Mastering the challenges

The constantly changing parameters in workers' compensation insurance mean that systems need to be continuously reviewed and, if necessary, reformed:

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  Tight state budgets have forced legislators to instigate reforms which shift the funding of work-related accidents and diseases to the private insurance sector.
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  Pay-as-you-go systems, which tend to dominate state cover, are increasingly being questioned as a funding method.
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  Greater flexibility in the jobs market, a changing work environment as a result of technological progress and new employment concepts such as telework are bringing new risks to this field.
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  Growing regional and occupational mobility is making it more difficult to trace someone's professional history and thus also to identify the cause of occupational diseases.
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  Medical advances have increased life expectancy. Chronic diseases, which include a good number of occupational diseases, increase with age and are then usually more acute.

Such trends show just how difficult it is for legislators to assess whether the systems used today are still adequate and whether it might not be better to consider greater participation by the private insurance industry. Examples of possible public system reforms in order to restrict insurance cover to a financially viable minimum can be found in many countries. These include, for instance, discussions on the removal of commuting accidents from statutory cover, a reduction in the amount/duration of benefit for loss of earnings, i.e. benefit calculation based on actual rather than abstract reductions in earning capacity.

Alternative solutions will need to be developed in close cooperation with the insurance industry if we are to ensure the long-term financing of these risks. One aspect of this process in particular is of fundamental significance. Although the problems are very often of a similar nature, there are significant differences in market-specific parameters, meaning that potential solutions have to be selective and finely tuned to individual market circumstances. The classic separation into "typical private" and "typical state" system is therefore no longer contemporary or appropriate.

With this very much in mind, Munich Re established a Centre of Competence for Workers' Compensation in 1998 in order to formulate and structure its know-how in the field of workers' compensation insurance. We consider it our task to identify and analyse trends and to develop possible solutions. This is our contribution to risk-adequate, financially viable and sustainable insurance systems for all sides - employers, employees, riskcarriers and the state.

Dr. Adriano Bastiani is head of the Centre of Competence for Workers' Compensation in the Corporate Underwriting/Global Clients Division. He is responsible for Munich Reclients worldwide, except for the USA.

Dr. Héctor Upegui-García is a primary insurance specialist in workers' compensation and social insurance. He is responsible for Munich Re clients worldwide, except for the USA, and is a specialist in reform markets.