The Annual Congress of the National Federation of Building Trades Employers in
1936 was told by its president, Joseph Garnett, that "Never before in the
history of the country has there been such amazing activity in the building
industry as exists today and I see no reason why that activity should not
continue for some considerable time".
However, all was not Utopia.
Other vital issues occupied the minds of those attending the 1936 Congress in
the Pretoria City Hall, foremost of these being the existing system of fixing
wages and working hours on a regional basis, another being the relatively new
Workman's Compensation Act which had been passed in 1934 which replaced the Act
of 1912 and forced all industrial employers to insure their workers against
accident or injury.
The builders did not object to the law as they accepted their responsibilities
to their workers in humanitarian terms. Their concern was the "excessively high
rates of insurance".
Under the old Act the premium averaged 15 shillings for every £100 of cover.
With the new Act, the premium rocketed to 50 shillings! Unlike the situation
today, Workman’s Compensation insurance was at the time underwritten by
conventional insurance companies.
Garnett said that these costs were a financial club with which the building
industry was being beaten. He reminded Congress that ten years earlier at the
1926 Congress, the formation of a builder’s insurance company had been advocated
but not supported, but that it was now time to give serious consideration to
this matter.
Albert Barrow, a highly respected builder and past president of the Federation
was asked to speak on the matter. He had done his homework well and told
delegates that returns from members showed that premiums of £67 189 5s Id were
paid and against this £13 436 8s Id was received in compensation and medical
benefits.
Some 36% of the firms insured made no claims during the year (1935/36) and a
further 23% of the claims made were for amounts of less than £10.
He stressed that this situation called for a remedy. “Your executive is very
concerned about this matter particularly as reports are being received alleging
specialist medical attention and treatment being given for comparatively minor
injuries with extremely high costs being involved”.
W J Cullen, vice president of the Workman’s Compensation Insurers’ Association
was present at Congress and argued well for the insurance companies.
He promised that the higher premiums would eventually lead to re-bates being
granted, but not to the individual member who had made no claim but to the
industry collectively - “The basis of insurance, of course, is that the many
carry the risk of the few”.
But Cullen was not persuasive enough and the minutes of the 1936 Congress show
an entry which read ‘it was agreed that the Executive Committee of the National
Federation of Building Trades Employers should investigate the whole position
and should be given full powers to act accordingly’.
It was this formal minute that was to have far reaching effects on the building
industry as a whole.
The first chairman was 61 year old Albert “Bert” Barrow. He had created the new
company and was chosen to guide it through infancy.
He gathered notable people around him - James Thompson, founder of one of the
biggest building firms in the Transvaal and a former mayor of Johannesburg;
Daniel Faragh Corlett, also a successful builder and also a former mayor of
Johannesburg; H O Young, president of the National Federation of Building
Trades Employers and managing director of the Cape-based Arderne Scott, Thesen
Timbers; and finally, Keith Fleming, one of the two joint secretaries at the
Federation who was appointed general manager of the new company.
The obvious priority was to bring all building companies and contractors on
side and Keith Fleming and Charlie Roberts went on a tour of the country,
visiting all the Master Builders Associations. True , the industry had accepted
the idea of forming the Federated in principle, but individuals now had to be
persuaded to ‘commit some cash to the idea’.
One enormous plus factor was that men such as Bert Barrow, Young, and Corlett
were doyens of the industry and the fact that they were fully behind the
Federation was good enough for many builders throughout the country.
By December 1936, Fleming was able to tell the Natal Master Builders Association
that company was in the course of registration with a capital of £20 000 (quite
a sizeable investment in those days).
Of this, £5 000 had to be paid to the government under the Insurance Act of 1923
and £2 500 paid under the Workmen’s Compensation Act on commencing business.
Barrow suggested that the Cape, Durban, Pretoria, and Witwatersrand Associations
be given the opportunity of contributing £1 000 of the capital while the four
smaller Associations contribute £200 to the capital. The directors of the
company were able to take up £500 in shares each.
Support came quickly and some 15 000 shares of £1 each were issued and the
National federation, perhaps realizing the vast investment potential, took up
500 shares in the company.
Many of the highly competitive insurance companies saw the creation of the
Federated as a real threat to their business and closed ranks.
However Federated was able to accept a three year working agreement from the
South British Insurance Company and this successfully launched Federated onto
the market.
