50 deaths a year, they will be getting reasonable insurance. I figure the death rate will step up from 30 to 45 if the group was full.
They would still get $1500 as against the $500 they are getting now. They would be
getting a cheap rate of insurance even if $45.00 for $1500.00. That is cheap life insurance of 55 or 60, and he can't get insurance with a life insurance company in most cases.
I believe the whole reason of these clubs slipping down is due to poor salesmanship.
Mr. Duffield's views that it is all a matter of salesmanship are further extended
at pages 3414 and 3415.
THE COMMISSIONER: Q. How can you compete with the other associations?
The highest, to my recollection, that any association has charged so far is somewhere in
the neighborhood of $50.00 or $55.00 a year for $2500 coverage?
A. It is just a matter of salesmanship. That is what I would put it down to. You
have got a bunch of salesmen out selling. You will have to get the business. You have
got to go to the person and solicit them and if you are not soliciting, a lot of them aren't
going to get the business.
Q. Then you are really carrying on a regular commercial insurance business?
A. That is about the size of it. You have got salesmen out who are interested in
sales.
Q. So why should you not then conform to the ordinary regulations of insurance
companies?
A. There is no reason why we shouldn't.
Q. You know that you could not possibly operate if you conform to the provisions
of the Insurance Act now?
A. It just so happens that the Society Act says you don't have to conform the way
it is written at the present time.
MR. CAMERON: Q. In view of the fact that the majority of these societies seem
to be endeavoring to cut down their membership beyond certain ages—in other words to
get rid of their members 50 and over one way or another—are you more or less anticipating building up your society here by people who are rejects or discards from the other
societies? CC 66 REPORT OF THE ROYAL COMMISSION.
A. We happen to be in the position where we are just about stuck with a bunch of
old members and we might as well turn around and fill it up. It is not right to turn
around and say to these people, " We are going to cancel your policy." It is also not
right to let them go on and declare they might be lucky to get $100.00. So it is conceivable there is a situation there we have to face and I think the only way is to increase
the membership and it is fair to charge the members at the same age.
I cannot see how Mr. Duffield can expect to operate a group in which the joining
age is from 50 to 55 to 65. The cost unquestionably will be beyond the reach of the
majority of members. It should be remembered that in obtaining new members a
society does not benefit in the slightest unless the member also pays an assessment.
In 1944, under Mr. Duffield's regime, his society had an increase of 191 and lapses of 81.
In 1945, after he had formed his groups, he had 131 new members in Group A, and
lapses of 93. No figures were asked or given as to what proportion of the new members
allowed their certificates of membership to lapse. However, it is believed that lapses
generally occur during the first year of membership. With the extreme age of the
members in Group A, it seems quite improbable to me that they can successfully carry
on. One of the witnesses in Kaslo, Mr. Exter, at page 3867 was asked his opinion and
he said if they had known that Mr. Duffield was going to put them in a group with old
members they would not have been interested in his proposal. They, of course, already
have had experience with increasing their members by adding old members. They tiad
tried it on two different occasions and on each occasion it did not work out. I refer to
the amalgamation first with the Grand Forks club and secondly with the Nelson club.
Agents.—Mr. Duffield frankly admitted that the success of these clubs was a
matter of salesmanship. He employs agents. He even had a sales manager. The
agent gets the joining fees and all the first year's dues. The member must pay any
assessments made during the first year but the society gets no other benefits out of
the first year of the membership.
Finances.—Due to the fact that the annual dues were only $2, the society has
always had difficulty in paying its way. In 1935 the annual dues amounted to $1,634.
The overhead expenses amounted to $1,911.60. In 1936-1937 there was a small saving.
From 1938 on, however, expenses were more than the annual dues. The loss, however,
was never greater than $200 to $400. In 1944 the dues were raised to $5. The amount
received was $1,990 and the expenses were $4,224.60. The excess of expenditures over
revenues was $3,232.56. Salaries alone were more than the total expenses of running
the society in Kaslo. A further expense of $664.23 was charged for moving the society
to Vancouver. Details of this were asked by the auditors and his original memo was
put in as Exhibit 63. The train fare for three trips was shown as $351.30. Meals,
hotels, and sundries for eighteen days amounted to $312.93 which averaged out at
approximately $9 per day. It is quite understandable that the expenses would be large.
There is, however, no excuse for concealing these from the members. For years annual
statements have been sent out to all members. The 1944 statement was not sent out.
All the witnesses who appeared in Kaslo expressed considerable concern over this.
I have no doubt that if they had known that their reserve had been depleted by some
$3,200, due to extra expenses, they would have regretted exceedingly their acquiescence
in the change to Vancouver. The perusal of the balance-sheet would further indicate
that in 1944 the assessment funds and general funds were operated as one account.
Mr. Oswald, the auditor, was called and assured me that during the year 1945 this had
been corrected and that in future the two would be operated separately.
Claims.—The payment of claims has been reasonably prompt. During the years
it operated in Kaslo they had a fixed policy of never assessing for more than five claims
at once. At times a considerable number of claims were carried over. Latterly, however, this was corrected. Since coming to Vancouver, sufficient data was not given to
make any statement regarding this. DEATH BENEFIT SOCIETIES.
CC 67
Annual Meetings.—The annual meetings when held in Kaslo originally were well
attended. Later on there was not much interest, and as Mr. Exter said they had to
" drum up attendance." Since coming to Vancouver, and the consequent amendment
of the by-laws, notice of the annual meeting can be given by publishing such notice in
a daily newspaper at Vancouver. This was the procedure which was adopted in 1945.
In my opinion, this is unsatisfactory owing to the fact a large proportion of the membership reside in and around Kaslo. Proxies are allowed, and the application for
membership had attached to it a proxy appointing the secretary-treasurer. The evidence was in many cases this was not filled in, and it was detached by the secretary
and retained by him. However, so far there has been no necessity of using such
proxies and I understand they have not been used.
Complaints.—The three witnesses who appeared at Kaslo all complained that they
had not received the annual statements nor had statements since the society had moved
to Vancouver. Two of them also criticized the way in which the notice of the payment of claims was given.    Latterly, I believe, this has been rectified.
Conclusion.—The moving of this society from Kaslo to Vancouver is more or less
typical of a number of societies. Owing to the fact that this society had a considerable number of older members, the possibility of carrying it on and making it a success
is, to say the least, problematical. The situation is still further aggravated by the
fact that they continue to take in members up to age 65. In the chart filed as Exhibit
76 it appears that no less than 10 were accepted for membership at an age of 65. Of 84
members accepted 64 were over age 50. In a club which has had two experiences of
taking in a group of old members such a policy can only be attributed either to ignorance or to the exuberance of a super-salesman. It is indicative of the trend to note
that in the 1945 figures given me by Mr. Duffield two new groups are listed, Groups B
and C.    These I presume are the younger groups which he mentioned in his evidence.
With regard to the loss in running the association during the year 1944, this is
made doubly bad due to the fact that the annual dues were increased from $2 to $5.
After hearing the evidence of the three fine old citizens in Kaslo I cannot but regret
that the management of this society has passed into the hands of a group of salesmen
who are more interested in selling than seeing that the society is carried on cheaply
and efficiently.
Statement op Membership as
at December 31st in Each Year.
Year.
Number of
Members in
Good Standing.
Number of
Members
Delinquent
Members
joined
during
Year.
Lapses.
Died.
Number at
End of Year
in  Good
Standing.
Delinquent.
1935	
800
1,068
958
875
858
751
672
573
464
410
493
44
71
142
74
28
52
41
28
50
33S
2
27
15
5
3
1
193
84
35
30
146
56
62
62
83
53
43
52
18
13
32
32
22
26
31
30
17
29
29
11
1,093
958
875
858
751
672
573
464
370
522
548
41
1936	
142
1937	
74
1938	
28
1939	
52
1940	
41
1941	
28
1942	
50
1943	
72
1944	
52
1945 (to September)	
TWO THOUSAND BENEFIT ASSOCIATION.
This society was incorporated under the " Societies Act" on December 19th, 1921,
under the name " Two Thousand Club." On April 16th, 1926, the name was changed
to " Two Thousand Benefit Association."    The society has carried on under that name CC 68 REPORT OF THE ROYAL COMMISSION.
ever since.    The locality in which the society was to carry on its operations was in
the City of Vancouver.    No change has been made in this.
Objects.—The objects were originally as follows: " The object of the society is to
make provision by means of subscriptions for relieving the beneficiaries of its members
without being connected with any secret organization. Its membership shall be limited
to 2,000."
On March 26th, 1942, the society passed an extraordinary resolution as follows :•—
That paragraph Two  (2)  of the Declaration to secure Incorporation be struck out
and the following substituted in its place and stead:
2. The object of the Society is to promote objects of a philanthropic, charitable and
social character and to make provision for the benefit of its members by means of subscriptions against sickness, disability, unavoidable misfortune, or death, and for other
dependents, but shall not otherwise carry on the business of insurance.
Also to amend Section Two (2) (object) of the Constitution and By-laws, by deleting
" Widow " in the fourth line thereof and inserting " Husbands, Wives " before the words
" children and other dependents, etc."
A copy of the above extraordinary resolution was duly forwarded to Victoria.
The words " To promote objects of a philanthropic, charitable and social character and "
were struck out and marked in the column "(Disallowed HGG R. of C.)." Apparently
the Registrar of Companies disallowed those objects, so that the object of the society
read as follows: " The object of the society is to make provision for the benefit of its
members by means of subscriptions against sickness, disability, unavoidable misfortune, or death, and for other dependents, but shall not otherwise carry on the
business of insurance."
The amended object of the association as taken from the paragraph 2 of the
constitution and by-laws read as follows after the above amendment was made: " The
object of the association is to make provision for the benefit of its members by means
of subscriptions for relieving the husbands, wives, children or other dependents of
its members, but not otherwise to carry on the business of insurance. Its membership
shall be limited to 2,000."
It is obvious from the above that the late Mr. Garrett insisted that the object of
the society should be limited to the above-quoted object. Unfortunately, he died before
his views on the interpretations of section 3 (1) of the " Societies Act " were obtained.
It is obvious, however, that he must have interpreted the words " or any useful object "
at the end of the above section as being wide enough to include the above-mentioned
object. In any event, through his intervention, the object of this society is limited
as above mentioned.
Early History.—The society has always been carried on in the City of Vancouver.
Its operations were conducted in an exceedingly modest manner and, so far as I have
been able to judge, in the manner contemplated by the " Societies Act."
The present secretary is Henry Edgerton Warburton. He was appointed in 1940.
