The kibbutz, being a collective, decided years ago to take out insurance for what Google Translate coyly calls LTC - long term care. This is for members who are unable - at various levels - to take care of their bodily needs. The idea is that every month, everybody pays a small premium, and should the time come, the insurance company will pay a monthly stipend to help cover costs (mainly for nursing).
At the end of 2013, the overseer for insurance decided that such collective insurances were problematic and risky for the insurance companies as the ratio between premium and stipend was far too low. He decided that there should only be personal insurance programs. A wise person (no irony intended) on the kibbutz examined the situation and saw that for members aged over 50, the required monthly premium would be too high. Enter the kibbutz solution: create our own "insurance company" (hereinafter 'fund'), which takes premiums from the members and pays stipends, should the need arise.
I was asked whether I was interested to serve on the management committee of this fund about six or seven months ago; it took a long time for the subject to come to ballot. When it did come, about three months ago, my name had inadvertently been deleted from the names proposed (four chosen out of six), so the election had to be postponed for another month. Two months ago, I was elected, and on Thursday night we had our first meeting.
The meeting was mainly taken up with the kibbutz secretary (who serves as a de facto member) explaining the charter of the fund. The explanation might have gone faster had not one person slowed down the pace with worries about members deciding to opt out (reasonable if one already has suitable insurance) then dropping their external insurance and demanding that the kibbutz treat them. I won't discuss such matters here as they don't interest me - I'm probably too naive.
The committee has to elect itself a chairman; towards the very end of the meeting, the secretary asked "No'am?" and I agreed. No one said anything. Such is the old fashioned way of accepting responsibility on kibbutz. I don't know whether I will be an effective chairman but I certainly hope to be an effective fund manager; this position allows me to utilise some of my talents, which unfortunately have been totally under-used by the kibbutz.
Incidentally, we're talking about annual premiums of around 700,000 NIS (around $210,000); a monthly stipend is fixed at 2500 NIS (both premiums and stipends are inflation linked), and no stipends will be paid in the first three years of the fund's existence, thus allowing capital to be built up. I made a quick calculation which shows that if the number of paying members is between 200-250, then about 20-23 stipends can be paid without touching the acquired capital. Hopefully, the number of stipends will be much less.
After the meeting, various ideas popped into my head. I am listing them here for I won't be able to discuss them for some time (because of the trip to Florence):
- Most of the money paid into the fund will be invested; should that investment be maintained by means of a bank or by a private investment company? Whilst I am capable of managing the investments themselves, they have to be stored somewhere. This is basically a matter of charges: there will be a monthly or quarterly charge for simply storing the investments (this charge is very annoying) and another charge every time an investment is bought or sold. I shall hold meetings with a few organisations to see which is cheaper.
- Should the book-keeping be done with a separate database within the kibbutz's Priority program or should I write a simple book-keeping program? Using Priority is overkill, there are problems of security and access for me to the program. On the other hand, the authorities may require a certified accounting program, and Priority will also aid external auditing.
- An investment policy has be established. Whilst the charter states that the fund may invest only in solid investments with a fixed and known rate of interest, this is a problem in these days of minimal rates of interest. As no stipends will be paid for the first three years (one has already passed), all the incoming money is candidate for investment. So for the first three years, liquidity will not be a requirement which means that the idea of commercial bonds and similar can be entertained. Once the three years of grace have been completed, the monthly income should still exceed the monthly expenditure.
- How democratic is the management going to be? Obviously there will be a need to two signatories but is every decision going to be debated or just the policies? I doubt that the other three elected members have much knowledge of finance and investments (even I lack practical experience at this level); I may have to give a short lecture about the market. Fortunately, there should only be a few decisions to made, especially now. Obviously there will need to be two signatories to the account, which makes me wonder how internet investing can work when two people have to sign an order.
- How will the fund be audited? Obviously, I intend after three months of activity to present some form of annual balance sheet with an eye to the future, but I could be less honest that I actually am.