Lady Grover’s Fund (”LGF”) is a Friendly Society authorised to provide health insurance. As such it is regulated by the Prudential Regulatory Authority (“PRA”) and the Financial Conduct Authority (“FCA”). It is run by an elected Committee (all volunteers) and employs a paid Chief Executive. Member Services including claims administration are provided by a trading subsidiary of the Officers Association (“OA”). The OA is a Charity, but not its subsidiary.
In December 2020, we wrote to members outlining our proposal to rewrite the constitution and rules of LGF – it would still be Friendly Society, but the provision of claim benefits would be subject to Committee discretion. Members would be asked to approve the new rules.
LGF would then no longer be subject to insurance regulation. However, there is no intention to reduce the benefits in the foreseeable future.
Members would be entitled to a cash distribution funded from our reserves – this would comprise around 25% of our funds. This distribution would recognise the change in the contractual relationship between the Society and its members, and the freedom from Solvency regulation as applied to insurers by the PRA.
The Chief Executive would step down and his role would be assumed by an appointee of the OA.
These changes would save costs and enable us to market LGF more effectively; in particular, we envisage a reduction in the contributions paid by younger members. It is only by attracting new members that we envisage a long-term future for the Society.
The following Questions and Answers are prompted by some of the comments we have received from members.
Q. Is LGF becoming a Charity?
A. No. LGF will remain a Friendly Society. It will continue to be run by an elected Committee for the benefit of its paying members.
Q. Do you have to distribute some of the reserves? I would rather not claim the cash.
A. We are advised that it is both normal and fair to offer a distribution to members for a transformation of this nature. All members of the Committee have said that they will waive their entitlement; and any member is of course welcome to do so. We envisage asking members to provide payment details if they wish to claim the cash distribution – and we will offer the default option of paying into their normal bank account where we have those details (i.e. for direct debits).
Q. Are you planning to means test benefits?
A. No. There is no plan to reduce benefits, but we must reserve the right to do so to protect the long term viability of LGF. In particular, our reserves are there to help meet the claims from existing members in their later life when their demands on the fund are greatest. So we would be particular vigilant to monitor claim levels by age band, and we would also be concerned if there was a protracted fall in the value of our investments. If we did ever have to reduce benefits, this would not involve means testing.
Q. Can you provide a financial update for LGF?
A. Members will appreciate that 2020 was not a normal year. Whilst we are beginning to see claims from those recovering from Covid, the overwhelming effect of the pandemic is for certain treatments to be deferred and so claims levels are depressed at present. The following numbers are subject to audit.
In 2020, claims totalled about £60,000 (down 41% on 2019). Contributions totalled about £155,000 (down 4%) out of which we had to pay Insurance Premium tax of £17,000 and expenses of £141,000 (up 3%). We drew on reserves (and the investment income thereon) to the extent of £60,000.
Despite a poor start to the year, investments later recovered and our assets at year end were £2.22 million (up 1.5%).