His predecessor was J. Eades Ward. He had held the secretaryship for many years
and died while still in office. Mr. Warburton is only familiar with the history of the
society since his appointment, and accordingly very little of the early history of the
society was obtained. Its early records, however, were produced, and it is apparent
from them that the society has always carried on in a very modest and careful manner.
There have been no transactions whereby the secretaryship was sold or transferred.
The directors have always been in control of the society, and the secretaryship has
always been an annual appointment by them.
By-laws.—The by-laws are short and straightforward. Very few changes have
been made in them. In 1926 they were revamped, and since that date only two changes
have been made. DEATH BENEFIT  SOCIETIES. CC 69
The joining fee is $10, out of which $1 is paid into the Benefit Fund. The balance
of $9 is paid into the General Fund, but the directors have power " to pay such bonus
to the sponsor of the applicant as shall from time to time be determined by them."
The annual assessment or dues is $3. Originally it was only $2. The death assessment
is $1, and it is levied against each member. This is paid into the Benefit Fund, which
is a separate savings account, and the death assessment is used for " no other purpose
than for payment of amounts that fall due to beneficiaries named in certificates of
membership upon the death of members of the association in good standing."
The by-laws further provide that the beneficiary shall receive $1 from each
member in good standing on the date of death of a member, and the association
" shall pay over to the beneficiary the total amount of such assessment paid into the
association."
Certificate of Membership.—The present certificate of membership has been used
for many years, and it incorporates the above provisions from the by-laws. In addition,
it states as follows:—
The association is simply the authorized agent of the insured and of the beneficiary
for the collection of the said assessment and will pay the amount so collected to the
beneficiary, but the association does not guarantee payment of the assessment by the
members.
From the above quotation it will be seen that the certificate of membership sets
out in plain language exactly what its duties are and holds out no false hopes to the
beneficiary as to what he or she will receive.
There are no groups in the association. All the members pay the same dues and
assessments, and the beneficiaries all receive $1 per member.
Membership.—The records of the association were not examined prior to 1935.
At the beginning of that year the membership stood at 1,824. During that year there
was a loss of approximately 140 members. At the end of the year it stood at 1,687.
For a few years it remained practically the same, but in the last six years there has
been a gradual decline, until at the end of 1945 the membership stood at 1,330.
The age of the members was given in detail as at January 31st, 1945. It showed
that out of 1,348 members only 225 were under 50. In other words 83.2 per cent,
were over 50.
Agents.—This society has never employed agents. Its only means of obtaining
new members is through the existing members of the society. A bonus of $5 is paid to
each member bringing in a new member. The result is that it is a local concern.
Figures were filed showing that 1,106 of its members reside in British Columbia, and
Mr. Warburton stated that 75 per cent, of these live in and around Vancouver.
A further result of this method of obtaining membership is reflected in the almost
complete lack of cases of misrepresentation of age. Naturally where a member obtains
a new member he or she makes sure of the age of the applicant. Furthermore, there
have been no cases where there has been any trouble over a person having falsified
the statement as to health.
Finances.—The method of book-keeping adopted by this society is simple, clear-
cut, and efficient. The Benefit Fund and the General Fund are separate bank accounts.
All expenses are paid out of the General Fund. The Benefit Fund is made up of $1
from the annual dues and the assessments. Beneficiaries are paid out of this account,
and extreme care has always been taken to keep the two accounts separate. The auditor
comes in monthly, checks up on the accounts, and keeps more or less of a running audit.
The directors meet each month, and each one is given a complete statement showing
receipts and disbursements during the preceding month. Copies of these were filed as
prepared for the months of September and October, 1945. They give in detail the
receipts and disbursements in the General Account and the same in the Benefit Account. CC 70 REPORT OF THE ROYAL COMMISSION.
These are prepared by the auditor. Mr. Warburton states that the directors examine
these in detail and question him regarding the details.
Expenses are kept at a minimum. Details were given for the last ten years.
The late Mr. Ward was paid a salary of approximately $150 per month. Mr. Warburton has been paid $75 per month. He is only supposed to devote a portion of the day
to his duties. The one stenographer is paid $80 a month. Practically no advertising
is done, and rent is only $35 a month. General expenses would not average more than
$50 per month.
From the above figures it is obvious that the finances of the society are carefully
administered and the work done at a minimum of cost. The auditor is paid $15 per
month and, as stated above, conducts a more or less running audit. He is appointed
at the annual meeting, attends the annual meeting, and is available for answering any
questions regarding the finances.
Some criticism by both Mr. Cameron and myself was directed towards the form
of the balance-sheet. For instance, throughout all of them amongst'" current liabilities " is the item " assessments unpaid." This nomenclature is misleading. Actually
this means amounts owing to beneficiaries. Furthermore, the two accounts might be
shown separately.
Payment of Claims.—Claims are paid as promptly as possible. Advance payments
are made to beneficiaries who require them. Owing to the smallness of the society
and the fact that the majority of members reside in Vancouver, the secretary has more
or less a personal knowledge of the requirements of the beneficiaries. The result is
that he makes advances as required. Due to the fact that there have been practically
no cases of misrepresentation of either age or health, the risk that is run in making
such payments is practically nil. Assessments are made as required. Usually two or
three claims are assessed at the same time. As the money comes in, it is deposited in
the Benefit Account and payments are made from it. The beneficiaries receive all
the money collected from assessments. There is no " cut-off " time as in some of the
societies. Owing to the method in which the accounts are kept, the amount owing to
each beneficiary can be actually determined at any time. The result is that the beneficiary gets exactly what he or she is entitled to receive. There is no undue delay in
payment. There is no undue carrying-over of claims which have not been assessed.
Apparently at one time claims were held over. Since Mr. Warburton has been in
charge, such is not the case. For instance, on January 31st, 1944, the end of the fiscal
year, there were only three claims on which payments had not been made. A year later
there were only two.
Annual Meetings.—Annual meetings are always held in Vancouver. Notices are
sent to each of the members. The attendance is disappointing, being only from fifteen
to twenty-five. Complete financial statements are distributed at the meetings and, up
until the recent shortage of paper, have been available on the counter in the office.
As stated above, the auditor attends the annual meeting, and questions are invited.
Directors are elected at the annual meeting, and an honorarium of $50 each is voted
to them. In addition, they receive $1 per meeting. The secretary-treasurer has on
several occasions been voted the sum of $100 as an honorarium. It should be noted
that the secretary-treasurer is not a director. He is appointed yearly by the directors
at their first meeting immediately after the annual meeting.
Proxies are not authorized under the by-laws, and accordingly only those who
attend the meetings are entitled to vote.
Complaints.-—No complaints of any kind have been received against this society.
Conclusion.—This society is operated within the spirit of the " Societies Act."
There can be no suggestion that it is a commercial undertaking in any way.
The secretary-treasurer has not a personal interest in it other than carrying out his DEATH BENEFIT  SOCIETIES.
CC 71
duties. No agents make their living out of selling membership. Expenses, as stated
above, are exceedingly moderate and are well within the income from the annual dues.
In the ten years under review there has not been a deficit in the General Account.
All the assets belong to the members, and the secretary-treasurer has no claim against
them.
Latterly the membership has been decreasing, but the deaths per thousand have
remained fairly constant. The lowest death-rate in the years under review was in
1936, when it was 7.6. The highest was in 1940, when it was 18.3; in 1943 it was 13.2;
in 1944 it was 15.5; and in 1945 it was 13.5. The cost to the members has remained
fairly constant. The highest was in 1939 and 1940, when it was $30. In 1941 it
was $21, in 1944 it was $24, and in 1945 it was $21. Owing to the fact that the high
percentage of the membership is over 50 years, these costs will undoubtedly increase.
The decrease in new members may be viewed with a certain amount of alarm, but the
modest way in which the society operates should give it many more years of operation.
Statement of Membership as at January 31st in each Year.
Year.
Members
at Beginning
of Year.
New
Members.
Lapses.
Died.
Membership
at End of
Year.
1935	
1,824
1,687
1,690
1,711
1,664
1,575
1,468
1,402
1,377
1,358
1,348
99
96
76
69
33
30
24
24
11
16»
9
217
81
36
95
95
110
72
27
12
7
9
19
12
19
21
27
27
18
22
18
21
18
1,687
1936	
1,690
1937	
1,711
1938	
1,664
1939	
1940	
1,575
1,468
1941	
1,402
1942 :	
1,377
1943                               	
1,358
1944	
1,348
1945	
1,330
* Two reinstated.
WESTERN MUTUAL BENEFIT ASSOCIATION.
Name.—This society was incorporated on the 5th day of July, 1924, under the
name " The Royal City Mutual Benefit Association." On the 14th day of July, 1933,
its name was changed to " Western Mutual Benefit Association," and it has carried on
under that name ever since. The locality in which it was to operate was originally
the City of New Westminster. No evidence was filed as to the formal change of the
locality of operations. I presume, however, that with the change in name in 1933 the
locality was changed to Vancouver.    In any event, the office was moved to Vancouver.
Objects.—The objects of the society at the time of incorporation were as follows:
" The objects of the Society are to unite fraternally all persons of sound health,
physically and mentally, of good character, who are socially acceptable and who have
reached their 16th birthday at the time of their admission to the Association, and to
establish and maintain a benefit fund for securing to the constitutionally designated
payee or payees of each member at time of death of member such sum of money as has
been subscribed by the members for that purpose." No change has been made in the
objects, and they remain the same to this day.
Early History.—For some years after its incorporation this society carried on in
a very small way. On June 30th, 1934, which was ten years after its incorporation, it
only had a membership of 81. During that year it increased its membership to 264.
In 1935 it increased to 361. In 1936 Joseph A. Bryant became connected with the
society, and at approximately the same time H. P. Wyness, LL.B., became president. CC 72 REPORT OF THE  ROYAL COMMISSION.
Since then the society has had a remarkable growth. The schedule attached shows
the growth in detail; sufficient to say here that within the years under review the
original group, paying a $1,000 benefit, has increased from 437 to 4,186. During the
same period other groups were formed, and the total membership by the end of 1945
was 6,956.
Growth of Society.—The growth of the society can be attributed to an exceedingly
active sales campaign, made possible through the energy and enthusiasm of Mr.
