View all notes The social policy arena was made up by three interrelated sectors. This study focuses on the interplay between the business and the public sector, or more specifically, between life insurance and social insurance. In turn, these terms refer primarily to insurances related to pension policy.
For example pension insurance, endowment insurance, annuities, tontine insurance, burial insurance and so forth. Welfare-formation in the social policy arena took place in a grey zone characterized by both competition and co-existence. The boundaries between private and public were not clear-cut in any way.
An illustrative example is that the first social democratic prime minister in Sweden was also one of the founders of an Industrial life insurance company in The board of Industrial life insurance companies was generally made up by prominent people with political power.
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View all notes Welfare-formation thus highlights the hybrid form of public-private action involved in the making of the welfare state. Life insurance influence on welfare-formation can be discerned into two forms of impact: The direct impact was achieved through propaganda, political influence in parliament and insurers involvement as experts in governmental committee reports. The other form of influence was indirect where actuarial practices as well as societal ideas about insurance in general were mediated from the private to the public sphere.
Hacker, Divided Welfare State , The business of life insurance has always been entangled with moral issues and infused with ideas about social improvement. View all notes Already in the s the practice of profit sharing was established as a result of pressure on the industry to conform to societal ideas about life insurance. Dividends were limited and policyholders were granted a share of the returns. This principle became a key characteristic of life insurance in Sweden.
A platform for resolving internal disputes and political lobbying had been established. From now on the Insurance Society successfully promoted ideas about life insurance importance for both personal and public finances.
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The more rapid development of life insurance coincided with the growth of the working class and the formative years of the social democratic party during the s. Consequently, the product was now framed in terms of social policy, and a thorough regulation was presented by the Insurance Society as necessary to safeguard and develop life insurance among the working classes.
In the first comprehensive laws on insurance were implemented. Second, on behalf of demands from the industry, the public Insurance inspectorate was established. A government body had now been created to monitor the market and promote the development of commercial insurance in general. This new authority with very close ties to the industry could exert influence over welfare-formation. Third, in the process the company manager Sven Palme emerged as the leading representative of the industry.
In his dual role as business leader and politician Sven Palme would play an important part in the emerging industrial Sweden. Palme was a productive writer who was especially interested in the social aspects of life insurance and the relationship between public and private social policy. View all notes In the hands of actors like Palme the business cultivated the self-perception of a social movement. This perception led to a strong sense of identity and purpose, emphasizing self-discipline and laying the basis for collective mobilization.
Through direct impact the conditions on the social policy arena could be monitored; a market for life insurance sustained and developed and competition from the non-profit sector checked. If the insurance industry has been overlooked in the history of the Swedish welfare state, this is also true for friendly societies. This sector was in fact thriving, especially among the working classes, around the turn of the 20th century.
By a thorough regulation of the non-profit sector had been put in place. View all notes The entanglement with social politics was a key for adapting to the changing landscape of social policy. It was the development in the public sector that was to be the main issue for commercial insurers to deal with. Welfare historians have sought to explain why Sweden was the first country in the world to introduce universal pension insurance in Thus, it was the obligation to be properly insured that was universal. View all notes The substantial support in Parliament for this scheme has been interpreted as a typical expression of consensus politics in Swedish social policy.
But the implementation of a public pension scheme was actually a political mess. The question of social insurance was first raised in Parliament in and it would take three public committees and a series of bills over a period of 30 years to reach a solution that finally could be accepted by Parliament. The future of social insurance was actually discussed in the Insurance Society before it was raised in Parliament.
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At this point the industry still believed that the best policy was to develop the business of Industrial life insurance in Sweden. Life insurance had to be adapted to the needs and conditions of the working class. However, this position within the industry slowly gave way to a positive view on social insurance based on an ideology of complementarity described in the next section.
In the beginning of the s the business support for a universal pension scheme was firmly rooted. The question at hand was instead how the scheme would be designed. View all notes The business leading spokesman on social issues, Sven Palme, was also part of the public committee that outlined the universal pension scheme introduced in — the industry had insight as well as influence over the process. The pension reform was a compromise between the three major types advanced for providing pensions through state action: i a compulsory and contributory insurance scheme like in Germany, ii a supplementary tax financed and means-tested assistance system of the Danish type, iii a state subsidised optional insurance scheme like the post office scheme in the UK.
Gosden, Self-help , — The post office scheme was introduced by Gladstone in as an alternative to Industrial life insurance.
It was an apparent failure. View all notes In welfare state research the optional third part is almost always ignored and the pension scheme is described as a dual system.
But in the on-going process of welfare-formation this part is equally important. In a sense the pension system was a combination of three different views on social policy. The fee-financed compulsory scheme represented social insurance as a social responsibility for each citizen to practice self-help. The supplementary system represented social insurance as a social right to a bearable old age without the social stigmata of poor-relief. The optional insurance represented the values of voluntariness and thrift and insurance as a moral institution.
None of the actors involved were in a position to fully realize their own interest. View all notes Besides from the inherent logics the pension scheme was also a critical juncture with three possible development trajectories. Crucial for these trajectories was in turn the relationship that the insurance industry had to these different views on social policy. Business representatives, like Sven Palme, were firm in their belief that the state had to intervene; the uncertainty in the actual position of the workers implied it.
A voluntary solution was not feasible if pauperism was to be abolished. View all notes But this societal perspective on social insurance rested on a dogma that emphasized the importance of complementary spheres. According to business representatives there were some key aspects that guided a proper balance between private insurance and social insurance.
Business representatives observed that private companies could administer social insurance, but at the same time the state could also pursue private-like insurance schemes. Hence, the public-private dichotomy was not sufficient for establishing proper boundaries.
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Exactly this element was lacking in individual private insurance that was based on the actuarial principle. From this perspective the most important policy issue to address was how to establish a boundary where a redistributive social insurance could be justified. View all notes Two conditions determined this boundary according to insurers like Palme: The first was that social insurance exclusively intended to protect against the need that arises when the capacity for work has diminished and when work is the main source of income: if one by social insurance has something else in mind, something more, one will tear away the support for the logical and natural determination of boundaries.
The second condition was that the objective of social insurance was preventive, to render poor relief unwarranted. The idea that social insurance should be universal did not mean that it should cover the needs of the entire population. Or as one insurer put it: The aim is to prevent pauperism, not to administer pensions for everyone. Even if this meant a deteriorated standard of living, Palme believed it to be of secondary importance compared to the advantage of a subsistence level eligible to everyone.
More important, from the viewpoint of our contemporary concept of moral hazard , business representatives could present these boundaries as self-evident. In the same manner as an insurance policy reduced incentives in individuals to act responsibly, statutory social insurance could endanger the moral fabric of society. According to business representatives social insurance had to be based on the principle of assistance, hence the business opted for a state subsidised system based on progressive taxation.
View all notes The important question of financing has always informed the politics of pensions. Already in the question was debated at length in the Insurance Society: should social insurance be financed through contributions in an insurance system, or should it be financed through taxes in a redistributive system? If an insurance model was used there were two possibilities; an actuarial system, like in the commercial sector, or a pay-as-you-go system, like in the non-profit sector. Worst-case scenario was, according to business representatives, an actuarial model.
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In the long run this was also expected to have a negative effect on returns on capital and thereby threaten the development of life insurance in general. A pay-as-you-go system was also considered to have drawbacks. The lack of robustness compared to the funded system made it prone to political manoeuvrings.