The first meeting of the Directors was chaired by Bert Barrow on the 5th January
1937 and those present were told that praise for The Federated was flowing in
from all over the country. The South African Builder wrote in its monthly
editorial that “the builders must be given credit for having done a courageous
thing in floating their own ‘Mutual’ and in our view, great possibilities attach
to the future of the company”.
The slogan of the company was advertised as “Insurance of the Builders, by the
Builders, for the Builders”, and in April 1937, the first Federated policy was
sold to a well known and respected builder. John Kirkness OBE from Pretoria
Within just six months, the Federated had been formed, licensed, registered and
had issued its first policy. It never looked back and as time passed, its
results and achievements became more and more impressive.
The first balance sheet of the Federated underlined the viability of the company
and its benefits to builders: The premium rate had been reduced from 50
shillings to 38 shillings, a drop of 24%and in addition, the company gave a
rebate of 25.19% effectively bringing down the builder’s charge for Workmen’s
Compensation insurance to only 28 shillings per £100.
Premium income increased at an encouraging rate and Federated was able to reduce
its dependence on South British, using the Pearl Assurance Company for its
reinsurance risk. In fact, the arrangement with the South British expired on
April 1st 1940.
In 1940, the Smuts government was planning to introduce a bill to institute a
state fund for Workman’s Compensation Insurance, which would greatly affect the
future of the Mutual insurance companies in the country.
The Secretary of Labor intimated to Federated executives that such a fund would
be introduced and the Mutual companies would be excluded.
Almost immediately, the government entered the Second World War - only 13 votes
swung this decision - and a time of consolidation and reflection settled on many
South African companies, the federated being no exception.
In his 1940 report, Bert Barrow was stating that the purpose for which the
company had been formed in 1936 had been achieved and perhaps it was time to say
to the shareholders “We have done what we undertook to do, now let’s wind up the
company’.
After this question had been seriously considered, the feeling was that as soon
as Federated was ‘out of the way’ premiums would quickly rise.
Technical and actuarial advice was taken which strongly favored the expansion
of activities, especially in the short-term sector of the market and the
Federated Board gave the expansion plan its blessing.
The disruption of the war was now having great effects on the smooth running of
the company with most staff members volunteering for active service.
Contingency measures were taken and half salaries were paid to married employees
engaged in active service and an allowance paid to single men irrespective of
the time they had been with the company.
Some shareholders wanted to sell their shares as a result of the war and a
Register of members who were prepared to increase their holding was opened.
Federated battened down the hatches; its sound financial position and the
calibre of the executives with a healthy sense of faith in the company and its
goals providing a cushion for the duration of the war years.
One problem which would not go away was the governments proposed Workmen’s
Compensation scheme.
In the depressing latter months of 1940, the Federated Board realized that they
would not be able to be competitive with this scheme if it was implemented and
by early 1941, the Board was leaning towards selling the company, distributing
any cash and getting out of the insurance field altogether.
The Workmen’s Compensation Bill was passed in Parliament although no date was
set to bring the national fund into operation.
Thanks to the excellent dialogue between government and Federated the company
was offered a compromise; builders had the option of taking out Workmen’s
Compensation insurance directly with the Commissioner or with Federated
Employers Mutual.
The only other exception granted was to the mining industry where companies were
allowed to place business with Rand Mutual. But the State insisted that the
Federated became ‘truly’ Mutual and preferent shareholders were bought out at 19
shillings in the pound, leaving them with one shilling nominal share to qualify
them as policy-holders.
But at the June 1941 Congress in Johannesburg, members were asking themselves
why they should stay with Federated?
Bert Barrow was too ill to attend Congress and it was up to D F Corlett to spell
out the benefits of staying with the company. “The principal benefit will be
that our company, however large it may grow, will always take a more personal
interest in the affairs of its insured and in the care of injured workmen than
any impersonal State fund with its changing personnel of labor inspectors,
police and magistrates. Our motto will be ‘service’ and I have no fear that in
this connection, we can give our insured better service than any State fund can
do.”
This ‘credo’ from D F Corlett would serve Federated through the coming
generations as it does today.
To this day, these safety campaigns have continued - an uninterrupted campaign
stretching over 45 years and surely the longest ever campaign of its type.
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