Bryant. This society advertises in the newspapers, by pamphlets distributed through
the mail, by radio, by sponsoring baseball teams, bowling leagues, basketball teams,
lawn bowling, and other sports. Furthermore, it has developed different groups so
that practically any person, irrespective of age or health, can be sold a membership
of some kind. In addition, Mr. Bryant and Mr. Wyness have interested themselves
in sponsoring mutual aid societies. They have no less than four of these, being the
Western Mutual Aid Society, paying $300 for loss of life and $15 a week disability
benefit; the Western Mutual Medical Aid Society, paying $300 for loss of life, $60 for
maternity benefit, $150 for surgical operations, and $25 a month hospitalization; the
Western Mutual Travellers' Aid Society, paying $300 for loss of life, with certain
travel accident disability benefits; and, lastly, the Western Mutual Senior Citizens'
Aid Society, which pays $200 life protection up to age 70 and $100 for those over 70,
only taking members from ages 60 to 75. No attempt was made to get any of the
details of the operations of these societies. Both Mr. Wyness and Mr. Bryant stated
that they were entirely separate corporations. Mr. Wyness, as stated before, is
president of them all, and Mr. Bryant is either secretary or the manager of them
all. They are all operated out of the same office, and they all contribute to the expenses
of running the common office.
By-laws.—The by-laws of the society originally were very simple. They provided
that within forty-eight hours after the receipt of the proof of death and the surrender
of the certificate an assessment of $1.10 should be mailed to every member. The 10
cents was paid into the General Fund for the expenses of the association, and the
dollar was paid into a benefit fund. The total received was paid over to the beneficiary of the deceased member.
After the change to Vancouver the by-laws were amended to provide that on the
death of a member each remaining member of the association should be assessed the
sum of $1 until the membership had reached 1,000 members. After it had passed the
1,000-member mark, each member would be assessed a proportionate part of $1. A
further section provided that as an alternative the society could assess each member
an amount sufficient to establish a fund out of which claims could be paid. Further
changes were made until 1940; since then no amendments have been made. Exhibit 7
was filed as the certificate of membership in use since 1940, and printed on the inside
of it are the by-laws now in force.
Officers and Executive.—Owing to the complexity of this organization it is necessary to examine the by-laws in rather more detail than with any of the previous
societies. Under the by-laws as they now stand the officers of the association are the
president, vice-president, secretary-treasurer, and general agent. The executive committee consists of the above officers, any three of which form a quorum. The
president and vice-president are elected at the annual meeting. The executive committee appoints the secretary-treasurer and general agent. There are no directors;
the executive committee functions as such. In practice, the method adopted is as
follows: Just prior to the annual meeting the executive committee appoints the
secretary-treasurer and general agent, if any, for the ensuing year. At the annual
meeting, after the election of the president and vice-president, the secretary-treasurer's
appointment is confirmed.    At the present time there does not appear to be a general DEATH BENEFIT  SOCIETIES. CC 73
agent, his duties being performed by Mr. Bryant and Mr. Lumsden, the vice-president.
In addition, a Mr. Cooper is a director. As pointed out above, there is no authority in
the by-laws for the appointment of directors. This apparently is disregarded, as on all
of the advertising material Mr. Cooper is shown as a director, and prior to his
appointment a Mr. Douglas was shown in that capacity. No explanation of this
discrepancy was given, although Mr. Cameron spent some time trying to get one from
Mr. Bryant.
. Advisory Board.—In addition to the executive committee, there is an advisory
board. When questioned as to their duties, Mr. Bryant simply stated that it was
" window-dressing."    Apparently they have no duties.
Clause 5 of the constitution and by-laws gives the duties of the officers under
paragraphs (a), (b), (c), and (d). Clause (e) was added as an amendment. It is
as follows:—
5. («) As the membership in the Association increases the Executive Committee, in
order to facilitate the administration of the Association, shall, at its discretion, divide and
allocate the membership of the Association into designated groups and any person may
apply for membership in one or more designated groups.
I will refer to this subsection later in my report, as apparently it is used as an
authority for dividing the society, not only into groups, but into age classifications.
From the point of view of draughtsmanship, it should not be included under the duties
of the officers.
Meetings.—The next section is under the heading of " Meetings." It provides
for the various meetings of the society and the calling of them. Subsection (g)
provides that each member in good standing shall have a vote at any annual, general,
or special meeting. Proxies are allowed. Subsections (h), (i), and (j) have been
added as amendments.    Subsection (h) is as follows:—
Definition: Section 17 hereof excepted: Wherever hereinafter used in this membership certificate the word " member," " members " or " membership " shall in all cases
mean and be deemed to mean member or members of and membership in a designated
group or groups as herein provided.
This definition is used in connection with section 5 (e), above quoted, as authority
for dividing the society into groups. Despite the definition, however, if a member of
the society is a member of more than one group, he only has one vote at an annual
meeting.
Funds.—The funds of the society are divided into a General Fund, into which is
paid all membership fees and out of which are paid all expenses of the association, and
the Mortuary Trust Fund, into which are paid all other funds. This can only be
used for the purpose of paying claims. The annual dues are $5 for each member, out of
which, after the membership has reached 1,500, $2 "shall be placed in the General
Reserve Fund of the Association."    Then follows this sentence:—■
The General Reserve, so constituted, shall be available for transfer as and when
required to the General Fund as revenue to be used for the proper purposes and expenses
of the Association. All other moneys shall be placed in the General Fund of the
Association.
Section 9 (a) provides for the assessment. Its provisions are given above.
Section 9 (a) (a) provides for advance assessments in order to establish a Mortuary
Trust Fund.
It should be noted that nowhere in the by-laws is there any age-limit given for
members, nor is there any authority for the executive committee to set age-limits other
than that contained in 5 (e) above.
Membership Certificate.—In order to understand the certificates of membership,
which will be dealt with next, it is necessary at this time to name the various groups
which have been formed by the society.    It should be borne in mind that the clauses CC 74 REPORT OF THE ROYAL COMMISSION.
in the by-laws under which the executive committee purported to act were 5 (e) and 6
(/_•), quoted above. The groups are as follows: Original Group—maximum $1,000,
ages 16 to 52; Group B—maximum $500, ages 10 to 55; Auxiliary Group—maximum
$1,000, ages 16 to 55; Casualty Group (death by accident only)—maximum $1,000, up
to age 70;   Crescent Group—maximum $1,000, age up to 65.
The membership certificate of the Original Group as now constituted provides that
the Association will " in the event of the death of the said member, if in good standing
at the time of death, pay to the beneficiary an amount as thereinafter provided but not
exceeding the sum of one thousand dollars." The words " one thousand dollars "
are in block letters and occupy one line. Under the heading " Conditions and Provisions " the following sentence is reproduced on the face of the certificate:—
(1) This certificate is issued subject not only to the Constitution and By-laws as
they now exist but as they may be lawfully amended from time to time and to the
conditions as hereinbefore and hereinafter stated, all of which shall be considered as
conditions precedent to the right' to make any claim under this certificate.
Group B: The certificate of membership of Group B has a similar wording, except
that it states that the member " has been accepted as a ' B ' Group member," and the
sum of $500 is substituted for $1,000.
Auxiliary Group: The Auxiliary Group certificate is exactly the same as the
Group B certificate, except the member is accepted as an Auxiliary Group member, and
the amount is $1,000. Only members in good standing in the Original Group or Group
B can join this group.
Casualty Group: The Casualty Group certificate is similar in form to the two
preceding ones, except that it is headed " Casualty Group," and provides that the
member is accepted as a Casualty Group member. It provides further that " the
Association will, in the event of the death of the said member from purely accidental
means and which death was a result, directly and independently of all other causes
within 90 days from the time of the accident and the said member is in good standing
on and within such time and event, pay to the beneficiary an amount as hereinafter
provided but not to exceed the sum of one thousand dollars." Instead of printing the
by-laws in full as in the other groups, excerpts are printed on the back of the certificate.
Crescent Group: The Crescent Group certificate is quite different. It provides
that the society will " pay to the beneficiary an amount as hereinafter provided, a
maximum sum based upon uninterrupted membership in the Association from the
acceptance of the original application for membership or from the last reinstatement
of a member at the time of his or her death, and limited to the following schedule: At
the end of one year in good standing of uninterrupted, continuous membership from
the last reinstatement, there shall be payable the sum of $100. For two years such
membership in good standing the sum of $200. For three years such membership in
good standing the sum of $300. For four years such membership in good standing
the sum of $400," and so on, until it reaches ten years. Then follow these words:
" but in no event shall the total maximum amount payable to the beneficiary exceed
the sum of ONE thousand dollars." Inside the certificate are reproduced the by-laws
of the society.
It should be observed that nowhere in any of these certificates of membership is
mentioned the ages at which a member can become a member of one of these different
groups. I have already pointed out that nowhere in the by-laws is there any reference
whatsoever to age. The only place where age is referred to is in the application for
membership. They were filed for the different groups. They show the Original
Group, ages 16 to 55; Group B, ages 10 to 60, and latterly 10 to 55; Auxiliary Group,
ages 16 to 55; Casualty Group, no age; Crescent Group, up to 65. DEATH BENEFIT SOCIETIES. CC 75
It is pertinent also to point out that nowhere on the face of the certificate does
there appear anything which would indicate that the amount payable is to be produced
by assessment. It is true that the constitution and by-laws as reproduced on the two
inside pages refer to an assessment, but when such emphasis is placed upon the fact
that they are quite different from insurance companies and that the society is merely
a collection agency, it would seem to me that the certificate of membership should have
displayed upon it in some prominent place the fact that the money that is being paid
over is being produced by assessment. Furthermore, it would seem to me that some
details of the different groups should be incorporated somewhere in either the certificate
or the by-laws.
Method of Assess?nent.—It will be recalled that the by-laws provide that assessments will be made upon death. The method adopted, however, is not as simple as
that. Referring to Exhibit 19, which is a circular issued to the public, the system
is described.    I quote as follows:—
THE PLAN
The plan of the Western Mutual Benefit Association is to make provision by means
of assessment subscriptions against loss of life from any cause (suicide excepted the
first two years), and for relieving the widows, children and other dependents against
loss of the " Bread Winner," by death. The Western Mutual Benefit Association is
incorporated under the " Societies Act" in the Province of British Columbia and is
authorized to form groups of members to provide each member with protection against
loss of life by means of assessment, on the basis of $1.00 or less for the death of
a member and subscribed by the members through the payment of Mortuary Trust calls.
The plan is simple, inexpensive—it is nothing more or less than protection at cost,
providing for the well being of its members by dividing among the many that loss which
would bring hardship and misery to the individuals. The plan provides for the grouping of members, and persons of either sex in good health may apply for membership
without medical examination. Further, those desirous may apply for membership in
any or all groups eligible to their age.
THE COST
In accordance with the plan, the cost of this protection is decided at all times by
the death rate in the association. A careful study of what has been done by other
similar associations in B.C. and elsewhere, coupled with the requirements of our own
association over a period of years, enabled us for the convenience of our members to
estimate a quarterly system of calls which with but few exceptions has proved adequate
to meet our death claim requirements. But it must be stressed that these calls may be
more or less for any or all groups.
