THE FEM STORY

Builders look to better themselves
 

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 YEARS
 

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.

THE WAR YEARS
 

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.