EUROPEAN PAPERS ON THE NEW WELFARE

5. Towards a ‘Multipillared’ social security system

How will this cooperation between the public and private systems be set up? What will be the parameters and limits of intervention within which the offer of insurance companies can fit? Today Italy is the country with the highest social security expenditure, contrasted with the lowest percentage of incidence of health expenditure on GDP. If the cost of social security amounts to 14% of GDP, this already fragile and uneven system is heading for collapse in 2031 when the ‘pension bulge’ will reach a peak of 15.8% of GDP. The progressive growth in social expenditure, due to the process of increasing senility of society will make a reduction in public pensions necessary, as the forecasts for future rates of substitution show. Alarming numbers emerge from these: while in 2000 the public pension of a privately employed person with 35 years of contributions equaled about 67.3% of his last salary, it is estimated that in 2050 that percentage will drop to 48.1%, i.e. less than half of his last pay-check.
This projection is already sufficient to have us understand that in the next decade the maintaining of a good quality of life in old age must be ‘planned’ through time, integrating the social pension with private forms of provision. The social security scenario of the years to come will see the current system evolve into a ‘multipillared’ pension model which will allow the overcoming of the imbalance of the public system (First Pillar) through the development of instruments of integrated social security in a collective form (Second Pillar) and in individual form (Third Pillar). Currently those subscribing to supplementary pension systems, between pension funds and peps are around 2.9 million, or 12% of employed persons, while the resources put into services amount to 42 billion euros, equivalent to 3% of GDP. In particular (Fig. 5) 1.1 million Italians contribute to contractual pension funds, around 400,0000 to an open pension and 735,000 to an individual providence policy; while there are 660,000 subscribers to pre-existing pension funds, i.e. those set up before 1993.

Figure 5: Difficulties in the launch of complementary provision

Source: Covip, June 2005.

The purpose of pension reform, still under discussion should be the promotion of the launch of supplementary social provision in a way that is subsidiary to that of the public operation. It is nevertheless fundamental that the freedom of the worker is protected so that he/she can choose between the different forms of social provision without obligation. In this way the basis for a competitive and effective development of the market and for the spread of a mature social provision culture can be put in place, founded on information and openness and an informed choice by each individual of the form most suited to his or her own needs.

6. The challenge of the new welfare: the protection of those not self-sufficient

Alongside a ‘Multipillared’ social provision the near future will confront us with another difficult to achieve challenge: that of providing aid to the non-self-sufficient elderly. At the root of this problem which today is of interest directly or indirectly to around 41% of Italian families (spread between 21% who have a close family member who is not self-sufficient, and 20% who have friends who are not self-sufficient), there are phenomena such as the increasing senility of the population, the increase and growing spread of pathological conditions which lead to the loss of self-sufficiency and the very passing of the traditional family model, occurring above all in the large urban centres. Among the points listed the process of increasing senility of the population creates more than any other a source of problems out of assistance from the moment that the rate of disability of individuals is strongly linked to the age group between 65 and 69 years. Italy has an average disability rate of 2.4%, a percentage which rises to 8.5% between 75 and 79 years, only to leap to 24.9% (i.e. one in 4) when octogenarians are taken into consideration (Fig. 3).
Even leaving aside the fact that the judgement expressed by Italians concerning services for those who are not self-sufficient is negative in relation to both access to services (on which 68% of those interviewed expressed themselves ‘dissatisfied’) and on the quality of the services (judged to be poor by 63% of the sample) it is enough to keep in mind the numbers quoted to realise the importance of the problem in a society in which in 2050 there will be a rise in the number of the ‘very elderly’ from the current 22% to 41% among those people over 65 years of age.
The solution suggested by the insurance companies to the problem of loss of independence is Long Term Care (LTC) cover. This is an effective response to the need for long term protection and social services. Similarly to what takes place in the area of public social provision, it is possible to divide cover into two levels: the first is a basic cover geared to an individual within a community in which he spends his working life (the typical case is that of a business); the second is a supplementary cover, strictly individual, capable of being modular and incremental in line with propensity to risk and the security needs of each person.

7. The ‘public utility’ of the Insurance Companies

As I come to my conclusions I would like to point out three fundamental concepts in order that we might better interpret our task as insurers in the years ahead.
The first point concerns the importance of creating an insurance culture in our country. An open relationship between company and client should be founded on a kind of code of ethics which the parties will follow ‘instinctively’. The companies should expect of their clients a correctness of behaviour which should result in a curb on the phenomenon of fraud which represents an improper cost for the system. The insured should expect from the companies information and assistance in the choosing and analysis of offers, high standards of communication and openness, a fair system of compensation and a high quality service. When this system becomes the behavioural norm client and insurance company will achieve a perfect balance to their mutual benefit, the right protection at the right price. The creation of an insurance culture and the relaunch of the image of the social function of the insurance industry also constitute the premises for a greater spread and accessibility of the insurance service: it is important to reinforce the social role of the insurance sector, to attain the objective of transforming the perception of insurance from being a burden to being a ‘public utility’.
In second place, I would like to underline the role that insurers are called to play in the area of health which must be imbued with the philosophy of Managed Care. The insurer does not simply reimburse sustained expenses, but guarantees services useful for the health protection of the public. He carefully chooses suppliers, checking and monitoring the standards of quality. He obtains controlled priced services for those he assists, with favourable repercussions for the costs of a policy. The function of the insurer, even in the light of the anagraphic changes in the society in which we live is no longer simply that of the figure who pays for health services by way of compensation, but is now that of a very real manager of health care.

Figure 6: The role of the insurance companies in the area of Health and Assistance

The next decades therefore must not catch us unprepared for taking control of the social evolution, but even if our profession is prepared for a decisive cultural turning point for the insurance industry and for society, we must not think that the private operation should take the State’s place in responding to the social needs of society as a whole. We must look to work in a harmonious integrated and complementary partnership between public and private action.

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