Original $1000 Plan of Protection.
Open to persons up to 52 years of age.
Application Fee $10.00.
Thereafter:
Quarterly Calls to ages 45  $1.50
Quarterly Calls to ages 50  $2.00
Quarterly Calls over 50  $2.50
Separate call of $5.00 for Annual Dues commencing one year after the Membership
Certificate is issued.
Crescent Group $1000 Plan of Protection.
Open to persons up to 65 years of age.
Application fee $10.00.
Thereafter:
Quarterly calls only based at  $5.00
No separate calls for Annual Dues.
Benefits: With granting of membership, immediate benefit for loss of life is the sum
of $100.00 and with a yearly increase of $100.00 for uninterrupted membership until
the maximum amount of $1000 is payable in the event of a claim. CC 76 REPORT OF THE ROYAL COMMISSION.
Casualty Group—$1000 Loss of Life.
Accidental Cause Only.
Open to persons to age 70.
Application Fee of $2.50.
Thereafter:
Call of $1.00 only at approximately six-monthly intervals.
No separate call for Annual Dues.
The Cost of this Protection is Low because:
(1) It is not a profit seeking organization.
(2) There are no shareholders, no expensive offices or large staffs to pay.
(3) It is not burdened with investment features.
(4) Mutually co-operative, efficiently managed.
Important:
With the exception of the Casualty Group, all Plans provide protection for loss of
life from any cause, natural or accidental, and are open to persons meeting the age
requirements and in good health, without medical examination. Good health is necessary, and is your passport to membership in this association. Why not use your passport while you have it?
The application or joining fee is payable only when you apply for membership.
Thereafter, the plan of calls as described and explained will be the only further requirements in connection with your membership.
Members may reside wherever they wish and the protection may be kept in force
as long as the member desires and meets all payments in connection with same. These
Plans do not mature or expire at any attained age.
Mr. Bryant explains this system at page 5190.    He says:—
A. You will see a call $2.50. Now that is what we call " a call." If two calls are
needed in that period for the requirements we have on hand we make two calls. That
is $5.00. Just as this notice which I will submit later will indicate, in that group and
in Group " B," the older group. That is not the amount we have collected. Let me
explain it to you this way. The Group " B " calls consist of the normal requirements,
what we figure will normally take care of our deaths as we experience them.
Q. What you require, you mean?
A. No, what we expect.
Q. Isn't that what I say?
A. Yes. If our deaths in that period go beyond that we increase the amount of
the call to pay it. When the proceeds come in we pay those claims. But if we made
a straight call of $2.25, regardless of our deaths what you say would apply. But I believe
that is clarified in our latest balance sheet there. That would be more or less set up
by our death rate and we are stating definitely that it can't go beyond that and would
not be expected to go beyond that. I think it is set out. There have been several calls
made simultaneously.
He then goes on to state that these calls are made according to the number of
deaths which have already occurred. In practice the society at times makes double
calls. But other than that, so far as I can see, the calls bear no relationship to the
number of deaths. The auditor was questioned on this point, and I quote from his
evidence at page 5478:—
Q. No, my question was how could you have money in your account to pay it if you
make your assessments according to the deaths?
A. Oh, the regular assessment goes out every quarter regardless of the number of
deaths. I mean nobody may have died in the quarter at all, but still that assessment
goes out, in each Group, whatever it might be.
Q. That is what I thought?
A. They are all sent out.    There is a regular quarterly assessment which goes out.
These questions and answers followed a discussion as to how there could be money
in the Mortuary Trust Fund to make payments of claims in advance. It is apparent
to me that, despite Mr. Bryant's protestations, there are regular quarterly calls made
in all groups irrespective of the number of deaths.    In some cases when he sees or DEATH BENEFIT SOCIETIES. CC 77
thinks that there may not be sufficient money on hand, he makes double calls, particularly in the older age groups.
I have dealt in greater detail with the by-laws and the certificates of membership
in this society than in any other. I have done this owing to the fact that all other
societies definitely set out in their by-laws the ages at which persons may be accepted
as members. In this society that is not done. I asked them to file extracts from the
minutes showing the age-limits for membership in the various groups. So far as the
original group is concerned, apparently Mr. Bryant himself sets the age. He was
questioned in detail about this, and at page 5179 he was asked these questions:—
Q. Now is there a resolution in your minute book stating that will be the latest age
at which you will accept any membership in Group "A"?
A. No.
Q. Pardon?
A. No.
Q. Then who decides that?
A. It is on my recommendation to the executive committee, and I show them exactly
the results and why I would recommend a change. But our policy all the way through
is if we can get sufficient members up to 50 to make 50 the limit, but it is flexible.
We might go back to 52 in a special drive for members. Once we drop down to 50 well—■
say we found we needed a couple of hundred more members in the year, we would make
a special drive taking in up to 52. But that would only be a special membership drive.
Then it would automatically go back to 50 if that was our age limit.
Q. And all that might be arranged over the telephone?
A. No, not over the telephone.
Q. Would you have a resolution covering such a thing?
A. I know Mr. Wyness would agree with it and Mr. Lumsden would agree with it.
Q. Then would you go ahead?
A. On that particular drive?
MR. CAMERON:   Q. Would your minutes not show you agreed to do that?
A. Mr. Cameron, there might be many references to it in the minutes. I will refer
to them when I go back.
Copies of minutes of the executive were filed showing the authorization for the
formation of the Auxiliary Group, the Casualty Group, and the Crescent Group. All
these rates are set out in the resolution. So far as the Original Group is concerned,
there is nothing in the minutes showing the rates or calls to be charged. Mr. Bryant
produced an ambiguous minute, which he stated referred to Group B, in which " the
present scale was ratified and confirmed."    The scale, however, was not given.
It will be seen from the foregoing that the membership of this society is first
divided into five different groups. Three of these—namely, the Original Group, Group
B, and the Auxiliary Group—are then broken up into sub-groups, or age classifications
with quarterly assessments, called " calls," varying with the age of the member. As
the member grows older, he is passed into the higher age classification and pays a
higher rate. Extra assessments are obtained by making double calls or, in other
words, doubling the amount of the assessment. In actual practice this has only been
done with the age classification of over 50. All of these different groups and age
classifications purport to have been made under section 5 (e) of the by-laws.
Furthermore, it should be recalled that the only right to assess is given in clauses
9 (a) and 9 (a) (a). The former provides for assessment of $1 for each death until
the membership reaches 1,000. After that in the proportion that 1,000 bears to the
membership. Peculiarly enough, there is no authority whatsoever for making different rates for the different groups and age classifications. The balance-sheets as
filed do not segregate the different groups, showing the amounts received from each
group. In 1944 Group B paid claims amounting to $11,500. No detail is given as
to what amounts were received from the group in that particular year. In 1945,
$11,000 was paid.    Mr. Bryant contends that each group is self-supporting.    In view CC 78 REPORT OF THE ROYAL COMMISSION.
of the way the auditor's report is made, I feel inclined to believe that all the assessments go into one account, and the only worry of the secretary-treasurer is to see
that there is sufficient money in that account to pay all the claims irrespective of what
group the money comes from.
Membership.—The membership has been increasing ever since 1936. The increase
has not been as marked in the past three or four years, but there has never been a
loss in membership. This is, as I stated before, due undoubtedly to the continuous
advertising campaign carried on by the executive. Mr. Bryant has again and again
stated his views on the necessity of aggressive tactics in obtaining membership.
Age of Members.—Owing to the fact that the membership is grouped according
to age, it was possible to get detailed figures of ages from this society.
Over 50. 45-50.        Under 45.
1945 3,159 565 476
1939 2,691 658 465
The above figures show the increase in membership and age in each group in the
period of six years. It will be observed that there was an increase of 468 in those over
50, a decrease of 93 in those between 45 and 50, and an increase of 11 in those under
45. From these figures it is obvious that the age of the members of this group is
increasing. Detailed figures were not available for the increase or decrease in ages
in the other groups.
Amalgamated Civil Servants.—In addition to all the different groups above named
and the age classifications, the affairs of the society are further complicated by the fact
that there are no less than seven groups of Amalgamated Civil Servants holding
membership certificates.    The different groups, together with their membership, are
as follows:       City. Membership.
Regina   225
Moose Jaw     70
Lethbridge      45
New Westminster      96
Saskatoon, $1,000 Plan  118
Saskatoon, $1,200 B Group     52
Calgary, $1,000 Plan     35
Calgary, $500 B Group     11
Saskatoon Civil Servants (Federal) —
$1,000 Plan      45
$500 B Group     15
I had considerable difficulty in getting from Mr. Bryant a coherent picture of how
these groups were operated.    At page 5651, when I questioned him as to how they paid,
he stated a monthly cheque is sent in from each association, and this is divided into
the Mortuary Trust Fund, the Reserve and the General Funds.    He further stated that
they paid for the deaths in their own groups.    Again at page 5654 he was asked the
following questions regarding that:—
THE COMMISSIONER:   Have they got a separate policy?
A. No.
Q. Or a separate certificate?
A. No.
Q. How much do they each receive for a death?
A. $1,000 which they put up.
Q. Do any part of the funds collected from your ordinary members go to pay that?
A. Not a bit of it.    As a matter of fact I would say if by any chance a few dollars
go out of one back door it goes to other members. DEATH BENEFIT SOCIETIES. CC 79
Q. If you are running it separately, surely you are not suggesting that your money
gets mixed?
A. No, it is only a matter of accounting.
Q. Have you got a separate book account for them?
A. No, we keep a check on their contributions and their deaths.
Q. Have you got a separate account in your ledger for them?
A. Yes, we know each month.
Q. Have you a separate account?
A. We have covered that in a statement of account they have paid in every month,
as soon as it has been paid, and each one of the number of deaths, we have it we know.
Mr. Cameron then asked the following questions:—
Q. How many of those A.C.S. independent groups have you?    You have one in Regina?
A. And one in Moose Jaw, one in Saskatoon, one in Lethbridge, one in Calgary and
one in New Westminster.
Q. And each of those groups stands on its own feet?
A. Yes.
Q. You have made your own arrangements or contracts with each of those groups?
A. Yes.
Q. Which is separate and distinct from the ordinary membership contract made
between you and the members of, say, your original groups?
A. There is no difference. You are trying to suggest there is, but there is no difference. The only contract that we have with Amalgamated Civil Servants is that they
must contribute to the Mortuary Trust Fund, the Reserve Fund requirement and annual
dues requirement, and we have that with every member.
