Private insurers have been a vital part of the Swiss social insurance system from the very beginning. The nexus between public and private stakeholders shows that protection against social risks is also a hotly contested market.
The term ‘welfare state’ is somewhat misleading as it fails to reflect the diverse types of organisations involved in social security since the end of the 19th century. Alongside the expansion of social security by the federal state, it is important to note two types of private insurance: first, the mutual assistance funds that were organized on a local, occupational, union or denominational basis. These were typically non-profit schemes that, despite their marginal presence today, played a particularly active role in protecting against health risks at the turn of the 20th century. Second, there were the for-profit insurance firms – stock companies or cooperatives that gained important over the course of the 20th century, especially in the area of old age provision and health insurance.
Private Insurances, Mutual Assistance and the Rise of the Welfare State, 1880-1920
The mutualist movement reached its peak at the end of the 19th century. It had emerged in the course of industrialisation and had played its part in the establishment of numerous workers’ organisations, often formed around an assistance fund. These self-help organisations were mainly directed at serving male workers and provided cover in the form of pensions for an array of risks – from death to illness – which could lead to the male breadwinner’s loss of income. In 1880, around 15 per cent of the Swiss population were members of such welfare associations. Yet, their fragmentation, the lack of balance between contributions and disbursed benefits as well as insufficient actuarial foundations destabilized mutual assistance funds. From 1890 on, the first projects committed to introducing social insurance put even more pressure on them. In 1900, the mutual assistance funds therefore opposed plans to establish a health and accident insurance and were against the obligation envisaged in the 1912 legislative draft. After the First World War, the health and accident assistance funds received federal subsidies. From the 1950s onwards, numerous mergers quickly reduced their numbers. Several large health insurance funds in activity at the beginning of the 21st century are the direct result of this period, although they belong to private insurance and – with some exceptions – no longer exhibit a structure based on mutual assistance.
The end of the 19th century was also characterized by the expansion of the insurance market and the emergence of large insurance companies that covered the risks of industrial accidents. These included Zurich and Winterthur (renamed AXA Winterthur in 2007). Others were focused on the life insurance market, as was the case with the Swiss Life Insurance and Pension Institution (named Swiss Life since 2004). These powerful stakeholders pursued various strategies vis-à-vis the welfare state. On the one hand, insurers provided the technical expertise necessary for the establishment of social insurance; on the other hand, they stood for economic liberalism and considered the state as a competitor on the risk market. Just like the mutual assistance funds, the accident insurance companies successfully fended off the first draft of a social insurance programme in 1900. However, in 1912 they were unable to block the nationalization of a major part of the accident insurance market. This loss of market in Switzerland was compensated by the growing international focus of their work in Europe and overseas. The market for occupational accident insurance was reopened to private companies in 1984.
Before 1914, life insurers responded to initial plans for the introduction of an old age and survivors’ insurance by developing products tailored to the needs of the working class, such as "popular life insurance" (Volksversicherung). Despite their rapid propagation before the First World War, these contracts only covered a small fraction of the population and offered only meager benefits. Between 1880 and 1914, life insurers developed two responses to the emerging welfare state: an opposition strategy to prevent the state from intervening in areas previously occupied by private stakeholders and a preemption strategy to render state intervention in social security unnecessary. After 1918, the lack of old age and survivors’ insurance(AHV) brought about a third strategy, one of complementarity. In this context, insurers considered state intervention as acceptable, provided it remained as minimal as possible and did not endanger the development of supplementary social provision, which remained a market served by private stakeholders.
Competition and Complementarity Between Private and State Insurance Schemes in the 20th Century
Between 1918 and 1947, the division of tasks between the AHV and existing pension funds represented a prime example of the strategy of complementarity. The life insurers providing collective (or group) insurance – a form of old age provision in which companies delegated the administration of their old age provision to a life insurance firm – paid close attention to first debates on the AHV act (1919), the adoption of the constitutional article on the AHV (1925), the rejection of the first AHV legislative bill (1929-1931) and finally the completion of the AHV during the Second World War (1944-1947). Although insurers were not fundamentally opposed to AHV pensions, they strongly advocated minimal pensions. To a certain extent, these minimal benefits served as a stepping-stone for the development of group insurance (pension funds) and individual old age provision (life insurance). Additionally, insurers opposed the funding of the AHV by accumulating reserves and the participation of the AHV in financial markets (capital accumulation), which would have led to direct competition with the investments of insurance companies.
For the insurers the introduction of the AHV was not a defeat for their cause. On the contrary: the minimal programme of 1947 was based on a division of tasks between the state, which disbursed extremely modest pensions, and private funds, which retained sufficient room for maneuver in order to develop their range of insurance products. The subsequent AHV revisions, particularly the successive pension increases might have called this complementarity into question. Yet, in the 1960s, far-sighted life insurers like Peter Binswanger from the Winterthur insurance company launched an extended campaign to secure the market for old age provision and prevent any further expansion of the AHV. The campaign led to the introduction of the ‘three pillar model’, the adoption of which in 1972 paved the way for the Federal Law on Occupational Provision (BVG, 1985). This principle was a validation of the complementarity strategy as well as a sign of a fourth strategy pursued by insurers against the welfare state: the strategy of containment.
At the beginning of the 21st century, the private insurers were most prominently represented in the areas of social security that mobilized the most financial resources – old age provision and health insurance. The overlap between private and social insurances is a typical aspect of social security in Switzerland and also illustrates the fact that the insurance of social risks is a hotly contested market.
Literatur / Bibliographie / Bibliografia / References: Leimgruber Matthieu (2006), La politique sociale comme marché. Les assureurs vie et la structuration de la prévoyance vieillesse en Suisse (1890–1972), Studien und Quellen, 31, 109–139, Zürich; Lengwiler Martin (2013), Switzerland : insurance and the need to export, in Borscheid Peter, Viggo-Haueter Niels, World Insurance. The evolution of a global risk network, 143-166, Oxford.