Workers' Compensation a l'Europe
Settembrino, Francois, Risk Management
Prussian Chancellor Otto von Bismarck (1815-1898) is a well-known historical figure best remembered for starting the unification process in Germany. What is less known is the fact that he also served as a father of European social security. Although this article is not the place to develop the subject completely, we can concentrate on two principles he followed that continue to have an enormous influence on social policy in Europe today.
His first idea was to relate all social benefits to a worker's professional life. The amount of a retirement pension, for instance, was based on an employee's length of service. Other benefits were calculated as a fraction of an employee's retirement pension.
His second principle was to instill a strong partnership between employers and employees. Any change or modification to benefit programs had to be discussed between the partners, with the government playing, more or less, the role of referee. The majority of the social security systems in Europe still follow this model.
Lord Beveridge (William H. Beveridge, 1897-1964) expanded upon Bismarck's ideas through efforts to address England's unemployment problem. Under his approach, benefits were intended to ensure a minimal level of payments, funded by the state, that could be used for essentials like food and shelter. Benefit levels were not related to salary or other employment elements. The two main countries in Europe where Beveridge's ideas were implemented are the United Kingdom and the Netherlands.
Over the years, there has been a progressive intermingling of these two approaches. The Netherlands has maintained the Beveridge approach, granting benefits exclusively to residents. The United Kingdom has introduced some career-related supplemental benefits for retiring workers. Other countries relate benefit levels to a worker's salary, family status or the number of years of paid contributions.
From these two original foundations has emerged a workers' compensation system that is handled differently by the various European nations. In most, workers' compensation benefits are part of the social security system. They generally represent flat amounts or are based on an employee's salary, sometimes in relation to the number of service years. In Portugal, Finland, Denmark and Belgium, occupational accidents are covered through private insurance plans, but the benefits are not comparable.
After having worked very hard on a possible harmonization, the European Union (KU) has implemented only very specific rules, such as allowing immigrant workers to join the local system without losing the benefits accrued in their previous state plan. There are some coverage gaps in the Netherlands, such as medical expenses not being funded for employees above a certain salary ceiling.
In the majority of EU member states, workrelated accidents are handled by governmental agencies and are very often included in the social security scheme. Sometimes, as in Germany, enterprises have to join an entity related to their industry sector. Few countries still use private insurers. At a time when many social security systems show signs of financial weakness, there is less enthusiasm for continuing to promote monopoly solutions. In Belgium, participants are happy with the existing system, and the state has never had to provide additional financial assistance. Bureaucracy is kept at a minimum, compensation is much more generous than in many social security nations and capitalization principles have provided sufficient funding for future pensions.
Compensating Belgian Workers
Until the end of the past century, occupational accidents in Belgium were compensated only if a worker was able to demonstrate an employer's liability under the civil code. Because this system was never easy to implement and involved very long delays, Belgian officials realized that the liability structure had to be replaced with a strict no-fault system in which payments were made automatically and rapidly. Since 1903, occupational accidents have been handled by approved private insurers, organized as commercial or mutual companies (caisses communes). Benefits are defined by law, with a cap based on the employee's salary
Since the end of the Second World War, accidents that occur on the way to or from work have been considered compensable. (It goes without saying that litigation filed under this provision spread rapidly.)
It is only since 1967 that public entities fell under workers' compensation legislation and since 1971 that the system became compulsory for all enterprises. For companies that do not carry coverage, the fines are very heavy.
Regardless of the category, disputes and settlements are the responsibility of the labor courts and strict control is exercised by a national fund that also has to approve all cases of permanent disability. In addition, insurers may never invoke any exclusion or noninsurance clause against a worker.
Although benefit levels are determined by law, there is considerable premium competition between workers' compensation insurers. Premiums are expressed as a rate applied on the aggregate remuneration of the employees. Premium levels are based upon the organization's activities and the characteristics of the work performed within different categories of personnel. Another important consideration is the size of the company, with statistical information about past experience playing a more important part for larger companies.
Coverage for accidents on the way to or from work will be rated separately from workplace incidents at a level that is generally comparable throughout the country. Policies can only be purchased from an approved carrier, and coverage from a foreign insurer is not allowed. The only restriction is that one single insurer has to cover all personnel; the only exception is that hourly workers and white-collar employees may be covered by two different insurers, regardless of the functions within each category. Coinsurance is forbidden. In addition to mandated benefits, war risk may be covered. Specific rules apply for seamen and workers exposed to risks such as military explosives.
All workers' compensation benefits are based on an employee's salary at the time of the accident, with an absolute ceiling (revised every year) of approximately $30,500. It is difficult to explain all the rules applicable together with the procedures to be followed. A summary of benefits appears in Table 1.