Apparently, as far as I can gather from a very long and searching cross-
examination by Mr. Cameron, the arrangement simply is this: Each group sends in $1
per month per member. One cheque comes from each group. On occasion a group
has been asked to send in $2 per member, and they have done so. No separate ledger
account, however, is kept for each group. Mr. Bryant states that each death in each
group is charged up to that group. So far as the documents are concerned, he did not
produce any actual account showing that this is done. What I suspect happens is that
if a death occurs in a group, double assessments may be made. I asked him to produce
figures showing the amounts received from each group as at November 30th, 1945.
This was filed as Exhibit 99. According to this exhibit, Moose Jaw had contributed
$220 more than was necessary than to pay their deaths; Lethbridge had contributed
$1,066 more than was necessary; Saskatoon was short $2,823; New Westminster was
short $988; Calgary had contributed $205 too much; Saskatoon Civil Servants Federation had contributed $443 too much; Regina was short $1,100. The net result, therefore, was that these Civil Servants groups had not carried themselves by a sum of
almost $3,000. In other words, the ordinary members of the society had contributed
$3,000 towards the carrying of the Civil Servants group. Mr. Bryant was examined
in detail by Mr. Cameron regarding this. At page 5756 the following questions and
answers were given:—
Q. And that $2,937.00 has been expended out of the Mortuary Trust Fund, is that
correct?
A. Out of the Mortuary Trust Fund, yes.
Q. And your Mortuary Trust Fund is composed of death assessment calls which you
have received from your members of the other groups or classifications.
A. As a whole.
Q. As a whole?
A. Yes.
Q. Therefore, is it true to state that at the present time you have paid death benefits
to these Council Groups up to $3,000 which money has been provided by the other groups
to meet those claims?
A. Yes, that is what we may say—a neutralization of the common Mortuary Trust
fund—$3,000.00—during the period—up to the time that we collect that amount.
Q. In other words it is a loan or an overdraft on your Mortuary Trust Fund by this
group of Councils?
A. Yes, all those combined. CC 80 REPORT OF THE ROYAL COMMISSION.
Q. And then when they repay it, it would be put back in the Mortuary Trust Fund?
A. Yes, that is the correct position.
The position of the New Westminster A.C.S. Group was dealt with in detail.
Instead of assessing them for sufficient to pay their death claims, they were paid out
of the funds of the society and collected over a period of years from the New Westminister A.C.S. After a period of two years without any deaths, this amount was
reduced to $988. According to Mr. Bryant, when asked about this, he states as follows
at page 5759:—
A. We still have the assurance of the Council that they will pay it from their membership funds which amounts to 35 and 40 cents a month that they have been paying in
for over a period of years; but what they did not want us to do was to stampede their
membership with a large assessment which was liable to blow up their whole organization.
MR. CAMERON: Well, it just means you have been financing them to enable them
to have a surplus in their local fund?
A. Yes.
Q. But you don't show it as an asset coming from that Council and I presume the
Council in its records does not show that it owes you the money, or does it, or can you say?
A. I think it does because in their meetings they have dealt with this.
Q. But I am speaking of their annual statements. Can you tell me if the Council has
set up a liability for this money?
A. Not the association, but that does not mean very much. If the Amalgamated
Civil Servants of New Westminster is a gentleman's agreement, which it is—I feel they
would pay it, Mr. Cameron.    It is a gentleman's agreement, Mr. Cameron.
THE COMMISSIONER: Do you mean you are running your Association on gentlemen's agreements?
A. No, Mr. Commissioner, but I certainly do believe in them to this extent. They
came to me and extracted a gentleman's agreement from me that I would not at that time
put heavy assessments on their members and they said, " We will see that your association will get it."
THE COMMISSIONER:   And have they done that?
A. Well, in the first place they have not had to do very much for over two years.
Q. They just did not happen to have any deaths, that is all?
A. No, they paid additional assessments.
Saskatoon also has a shortage of $2,823. There, apparently, is another gentleman's agreement with them that this also will be paid off. It should be observed here
that these deficits will only be reduced if there are no further deaths. In view of the
ages of the members of these A.C.S. groups, in my opinion it has been merely a matter
of luck that more deaths have not occurred. The fact remains that the society as
a whole is at present carrying these groups.
Before I leave these groups I should point out that in none of the auditor's statements are these groups recognized. They are thrown in as the whole membership.
There is no suggestion in any of the reports that there are separate contracts with
them. This, I presume, is due to the fact that there is nothing in the minutes indicating any of the negotiations with these individual societies. A minute was produced
from the 1936 minutes.    This minute is as follows:—
Mr. Bryant then brought to the attention of the executive committee a discussion
that he had made with persons purporting to represent the Amalgamated Civil Servants
of Vancouver and who were being obliged to discontinue their arrangement with some
Life Insurance Companies. He explained to the executive committee that he expected
some time in the future to be invited to submit a plan to this association.
He pointed out that under the existing arrangements this body of civil servants contributed on a monthly basis and asked the board if they would consider such an arrangement of monthly contributions, at the same time the association having the right to assess
in addition quarterly amounts to make up any deficits. He explained that this body of
civil servants would be required to be taken as a group.
After general discussion in which Mr. Bryant pointed out he expected other bodies of
civil servants might apply, the Board then instructed and authorized the general agent
to proceed with such arrangement for the acceptance of such bodies of amalgamated civil
servants along the lines described by him. DEATH BENEFIT SOCIETIES. CC 81
Under this authority Mr. Bryant has proceeded to enter into contracts with the
different Civil Service groups. He was asked to submit the contracts. After a searching cross-examination it turned out that there were no formal contracts, and arrangements were made either verbally or by letter. He was asked to produce the letters.
All that was produced was a letter which he wrote to the secretary of the Lethbridge
group.    No letter from them was produced.
I cannot help but be extremely critical of this slipshod manner of doing business.
Furthermore, it would seem to me that in making the so-called contracts, this society
is going far beyond anything contemplated by the " Societies Act." These contracts.
with these different groups are of no benefit whatsoever to the society. The members
of these groups are not assessed for deaths of ordinary members. They are in the red
to the extent of almost $3,000. Mr. Bryant tried to justify this on the ground that
they had paid into the General Fund and the Reserve Fund more than the amount paid
out in death benefits. This, of course, is true, but the answer to that is that so far as
these groups are concerned, the provisions of the by-laws are not being complied with.
Agents.—This society depends for its existence upon the employment of agents.
Mr. Bryant was originally employed as the general agent for the special purpose of
building up the membership. As in so many of the other societies, the agent in a great
many cases simply keeps the joining fees. This amount over a period of years has
amounted to a very large sum. Commencing in 1938, the auditor has kept these
amounts separately;  they are as follows:—
1938  $6,490.50 1942  $3,339.00
1939     6,187.00 1943     3,468.50
1940        375.00 1944     3,659.00
1941     5,033.00 1945     2,818.00
This is a total of $31,370.
In the 1940 accounts the auditor for some reason only showed the net amounts
received from new members. Commissions of $375 were apparently actually paid out
by the society. The new total number of new members obtained during that year
was 635. Commissions, therefore, retained by the agents would be somewhere in the
neighbourhood of $3,000.
Finances.—Under the by-laws in force up to December 20th, 1938, after the membership reached 1,500 members $2 for each member's annual dues was to be placed in
the Mortuary Trust Fund in order to create a reserve, " for the protection of the
members of the Association." Yet it should be recalled that under By-law 7 (b) the
Mortuary Trust Fund was to be used " solely for the purpose of paying claims upon
such fund as hereinafter provided." On December 20th, 1938, clause 8 (d), which
dealt with the creation of the Mortuary Trust Fund reserve, was amended to read as
follows:—
After the membership has reached 1500 members in good standing $2.00 of each
member's annual dues shall be placed in the General Reserve Fund of the Association in
order to create a reserve for the protection of the members of the association. The
general reserve fund shall be used by the executive committee for the proper purposes of
the association.
On December 20th, 1940, this clause was further amended to read:—
After the membership has reached 1500 members in good standing $2.00 of each
member's recurring annual dues of $5.00 shall be placed in the general reserve fund of
the Association. The general reserve so constituted shall be available for transfer as
and when required to the General Fund as revenue to be used for the proper purposes
and expenses of the association. All other moneys shall be placed in the general fund
of the association. CC 82 REPORT OF THE ROYAL COMMISSION.
Attention might be drawn here to the fact that in the auditor's statement for the
year ended November 30th, 1938, which was filed as Exhibit 64, the following
paragraph is part of his report:—
The Association's revenues during the past years were insufficient to cover all
expenses and the management for preservation of the Association's credit by due discharge of liabilities anticipated the collection of annual dues of one of the groups—which
anticipation I have shown in the accompanying statements as a loan from the Mortuary
Trust Fund. It is my understanding that it is the intention of the executive to seek
from the members the power to make available as revenue, as required, the contributions
now earmarked for reserve. If such power is obtained the necessity for further borrowing should be avoided. In such event also it will be possible to arrange for monthly
supervision and check of receipts and their disposition, which in my opinion is highly
desirable in view of the rapidly increasing membershp.
There was an operating loss for that year of $1,213.11, and $1,171.25 was taken
from the Reserve Fund to pay operating expenses. This was in direct contravention
of the by-laws. The auditor was cross-examined on this, and at page 5469 he stated
that the funds had not been properly allocated between the Mortuary Trust Fund and
the General Account, and at the end of the year there was $1,185.25 owing to the
Mortuary Trust Fund. The auditor's explanation of these transactions is on page
5470;   it is as follows:—
A. The association's business was carried on out of that fund and when the time came
for adjustments between these various funds and there was not sufficient in the general
fund to cover it, that was the balance.
Q. In other words, the General Fund had expended that amount of money which the
General Fund should not have expended?
A. Yes, that is right.
The amendments of 1938 quoted above were made following this report. The deficits, however, continued. The auditor's report for 1939, filed as Exhibit 65, shows
an operating loss for that year of $1,147.82, and the amount of $1,185.25 previously
referred to is shown as still owing to the Mortuary Trust Fund. The money for these
losses, however, is apparently taken from the reserve funds, for it shows a balance
owing by the General Fund of $3,910.10.
On examining the 1940 report, filed as Exhibit 66, Mr. Cameron asked for
an explanation of an item shown as disbursements in the Reserve Fund Account
amounting to $1,200. It was simply entitled " Sundry Disbursement." I will quote
from the examination of Mr. Crowther, the assistant of Mr. Watson, the chartered
accountant, at page 5488:—
SIDNEY NEWTON CROWTHER resumes.
