Friendly Society

Definition

A Friendly Society is a non-profit-making mutual organization registered under the Friendly Society Acts (1896-1955). Friendly societies are member-based and traditionally provided financial and social services to their members, including various insurance and assurance benefits. While their prevalence decreased after the establishment of National Insurance in 1946, some Friendly Societies still operate today, offering services related to sickness, pensions, and unemployment.

Examples

The Oddfellows: One of the largest and oldest Friendly Societies in the UK, originally established in the 18th century. It provides insurance products, social activities, and other welfare benefits to its members.
The Foresters Friendly Society: Established in 1834, it offers financial products like savings plans, ISAs, and life insurance.
Benenden Health: Initially founded as a Friendly Society, it now provides health and wellbeing services.

Frequently Asked Questions

What is the main purpose of a Friendly Society?

The main purpose of a Friendly Society is to provide mutual aid and financial services, including insurance and assurance products to its members. While they traditionally also had a social and welfare role, they now mainly focus on financial products.

How do Friendly Societies differ from regular insurance companies?

Friendly Societies are not-for-profit mutual organizations, meaning they are owned by and run for the benefit of their members. Unlike regular insurance companies that operate for profit, any surplus generated by a Friendly Society is used to improve member benefits or reduce premiums.

Are Friendly Societies regulated?

Yes, Friendly Societies are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in the UK to ensure they operate within certain financial and ethical guidelines.

Can anyone join a Friendly Society?

Membership eligibility criteria vary by society. Some Friendly Societies are open to all, while others may have specific membership requirements based on occupation, residence, or familial connections.

What benefits do Friendly Societies provide?

Friendly Societies offer a range of benefits, including life insurance, health insurance, pension plans, savings plans, and other types of financial products. They may also provide social and welfare services depending on the society.

How are Friendly Societies funded?

Friendly Societies are funded through member contributions, premiums for insurance products, and investment income.

Mutual Insurance: Insurance provided by mutual organizations owned by the policyholders who share the risks and profits.
Non-Profit Organization: An organization that operates for educational, charitable, social, or other non-profit purposes, rather than for the profit of its owners.
National Insurance: A system of compulsory payments by employees and employers used to fund state benefits such as unemployment pay and pensions in the UK.
Pension: A regular payment made during a person’s retirement from an investment fund to which that person or their employer has contributed during their working life.

Online Resources

Suggested Books for Further Studies

“Friendly Societies” by S.M. Weaver - A comprehensive look at the history and function of Friendly Societies.
“Mutual Benefit Societies: New Perspectives in the 21st Century” by M.E. Henningsen - Examines the relevance and operation of mutual benefit societies today.
“The History of British Social Policy: From the Poor Law to Beveridge” by Pat Thane - Provides historical context for the development of Friendly Societies and other social policies.

Accounting Basics: “Friendly Society” Fundamentals Quiz

### Are Friendly Societies for-profit organizations? - [ ] Yes, they aim to generate profit for shareholders. - [x] No, they are non-profit organizations. - [ ] Only some are non-profit. - [ ] Profit generation is their secondary objective. > **Explanation:** Friendly Societies are non-profit organizations that operate for the benefit of their members, rather than for profit. ### What legislation primarily governs the registration of Friendly Societies? - [ ] National Insurance Act - [ ] Companies Act - [x] Friendly Society Acts (1896-1955) - [ ] Financial Services and Markets Act > **Explanation:** Friendly Societies are primarily governed by the Friendly Society Acts (1896-1955). ### After what significant event did the number of Friendly Societies notably decrease? - [ ] The introduction of state pensions - [ ] The formation of the NHS - [x] The introduction of National Insurance in 1946 - [ ] The Great Depression > **Explanation:** The introduction of National Insurance in 1946 led to a decrease in the number of Friendly Societies as the state took over many of the services they used to offer. ### Which of the following is NOT typically offered by modern Friendly Societies? - [ ] Health insurance - [x] Commercial loans - [ ] Life insurance - [ ] Pension plans > **Explanation:** Modern Friendly Societies typically do not offer commercial loans; they focus on insurance and assurance benefits such as health and life insurance and pension plans. ### How are surpluses generated by Friendly Societies typically used? - [ ] Disbursed as dividends to shareholders - [x] Used to improve member benefits or reduce premiums - [ ] Sent to the government - [ ] Given as bonuses to the board members > **Explanation:** Any surplus generated by a Friendly Society is used to improve member benefits or reduce premiums, since they are mutual, non-profit organizations. ### What type of insurance is uniquely provided by Friendly Societies that for-profit companies may not emphasize? - [x] Sickness benefits insurance - [ ] Car insurance - [ ] Fire insurance - [ ] Flood insurance > **Explanation:** Friendly societies traditionally emphasize providing sickness benefits insurance, among other personal assurance benefits. ### Which governing bodies regulate Friendly Societies in the UK? - [ ] HM Revenue and Customs (HMRC) and Financial Ombudsman Service (FOS) - [ ] National Health Service (NHS) and Office for National Statistics (ONS) - [x] Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) - [ ] Bank of England and Competition and Markets Authority (CMA) > **Explanation:** Friendly Societies in the UK are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). ### Can any individual join any Friendly Society? - [ ] Yes, they are open to all regardless of background. - [ ] No, they are only for government employees. - [x] Membership criteria may vary by society. - [ ] No, they are only for retired individuals. > **Explanation:** Membership eligibility criteria for Friendly Societies vary, with some being open to all and others having specific requirements. ### What traditional role besides financial services did Friendly Societies serve? - [ ] Providing state subsidies - [ ] Manufacturing products - [x] Offering social and welfare activities - [ ] Organizing trade unions > **Explanation:** In addition to financial services, Friendly Societies traditionally served social and welfare roles for their members. ### Why is being a mutual organization significant for Friendly Societies? - [ ] It allows for international expansion. - [ ] It means members can sell shares on the stock market. - [x] It ensures the society is owned and for the benefit of its members. - [ ] It reduces tax liabilities. > **Explanation:** Being a mutual organization ensures that Friendly Societies are owned and operated for the benefit of their members, not external shareholders.

Thank you for reading through our comprehensive article on Friendly Societies and tackling our knowledge quiz! Continue advancing your understanding of financial topics and keep learning for success!