TABLE 1 Summary of Benefits Temporary disability Depend on the degree of disability, with a maximum of 90 percent of base salary. Permanent incapacity Based on the degree of pension permanent incapacity, with a maximum of 100 percent. That maximum may be increased in case of required nursing. Medical and hospital Reimbursed at the same level expenses as social security. Prostheses costs and travel expenses are also reimbursed by the insurer. Survivor benefits Window's pension equal to 30 percent of base earnings. Orphan pension 15 percent per child, maximum three. Additional orphans and funeral allowances are also paid.
The market share battle among workers' compensation carriers between 1988 and 1992 has lead to an industrywide loss of about $361.9 million over this period. Since 1993, premiums have been increased to more profitable levels, reducing the overall loss by $263.2 million. The future can be thus envisioned with optimism, as long as the competition remains responsible.
When discussing how claims are handled, a distinction has to be made between accidents that occur within the workplace and those that take place on the way. For workplace injuries, the victim has only to prove that an incident occurred during the execution of the employment contract. The insurer can only refuse the claim if it is able to disprove one of the legal presumptions (and any dispute will be settled in court). The majority of the cases are settled expeditiously. For transit-related injuries, the conditions are similar, but the claimant also has to prove that the event occurred on the normal route, within an acceptable time frame.
Medical and hospital expenses are paid almost immediately, as are compensation claims for temporary disability. The settlement of permanent incapacity claims necessitates the intervention of doctors, which takes additional time.
Incident prevention and reduction are the only available tools companies can use to maintain or reduce their premium rates. Because workers' compensation coverage is compulsory, companies can see a payback from efforts to control losses--not only in premium reductions, but also in indirect costs.
Workplace safety and, more recently, overall employee health are regulated fully in Belgium. All companies must retain a safety officer with government-required qualifications based on the company's activities. The safety officer is expected to act independently of the company, with an emphasis on the workers' interests, which is not always easy to accomplish.
Companies with more than 50 employees must also establish a safety committee composed equally of worker and employer representatives. The committee has to handle all problems related to workplace safety, hygiene and education. A designated senior manager of the employer is legally responsible for workplace safety, and allegations of negligence can be filed against the safety officer in connection with his or her compulsory duties. The safety officer will also play a predominant role in identifying and implementing accident prevention measures and preparing accident frequency and severity statistics required by law. In addition, some insurers have trained loss prevention teams that can provide additional assistance.
The last element in Belgium's safety landscape is compulsory workplace medicine. This can be handled by hiring a full-time medical practitioner to serve employees on the premises. It is more common, however, for employers to contract with service providers approved by the authorities. Under this arrangement, doctors coordinate medical treatment with the assistance of engineers, chemists, nurses, industrial psychologists, social assistants and other professionals. Their authority includes reviewing the proposed acquisition of new machines and the use of toxic products as well as investigating workplace incidents.
The coverage of recognized work-related illnesses is organized through a national fund. Coverage is only provided for illnesses such as deafness and respiratory problems that are classified as work-related. This means there could be a delay in compensation for emerging conditions such as repetitive motion disorders and problems associated with excessive vibration. It is only after some experience that the list is adjusted. In this area, the doctors take a leading role.
Additional research should be conducted to reduce employee accidents on the way to or from work. Although employers are unable to influence traffic or weather conditions' some employee education, such as defensive driving techniques, could ameliorate the situation. Certainly any effort in this regard would have a positive influence.
Unions have their own role to play as defenders of workers, whether white- or bluecollar. There are only three large unions in Belgium, with two covering a large majority of the workers. More than 70 percent of employees are members of those unions, which play an active role in safety education.
Risk Management's Role
It is obvious that human behavior is an important part of any risk management program, and the Belgian system recognizes this point. In fact, the system constitutes a kind of compulsory risk management that forces companies to manage workplace safety actively.
Identifying and evaluating the type of relationship between employers and employees, the presence of a compulsory safety officer and the interdisciplinary approach involving doctors and other professionals all play important roles in managing workers' compensation exposures in Europe. The combined methods produce records that are very useful in analyzing and improving safety exposures.
Overall, the social climate is favorably influenced toward risk management, and practitioners may count on the collaboration of workers, business leaders and government. Together, their observations and actions can mitigate many risks, such as property, machinery, environmental pollution, dangerous products and others.
At a time of global introspection about workers' compensation, it was interesting to contribute to this risk management reflection with an example from Europe. Belgium is a small country of 10 million inhabitants, but the nation is very industrialized and has a long tradition in the area of protecting workers. The national system is comprehensive, competitive and is undergoing continuous amendments and improvements. Nearly one century of existence and the satisfaction of all citizens certainly meets some attention.
Francois Settembrino, the former risk manager of Tabacofina-Vander Elst, is in charge of education for FERMA/AEAI, the European Association of Risk Managers headquartered in Brussels Belgium.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Workers' Compensation a l'Europe. Contributors: Settembrino, Francois - Author. Magazine title: Risk Management. Volume: 43. Issue: 10 Publication date: October 1996. Page number: 24+. © 1999 Risk Management Society Publishing, Inc. COPYRIGHT 1996 Gale Group.