EXAMINATION CONTINUED BY MR. CAMERON: Q. Mr. Crowther, at recess
you were going to obtain an explanation of the item, sundry disbursements $1,200, as
shown on the Reserve Fund Account for the year 1940, as appearing in Exhibit 66.
A. Right. Those were two cheques, one to Mr. Wyness, for $200.00 and the other to
Mr. Bryant for $1,000.00. Representing the unpaid portion of their remuneration. That
was paid from the Reserve Fund. The charge for that was set up in the books of the
company as salaries and the amounts are posted to the credit of their two accounts, and
these cheques were being paid to each of their credit which existed.
Q. Yes. Well, those items should have appeared, should they not, in the 1939 balance
sheet as liabilities?
A. No, because in the minutes—I could find that. The unpaid portion of any fees
were agreed to be waived if they were not in a position to pay them. Isn't that right,
Mr. Bryant?
MR. BRYANT:   Waived and to be restored.
MR. CROWTHER: Waived and to be restored as conditions permitted. Now those
are all covered in the minutes.
MR. CAMERON: Q. That is rather a peculiar situation in view of the fact that in
1940 you showed a deficit of $1,400 on operations?
A. Yes. DEATH BENEFIT SOCIETIES. CC 83
The same procedure was carried on in other years. I quote from page 5494 of
the transcript:—
THE COMMISSIONER:   Q. Is that shown as a liability at the end of 1940?
A. No, it was removed from the books of 1940.
Q. Why would that be?
A. That would be in accordance with the minutes that were passed. The authority
to carry over some of the remunerations to the succeeding year.
Q. And were there any minutes the following year?
A. I am sure there was, yes. I could look those minutes up for you. I could not
quote them offhand.
Q. Well, isn't that an astonishing thing to do, to wipe off these before the end of the
year and then put them on after the audit was made, put it on again? Is that a usual
thing?    Do you find that being done?
A. It is not done in many cases, no.
An examination of the minutes shows that for a number of years immediately
prior to the end of the year the balance of salary owing to Mr. Bryant and Mr. Wyness
was waived. The auditor then apparently made out the balance-sheet without taking
these into account. Immediately following the annual meeting, the same executive
committee or directors restored the amounts that were owing to them personally and
actually paid them out of the Reserve Fund. In my opinion, this is quite wrong, and
the auditor, as the auditor of the society, should not condone such things.
Despite this juggling of liabilities at the end of the year, the society for a number
of years showed a loss in each year's operations. This gradually accumulated, and in
1940 it totalled $4,416.83. At the end of 1945 it still stood at $3,348.25. As mentioned
before in my report, the by-laws were amended to legalize this situation, and authority
now exists to pay this out of the Reserve Fund. For some reason or other, the amount
is still shown as an asset of the Reserve Fund.
In the last few years the Reserve Fund has been rapidly built up. In 1940 it only
amounted to $17,675.31, including the above-mentioned deficit. At the end of 1945
it amounted to $69,083.69. Of this amount, $65,735.44 was in cash in a savings account
and in Dominion Government bonds. The remainder was the amount owing by the
General Fund to the Reserve as above stated.
Salaries of Officers.—Mr. Bryant for the past four years has received a salary of
$7,000 per year and $500 a year travelling expenses. Prior to 1942 his salary was
smaller; from 1937 to 1944, inclusive, he has, however, received by way of salary
a total of $45,976.85. Travelling expenses are not included in this. The other officers
and the office staff receive exceedingly modest amounts. For instance, in 1944 the sum
of $10,127 was paid in salaries; of this amount, Mr. Bryant received $7,000, the president and other directors a total of $1,400, while the office staff only received $1,727.
It should be mentioned, however, that the balance of the salaries of the office staff is
made up from the other societies operated out of the same office.
Claims.—Claims are paid promptly, and there is not an undue carry-over into the
following year.
Annual Meetings.—Considering the size of the society, the annual meetings are
extremely small. Notices are mailed to all members. Considerable publicity is given
to the meetings, but it does not produce any tangible results. Proxies are allowed but
have never been used. The auditor is elected at the annual meeting, and his complete
report is presented there.
Complaints.—One complaint was received in Vernon against the society.
A Mrs. Muyens appeared and complained that she was receiving double assessments.
She belonged to the $1,000 or Original Group. Originally, she stated that the calls for
assessments were made for every three months in amounts of $2.50 each. Commencing
in 1940, these gradually increased until in 1943 every call was a double call, amounting
in each case to $5.    Her main complaint was that when she joined the society she CC 84 REPORT OF THE ROYAL COMMISSION.
was told that there would be a call of $2.50 every three months. The agent told her
that never in any case would her payment exceed $15 a year. She did not know the
agent, but stated he was going from door to door in Vernon canvassing for members.
Another complaint was made by Mr. Rogers, in Penticton, who was a member of
the Western Mutual Senior Citizens' Aid Society. This is a society operated from the
same office as the Western Mutual Benefit, and having the same president, Mr. Wyness,
and the same secretary-treasurer, Mr. Bryant. Mr. Rogers apparently was under
a misapprehension when he applied for membership. He filed a letter from Mr. Bryant
dated August 21st, 1945. He had written regarding the accounts in the newspapers
which were printed as a result of the sittings of this Commission. The last paragraph
of Mr. Bryant's letter was as follows:—
From time to time Western Mutual members are given particulars as to the progress
of their Society, and where and to whom Mortuary Trust moneys have been paid. With
reference to your own society this much can be said; that every claim has been paid in
full and with reasonable promptness. There is no reason why this condition cannot
continue, particularly as the Society with each passing year adds to its remarkable
Reserve Fund.
It would appear from this letter that Mr. Bryant was referring to the Reserve
Fund of the Western Mutual Benefit Association. Mr. Rogers was a member of the
Western Mutual Citizens' Senior Aid Society. It would appear from this that
Mr. Bryant was utilizing the Reserve Fund of one society as a means of boosting
another.
Conclusion.—This society at present is enjoying a period of prosperity brought
about by extensive advertising and aggressive management. By developing its system
of " calls " varying with the age of the members, it has obtained a large membership.
The practice of making double " calls " on those members over 50 years of age may
ultimately lead to a considerable number of the older members allowing their membership to lapse. Mr. Bryant agrees that this is the case. However, its operations
have not extended over a sufficient period of time to make any finding on this. If such
is the case, it is defeating the principal object of the society, which is to secure to the
beneficiary of the member " at the time of death of the member such sum of money as
has been subscribed by the members for that purpose."
So far as the management of this society is concerned, I condemn in the strongest
possible terms the action of the executive in passing resolutions wiping out the liability
of the society to pay the balance of the secretary's and president's remuneration just
prior to the end of the fiscal period so that the auditor could present a " clean " balance-
sheet, and shortly after reinstating the liability and ultimately paying it.
I also condemn the practice of allowing the secretary to enter into verbal " gentlemen's agreements" with the various Amalgamated Civil Servants Associations.
A totally different method of assessment is adopted for the members of these groups,
and at the same time they are relieved from assessments for the deaths of ordinary
members. The fact that these groups are not carrying themselves, but are actually
in debt to the society as a whole, is ample cause for recommending that regulations be
passed forbidding such practices.
I have already drawn attention to the obscure wording of the by-laws, particularly
those sections under which the society is divided into groups and age classifications
and under which the members are assessed. I doubt very much if they give the
requisite authority for the steps which have been taken. Furthermore, there is no
by-law dealing with the age at which members may be admitted. As previously
pointed out, Mr. Bryant apparently can raise or lower the age at will. A complete
revision of the by-laws is therefore recommended.
Mr. Bryant was asked as to the future of the society. He states quite frankly that
its continuance depends upon aggressive salesmanship and the employment of agents DEATH BENEFIT SOCIETIES.
CC 85
for the purpose of obtaining a continuous flow of new members. If such is the case,
it is obvious that this is a commercial undertaking and one which should not be operated
under the " Societies Act."
Statement of Membership by Fiscal Years ending November 30th in each Year.
$1,000 Original Group.
Year.
Members
Beginning of
Year.
New
Members.
Reinstatements.
Lapsed.
Died.
Members at
End of Year.
1936	
1937	
1938	
1939	
1940	
1941 ;	
1942	
1943	
1944	
1945	
437
1,290
3,157
3,517
3,814
3,792
4,138
4,164
4,179
4,162
1,170
2,207
868
539
131
522
272
206
236
187
9
18
22
40
37
26
32
24
314
320
486
205
119
129
216
136
157
95
9
20
22
37
34
42
30
55
66
54
1,290
3,157
3,517
3,814
3,792
4,138
4,164
4,179
4,162
4,200
Group B, $500 Group.
1938	
183
557
709
897
995
1,039
1,049
199
443
220
251
160
107
87
42
4
11
13
17
8
6
15
65
61
57
57
47
55
39
1
4
7
11
12
15
22
22
183
1939 	
1940	
1941	
1942	
709
897
995
1943	
1,039
1,049
1,030
1944	
1945                	
Auxiliary Group.
Crescent Group.
1939	
76
167
231
275
312
317
82
102
77
61
56
26
65
2
2
2
1
6
11
12
16
17
18
20
1
3
2
3
3
76
1940	
167
1941	
1942      	
231
275
1943	
1944	
312
317
1945	
359
1941	
78
160
304
400
78
118
159
138
94
1
2
3
35
13
38
24
1
2
4
4
1942          	
160
1943	
304
1944       	
400
1945              	
466 CC 86
REPORT OF THE ROYAL COMMISSION.
Annual Cost to Members.
$1,000 Original Group.
Year.
Under 45 Years
of Age.
45 to 50 Years
of Age.
Over 50 Years
of Age.
1936	
$14.00
12.50
12.50
11.00
11.00
11.00
11.00
12.00
11.00
11.00
$14.00
14.00
15.00
13.00
13.00
13.00
13.00
14.00
13.00
13.00
$14 00
1937	
15 50
1938	
17.50
1939                   	
15 00
1940	
20.00
1941	
1942	
20.00
1943    	
1944                                                	
1945	
Group B, $500 Group.
1938 (part of year)  $4.50 1942_____
1939     9.00 1943_____
1940     9.00 1944_____
1941     9.00 1945	
$9.00
10.00
12.00
12.00 DEATH BENEFIT SOCIETIES.
CC 87
SCHEDULE  1.
CONTAINING INFORMATION AS AT DECEMBER 31st, 1945.
Name of Society.
Date of
Incorporation.
Total Amount
of Claims paid.
Membership.
May
17,
1924
$2,635,00-0.00
500.00
1,001,071.82
255,525.15
1,256,062.00
$2,500 Group	
3,940
$500 Group	
June
13,
1922
3,065
1,346
Mar.
