Towards the end of the 19th century, social insurance schemes were still relatively unknown. However, the broad support of the population was critical for the expansion of the Swiss welfare state. The technical reliability of social insurance seemed to offer a major advantage. Advocates of the welfare state often pointed out that social insurance schemes were based on mathematical and statistical foundations. At the same time, authorities and experts criticized the purportedly unscientific practices of existing private assistance funds.
Before the first social insurance schemes were introduced, workers as well as low-income earners were predominantly covered by assistance funds. The assistance fund movement encompassed a wide range of fund types: firm-based, professional, communal or regional health, pension or death benefits funds. In 1888, Switzerland had a total of 1,085 assistance fund with 209,920 members (while the total population amounted to 2,846,102). Though some people had multiple insurance contracts. Nevertheless, up to a quarter of the population are thought to have belonged to an assistance fund in industrial regions.
When the introduction of social insurance was first discussed in Switzerland in the 1880s – beginning with health and industrial accident insurance – the new insurance model initially competed with existing assistance funds. The relationship between the assistance funds and the proponents of state social insurance was contradictory and often tense. On the one hand, assistance funds advocated the idea of insurance and thus paved the way for future social insurance programs. On the other hand, projects for state-led schemes competed against them. The opposition of assistance funds was key in the refusal of the first draft for a state health and accident insurance by 70 percent of voters in a 1900 vote. The second project accepted in 1912 accommodated existing assistance funds. It no longer stipulated mandatory health insurance coverage. Assistance funds could also continue to develop unfettered.
Because of the existing referendum hurdle referendums, proponents of state social insurance had to convince broad swathes of the general public. Authorities and experts often justified the need for state insurance schemes by criticizing the purportedly unscientific practices of private assistance funds. Statisticians, demographers and actuarial mathematicians repeatedly highlighted the lack of actuarial basis for the calculations applied by assistance funds. The Swiss Statistical Society (SSS) was among the most important stakeholders in this technical debate. Since its foundation in 1864, the SSS had had a strong focus on insurance matters. In the mid 1860s, it gathered national statistics on the rather patchy development of assistance funds – on the one hand to encourage state authorities to become more involved in insurance provision and, on the other, to examine the technical reliability of the funds. At the time, the author of the study, Hermann Kinkelin (1832-1913), was professor for mathematics at the University of Basel and subsequently became a prominent advocate of the welfare state and adviser to the Federal Council. Kinkelin’s report was highly critical of how the assistance fund movement was organized. He found fault with the often-inadequate accounting practices and offered an array of technical recommendations, for example on maximum admission age, waiting periods, the estimated average duration of periods of illness as well as for the investment and return of premium income.
Further criticism was voiced by Johann Jakob Kummer (1828-1913), another SSS exponent. Kummer served as the director of the Federal Statistical Office from 1873 to 1886 and later chaired the Federal Office for Private Insurance. As such, he became one of the founding figures of Swiss social statistics. Kummer believed it was the ‘duty of statistics and statisticians to put these associations [meaning: assistance funds] on the right track.’ Another critic of the assistance funds was the future doyen of Swiss actuarial mathematics, Christian Moser (1861-1935), who served the Confederation as the first Swiss actuarial mathematician from 1891 and also became a professor for actuarial mathematics at the University of Bern in 1901. In 1912, Moser declined an offer to become the first director of the Federal Social Insurance Office.
The controversy between statisticians and assistance funds intensified in the 1870s and 1880s. This became particularly evident in Kinkelin’s second assistance fund survey, also commissioned by the SSS. The report published in 1887 was significantly more critical than the first one presented in 1867. Kinkelin lamented that a mere five per cent of assistance funds worked according to correct actuarial calculations. Criticism was levied in particular against the Frankenvereine – a popular type of death benefit association. These associations operated according to a simple system. In the event of the policyholder’s death, all surviving members each paid a Swiss franc to the surviving dependents of the deceased; this provided a one-off lump sum. The problem with these associations was that they became increasingly unattractive to new members, the older their members became. The number of members thus often decreased over time; which meant that benefits paid to surviving dependents decreased accordingly and in some cases the association ran up a deficit. Most Frankenvereine therefore ended in financial ruin. Kinkelin’s report came to a scathing verdict. Such associations ‘cannot endure; sooner or later they are bound to fail [...]’. Kinkelin was also pessimistic in his assessment of the development potential of the assistance fund system: ‘It must be urgently noted that small health insurance schemes are highly disadvantageous, and they greatly impede the development of provision as a whole.’
Nevertheless, assistance funds did have some supporters. In 1899, for instance, two prominent SSS members opposed each other with respect to an assistance fund in Canton Vaud: Kummer was opposed while and Vilfredo Pareto, co-founder of the department of sociology and professor at the University of Lausanne, spoke in favor of the project. The debate revolved around the question of whether the accounting practices of Fraternité vaudoise(a medium-sized burial fund) were technically correct or not. The Fraternitéhad been founded in 1872 as a Frankenvereine and became embroiled in financial difficulties in the 1880s due to low member growth. Despite a number of reforms, its financial situation remained precarious. In 1895, the fund asked Pareto to examine its organizational model. Pareto recommended some moderate technical alterations, including the introduction of an annual membership fee, but left the fund structure unchanged. He considered the technical resilience of the fund to be of secondary importance as he ultimately considered Fraternité as a philanthropic organization. With this in mind, Pareto praised ‘the members, their courage and their initiative which represent the welfare and greatness of nations.’ Johann Jakob Kummer and other federal representatives thought Pareto did not go far enough; Kummer even spoke of an ‘irrational burial fund’. As long as these associations failed to operate according to the actuarial principles of a professional life insurance company, they were doomed to fail.
In the longer term, the criticism of assistance funds was effective to some degree. Especially larger funds introduced mathematic, statistical models in their organizations. At the same time, assistance funds were able to hold their ground – either as the executing organs of mandator social insurance programs or as supplementary institutions alongside state schemes. Private providers thus assumed important tasks in the Swiss welfare state, particularly in the domain of health and old age insurance (in the form of pension funds).
Literatur / Bibliographie / Bibliografia / References: Lengwiler Martin (2006), Risikopolitik im Sozialstaat: Die schweizerische Unfallversicherung (1870–1970), Köln; Degen Bernard (1997), Haftpflicht bedeutet den Streit, Versicherung den Frieden: Staat und Gruppeninteressen in den frühen Debatten um die schweizerische Sozialversicherung, in H. Siegenthaler (ed.), Wissenschaft und Wohlfahrt. Moderne Wissenschaft und ihre Träger in der Formation des schweizerischen Wohlfahrtstaates während der zweiten Hälfte des 19. Jahrhunderts, 137–154, Zürich.