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Historical background of social insurance

Updated by Pierrick Lanthaume on 17.02.2012

The first broad system of social insurance was created by the Government of Germany under Chancellor Bismarck between 1883 and 1889, though as far back as the 1850s several German states had helped local governments to set up sickness funds to which workmen could be compelled to contribute. The principle of compulsory insurance was thus already being applied, although at this stage the sole contributor was the insured person.

Sickness insurance, which began in 1883 and was managed by existing mutual aid funds, was the first stage. Employment injury insurance, operated by employers' trade associations, came in 1884. Invalidity and old-age insurance, administered by the provinces, followed in 1889. Already all three of the social partners – workers, employers and the State – were playing their part and had a voice in the management of the scheme as a whole.

Social insurance, as the name implies, was financed by contributions. It was compulsory for the wage earners for whom it was designed: employees, skilled and unskilled alike, young and elderly, male and female, and regardless of their state of health. Now all these people, who had had little to fall back on but the Poor Law, were protected by a system of guaranteed benefits, out of the shadow of the means test and the poor-house.

The insurance principle gave expression to the solidarity of the workers – each contributing regularly to support colleagues and workmates in the time of their need – and to the interest of both sides of industry in financing a scheme whose results would be beneficial not only to the workforce but also to the management.

The example of Germany was followed in Europe and elsewhere, and by the 1930s social insurance had spread to Latin America, the United States and Canada. Following the achievement of national independence and at different times after the end of the Second World War, social insurance was introduced in many countries in Africa, Asia and the Caribbean area.♦