31,
1924
$2,500 Group	
3,593
1,152
$500 Group	
May
13,
1924
550,000.00
1,981
93
The Fifteen Hundred Club of Victoria District	
Sept.
Dec.
3,
6,
1924
1923
28,309.00
178,917.67
261.00
320.00
260,283.03
438,547.75
10,135.00
162,282.00
462,941.00
457,966.00
1,840
428
84
Aug.
May
20,
18,
1924
1922
1,300
Group 1	
1,897
465
The Trail and Rossland Fifteen Hundred Club	
June
Dec.
May
14,
19,
11,
1921
1921
1922
525
43
Mar.
18,
1922
95,863.00
1,102
163
July
5,
1924
469,208.00
$1,000 Plan (original)	
3,415
1,011
$500 B Group	
458
356
901
Amalgamated Civil Servants Group—
70
45
96
Saskatoon—■
$1,000 Plan	
118
$500 B Group	
52
Calgary—
$1,000 Plan	
35
11
Saskatoon Civil Servants (Federal) —
$1,000 Plan	
45
$500 B Group	
15
Totals	
$8,263,192.42
32,669 CC 88
REPORT OF THE ROYAL COMMISSION.
SCHEDULE 2.
CURRENT ASSETS  AND  CLAIMED  SURPLUS  OF EACH  SOCIETY.
Society.
Date of
Report.
Cash on        Investments
Hand and              and
in Bank.     !     Interest.
Claims paid,
Assessment
not yet made.
Total
Claimed
Surplus.
B.C. Mutual Benefit i	
Dec.   31, 1944
Sept. 30v 1944
Sept. 30, 1945
Dec.   31, 1945
$4,141.04
32,734.09
55,867.06
5,362.94
13,531.90
1,707.54
10,333.00'
1,724.40
176.00
3,163.69
125.56
214.39
3,583.86
8,157.23
934.76
11,446.72
163.39
3,376.86
35,735.44
$62,255.50
12,340.00
66,927.54
48,752.65
25,990.00
3,000.00
$39,576.60
17,437.35
10,000.00
$106,034.00
Canadian Mutual Benefit	
48,869.79
126,903.54
54,745.59
39,521.90
Dec.   31, 1945
Dec.   31, 1944
Dec.   31, 1944
Dec.   31, 1944
Dec.   31, 1944
Dec.   31, 1944
Dec.   31, 1944
Dec.   31, 1944
Aug. 31, 1944
May   31, 1945
Dec.   31, 1944
Jan.   31, 1945
Dec.   31. 1944
Mar.  31, 1945
Nov. 30, 1945
5,103.54
10,000.00
1,724.40
176.00
500.00
1,000.00
— 926.62*
1,474.00
— 205.61t
17,034.48
3,000.00
10,833.12
2,500.00
5,759.35
5,470.30
30,000.00
250.00
6,593.45
20,049.00
Provident Mutual Benefit (Mortuary Trust)
17,750.68
11,893.87
1,150.00
15,356.72t
5,041.08
Western Canada Mutual Benefit (Mortuary
500.00
9,347.16
69,083.69§
	
* Liabilities $4,594.31.
owes Reserve $3,348.25.
t Liabilities $420.
t Liability of $4,200 to beneficiaries.
§ General Account DEATH BENEFIT SOCIETIES. CC 89
GENERAL FINDINGS.
SUMMARY OF METHODS OF OPERATION.
I have dealt in detail with each society and described " The Plans or Methods of
Operation of and the Conduct of Their Business." Owing to the fact that there are no
regulations governing the operation of these societies, each one has developed differently. There are, however, certain features in common to all. For convenience, I will
endeavour to summarize their common features.
Incorporation.—All of the societies have been incorporated since 1921 under the
provisions of the " Societies Act," which is now chapter 265, " Revised Statutes of
British Columbia, 1936." Schedule 1 attached hereto gives the date of incorporation
of each.
Objects.—All of the societies, with the exception of The Family Assurance Society,
have as their sole object the paying of death and disability benefits. The Family
Assurance Society has other objects, but does not attempt to carry out any of them
except the paying of death benefits.
Beneficiary.—All of the societies, with the exception of The Family Assurance
Society, provide in their certificates of membership that if the named beneficiary should
predecease the member the amount payable shall be paid to the executors or administrators of the deceased member. The United Home Security adds the rider, " if they
are entitled by law to receive it."
Amount Payable to Beneficiary.—All of the societies, with the exception of The
Family Assurance Society, agree to pay to the beneficiary of the member an amount
varying either with the number of members of the society in good standing or the
amount received from the assessment to be made upon the death of the member. The
Family Assurance Society, on the other hand, agrees to pay to the beneficiary a specific
amount, namely, $2,500 or $1,000, depending upon the group to which the member
belongs.
Form of Certificate of Membership.—Seven of the societies—namely, the B.C.
Mutual, the Empire Home Benefit, the Canadian Mutual, The Interior Mutual, The
Family Assurance Society, the Western Mutual Benefit, and the Western Canada Mutual
Benefit—all have the gross amount payable to the beneficiary set out in the certificate
of membership in heavy black-faced type, occupying one full line. The words "not
exceeding the sum of " in small type immediately precede the amount payable.
Assessments.—All of the societies have the power, under their by-laws, to assess
for the deaths of the members in order to provide a fund for the beneficiary. Two of
the societies—namely, The Interior Mutual Benefit and the United Home Security—
have the further power to levy assessments for the expenses of the association as distinguished from the raising of a fund for the payment of death benefits.
None of the societies assess for individual deaths; some allow a number of deaths
to accumulate and then levy assessments quarterly for the deaths which have accumulated in the preceding quarter. A number of the societies have groups which have been
established in the later years, the members of which pay set amounts quarterly. The
Western Mutual has quarterly calls in all its groups which do not vary, with the
exception of the highest age-group in which double calls are made. The Family Assurance Society sets a yearly fee at the beginning of each year which is payable quarterly
or by the year as the member may elect. It may be varied but for some years past the
amount has remained the same.
Paid-up Certificates of Membership.—A number of the societies—namely, the
Canadian Mutual Benefit, The Interior Mutual, the Pacific Mutual, the Provident Mutual,
and The Family Assurance Society—have provisions in their by-laws whereby the
member, after completing a certain period of membership  (usually twenty years), CC 90 REPORT OF THE ROYAL COMMISSION.
becomes entitled to some extra benefit, in some cases the remission of annual dues, in
others a pro rata share in the surplus or such part as the directors may decide. None
of the societies have implemented this, although in some cases the period of qualifying
membership has accrued.
Methods of Obtaining Neiv Members.—All of the societies, with the exception of
the Two Thousand Benefit Association, the Trail and Rossland Fifteen Hundred Club,
and the Fifteen Hundred Club of Victoria District, carry on active campaigns for
increasing their membership. They employ agents who are paid by receiving the
joining fee and all or part of the first year's dues. They carry on active advertising
campaigns making use of the newspapers, radio, and the circulation of pamphlets. In
each society, with the exception of the above mentioned, the expansion of the society
has been due to one individual obtaining control and developing it through an active
sales campaign. In each case the society was small and practically dead when it was
taken over. Examples are Farrell and the B.C. Mutual, Speirs and the Canadian
Mutual, Ogston and The Interior Mutual, Rice and the Pacific Mutual, Pym and the
Provident, Grassett and The Family Assurance Society, Bryant and the Western Mutual,
and to a lesser degree the Goodrich brothers and the Empire Home Benefit. In addition, Duffield is attempting to develop the United Home; Bell is attempting to develop
the Western Canada Mutual. All of these men, with the exception of Bell, are or have
been actively engaged in sponsoring selling campaigns, supervising agents, and generally carrying on the societies as commercial concerns.
Permanent Secretary-Managers.—Five of the societies—namely, the B.C. Mutual,
the Canadian Mutual Benefit, The Interior Mutual Benefit, the Pacific Mutual, and the
Provident Mutual—have a provision in their by-laws for the appointment of permanent
secretary-managers, who can only be removed for cause. Two of the societies, the B.C.
Mutual and the Provident, have or had contracts with their secretary-managers under
the terms of which the employee had the right to assign or dispose of the appointment
of secretary-manager. The Canadian Mutual Benefit has a provision whereby the
assistant secretary succeeds to the position of secretary upon that position becoming
vacant.    The assistant secretary is the son of the secretary.
Proxies.—Five of the societies—namely, the Canadian Mutual Benefit, the Pacific
Mutual, the Provident, the United Home, and the Western Mutual—have proxies incorporated in the application form, purporting to appoint either the secretary or the president, or both of them, as permanent proxies for the purpose of voting at all general
meetings.
Death-rate and Cost to Members.—In all of the societies the yearly death-rate per
thousand members has been gradually increasing; in some cases, during the past ten
years, it has doubled. The cost to the members also has been increasing in all the
societies except The Family Assurance Society. Its cost has remained constant for a
number of years.
Age of Members.—In all of the societies the greater percentage of members are
over 50 years of age. All of the societies have experienced difficulty in obtaining new,
younger members except in groups where the annual fee is collected on a quarterly
basis and is of a set amount.
Payments of Benefits.—All of the societies have paid substantial amounts in death
benefits.    Details of these amounts are given in Schedule 1 attached.
Finances.—All of the societies have surpluses or reserves in cash and bonds.
Details of these are given in Schedule 2 attached.
AUTHORITY FOR INCORPORATION.
After reviewing the objects of these societies and their methods of operating, it is
necessary to review the authority under which they are incorporated and under which DEATH BENEFIT SOCIETIES. CC 91
they operate. At page 7 of my report I summarize and give extracts from the various
Statutes which have been passed and the amendments thereto. None of the societies,
with the exception of The Family Assurance Society, have any of the objects enumerated
in section 3 (1) of the " Societies Act." So far as The Family Assurance Society is
concerned it is admitted that it only carries on one object, namely, the providing of
death benefits.    It must, therefore, be classed with the other societies.
I am aware that under paragraph 6 (4) of the " Societies Act" the certificate of
incorporation is " conclusive evidence that the requirements of this Act in respect of
incorporation have been complied with." I feel, however, that I would be neglecting
my duty if I did not draw attention to the fact that at the time these societies were
incorporated none of them complied with section 3 (1) of the " Societies Act," and it is
quite apparent that it was never intended that a society should be granted incorporation
which had as its sole object the providing of death or disability benefits raised by
subscriptions.
Operation of Societies under " Societies Act."
It is obvious from a perusal of the " Societies Act " that it is not the proper
authority under which to operate a corporation which either carries on a commercial
business or operates as a co-operative. Section 5 specifically prohibits the distribution
of dividends or property amongst the members. Section 9 (2) provides that the funds
and property of the society shall be used and dealt with for its legitimate objects and
in accordance with its by-laws. It is obvious that once a society is allowed to incorporate with objects which are not authorized its operations may very easily extend far
beyond the intent and meaning of the " Societies Act."
A thorough examination of the operation of these societies has convinced me that
all of the societies under investigation, with the exception of the Two Thousand Benefit
Association, the Trail and Rossland Fifteen Hundred Club, and the Fifteen Hundred
Club of Victoria District, are operating as commercial concerns. If they are to continue they must carry on their operations within the provisions of the " Societies Act."
THE SOUNDNESS OF THE PLAN OR METHODS OF OPERATION.
The Family Assurance Society.—I have already drawn attention to the fact that
The Family Assurance Society operates differently from all of the other societies by
reason of the fact that in its certificate of membership it agrees to pay to the beneficiary of the deceased member a set sum of money; in one group, the sum of $2,500,
and in the other group, the sum of $1,000. I have dealt in detail with this society at
pages 27 to 31, and there is no necessity of repeating what I said there. I have no
hesitation in making the finding that the plan on which this society operates is Unsound.
Other Societies.—With regard to the other societies, Mr. Locke appeared for a
number of them. He submitted that there is no question of the " soundness " of the
assessment plan of insurance owing to the fact that the society merely agrees to pay to
the beneficiary the amount produced by the assessment. He pointed out that if the
member could read he or she would know that this was all that the beneficiary was
entitled to receive. If due to the increase of the number of deaths the assessment went
up and the cost became prohibitive, the member could drop out and forfeit his membership. As he had merely paid the yearly cost and had no vested interest in any reserve
or surplus he would suffer no hardship.
If I were satisfied that the members of these societies thoroughly understood the
conditions under which they join I would agree with Mr. Locke. However, I am satisfied that the average member thinks of the certificate of membership as an insurance
policy. This is brought about by the representations of agents, the form of the certificates of a number of the societies, and advertising which these societies use.    I have CC 92 REPORT OF THE ROYAL COMMISSION.
referred in detail in the previous pages of my report to these matters and there is no
necessity of repeating.
Mr. Cameron, the counsel for the Commission, was very careful to ask each witness
who appeared on behalf of the societies if he had any solution for the difficulty caused
by an increasing death-rate and the corresponding increase in cost to the member.
Invariably the only solution offered was obtaining new members. As one witness
described it, " It is a matter of salesmanship." Each pointed out that these societies
had carried on for a number of years, had paid large amounts to beneficiaries, and there
was no reason why they should not continue indefinitely. I do not agree. The membership would have to reach astronomical figures if the death-rate and cost is to be kept
down. When such well-run societies as the B.C. Mutual and the Empire Home Benefit
are having difficulty in obtaining new members for their oldest group—e.g., the $2,500
group—it is apparent that it was not just poor management which caused the disappearance of the Kootenay societies. The only conclusion that I can come to is that the
assessment plan of life insurance js unsound and cannot be carried on indefinitely.
FINANCIAL STABILITY.
Mr. Locke, as counsel for a number of the societies, submitted that the question of
financial stability did not enter into the operations of these societies as long as they
were operated honestly and as long as they were only required to pay over to the beneficiary the amount received from the assessment. I agree. Mr. Locke, however, did
not appear for The Family Assurance Society. His argument, of course, does not
extend to it. Owing to the fact that they enter into a contract t opay a definite sum, the
financial stability of this society is of very great importance.
The Family Assurance Society.—I pointed out at page 31 of my report that this
society had a definite liability of over $5,000,000 to its members. To meet this they have
a reserve in cash and bonds of $54,415.19 and $39,521.90 in advance assessments. These
reserves are quite inadequate to meet its liabilities to the members. If this society
continues to carry on with its present certificate of membership, I can see no reason
why it should not be forced to establish the same reserve that any life insurance company is forced to maintain.
Other Societies.—With regard to the other societies, attention should be drawn to
the following:—
The Interior Mutual Benefit.—Continual deficits in the operating account covered
from the mortuary trust fund. Amendment of the by-laws giving authority to assess
for the expenses of the society. Assessing for deaths and after receipt of the money
refusing to pay the beneficiary.
United Home Benefit.—Deficits in the operating account since coming to Vancouver
covered by resorting to the reserve fund. Amendment of by-laws giving authority to
assess for the expenses of the society.
Pacific Mutual Benefit Association.—Utilizing the extra annual dues received from
members requiring disability benefits for the payment of directors' fees. Payment to
the secretary without authority of the accumulation of a portion of the annual fees
upon the lapsing of the membership, and the concealment of this practice in the annual
report. General deterioration in the accounting practices of the office, particularly
with regard to the receipt and deposit of assessments and annual dues.
The Western Mutual Benefit.—The action of the executive in wiping out the liability to pay the balance of the salary of the manager and the president just prior to
the annual audit, and the restoration of these amounts immediately following the annual
meeting with the subsequent payment of the same. Entering into verbal contract of
group insurance with the different Civil Service societies throughout British Columbia
and the Prairies whereby each group paid monthly instead of by assessment or by DEATH BENEFIT SOCIETIES. CC 93
quarterly call. The utilization of the mortuary trust fund of the society for paying
death claims in these groups when their monthly payments were not sufficient to pay
the same. The lack of information concerning these groups in either the auditor's
report or the annual report presented to the members.
The above matters are cited as some of the irregularities found in the investigation
of these societies. Many others have also been found. These are noted here owing to
the fact that it is admitted that the financial stability of these societies depends upon
the good faith of the management. Such being the case there is no doubt in my mind
that regulations are necessary in order to protect the members of these societies. CC 94 REPORT OF THE ROYAL COMMISSION.
RECOMMENDATIONS.
Under the terms of my Commission I am required to make recommendations in
regard to the matters under investigation. In this connection I would point out that
some twenty years ago the advisability of allowing these societies to carry on was
before the Legislature. At that time it was decided to allow the societies then in
existence to continue. I have no hesitation in saying that if this investigation had
been held then, my only recommendation would have been that these societies be given,
a certain length of time to qualify under the provisions of the " Insurance Act" and,
failing that, their charters should be cancelled.
My difficulty is that not only have they been allowed to carry on, but to a certain
extent they have been encouraged by the late Superintendent of Insurance. Furthermore, by an innocuous amendment to the " Societies Act" they were required to
" furnish him with such information " as he required. For years now they have filed
complete audits and yearly membership statistics. The result is that many members
are under the mistaken impression that they are under Government supervision.
A further difficulty is that the membership has greatly increased and now, owing
to the fact that a large majority of the members are well over 50 years of age, any
attempt to put the societies on an actuarial basis will mean that the older members will
either have to pay prohibitive rates or will have to drop their memberships and leave
their beneficiaries without any protection.
I have examined many text-books on the subject and have followed the transition
of the fraternal societies from assessment to actuarial principles. I have been unable
to find any " painless " solution. So far as the societies themselves are concerned, they
have given me no help. They simply close their eyes to all past experience and produce
the old fetish of more and younger members. I have already expressed myself on
that subject.
The majority of the witnesses produced by the societies admitted that some form
of regulation and control was necessary. Certainly any one reading the evidence would
agree that both control and regulation are not only necessary but long overdue. Furthermore, it is contended on their behalf that they operate on a strictly post-mortem
assessment plan. They therefore cannot object to regulations which will ensure that
they operate on that basis.
Under these circumstances I am of the opinion that these societies should be given
the chance to operate under regulations which will correct the irregularities which
I have found, and at the same time ensure that they operate on a post-mortem
assessment plan.
I therefore recommend as follows:—
1. That authority be taken either in the " Insurance Act " or the " Societies Act "
to make regulations by Order in Council.
2. That the penalty for contravention of the regulations be the cancellation of the
charter of the offending society.
3. That the regulations cover the following, amongst other, matters:—
(1.) That the application for membership, the certificate of membership, and
all advertisements and pamphlets issued by the society, have stamped
thereon in a conspicuous place the following: "Assessment plan,
amount of benefit not guaranteed."
(2.) That the accumulation of surpluses or reserves beyond an amount sufficient to finance the payment of ten (10) claims prior to assessment be
forbidden, and that the present surpluses or reserves be reduced to that
amount by utilizing the excess for payment of claims. DEATH BENEFIT SOCIETIES. CC 95
(3.)  That  assessments  be made  only  for  specific  deaths  and  the  amount
received be paid either to the  beneficiary or,  if the  claim  has been
paid in advance of assessment, to the fund out of which the payment
has been made.
(4.)  That all the expenses of running and operating the societies be paid out
of the annual dues.
(5.) That if proxies are allowed by the by-laws of the society they be valid
for one meeting only or any adjournment thereof.    Permanent proxies
shall be expressly forbidden.
(6.)  That the beneficiaries of the members must be in accordance with the
provisions of section 3 (2) of the " Societies Act."
(7.)  That the insuring or taking in of groups, the members of which are not
subject to the same assessment as the ordinary members, be forbidden.
(8.)  That the transfer or sale of charters of societies be forbidden.
(9.)  That the employment of permanent secretaries and the sale or transfer
of their position be forbidden.
(10.)  That the employees of a society, including the secretary, be ineligible for
election as directors.
(11.)  That the remuneration of directors be voted at the annual meeting.
(12.) That the Superintendent of Insurance or his representative be authorized
to make periodic audits of the books and inspection of the records of
the societies.
(13.)  That the certificate of membership and the by-laws of all societies or
any amendments thereof be subject to the approval of the Superintendent
of Insurance.
(14.)  That the annual report to the Superintendent of Insurance be in such
form and contain such matters as the Superintendent shall require.
(15.)  That all agents or members selling more than five memberships per year
be licensed under the provisions of the " Insurance Act."
(16.)  That all joining fees and the first year's annual dues be paid to the
society and not retained by the person procuring the membership.    Any
.    commission payable to or remuneration of such person shall be paid by
the society.
4.  That if this report is implemented and regulations put in force, the position of
all societies at present under investigation be reviewed by the Superintendent of Insurance four years after such regulations are put in force.    If any of the societies are not
then operating in a satisfactory manner, immediate steps be taken to force them to
comply with the provisions of sections 183 to 188 of the " Insurance Act."
All of which is respectfully submitted.
A. J. COWAN,
Commissioner.
Vancouver, B.C.,
December 2nd, 1946.
VICTORIA,  B.C. :
Printed by Don McDiarmid, Printer to the King's Most Excellent Majesty.
1947.
905-147-9013 

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