This article explains that the state mandates social insurance systems to prepare for situations where individuals cannot adequately prepare for risks themselves, and that these systems play a role in ensuring economic equity and enhancing social stability.
All people inevitably live with the possibility of facing risks. Therefore, individuals seek to prepare for risks themselves, and the market captures this need by providing suitable products. Various insurance products like life insurance and cancer insurance are precisely these. However, it cannot be said that individuals are fully prepared for risks solely through private insurance products they voluntarily choose to enroll in.
Individuals must appropriately allocate their income between consumption for current needs and savings for future needs. Yet humans possess an instinctive tendency to overvalue present desires over future ones. They are also irrational beings who overestimate the probability of good fortune and underestimate the probability of misfortune. Consequently, individuals emerge who spend most of their income on present desires rather than saving to prepare for risks. When faced with risk, these individuals collapse due to a lack of preparation, which quickly becomes a social problem. Thus, the state compels people to prepare for typical social risks. This system is social insurance. It is a mandatory insurance system requiring compulsory enrollment regardless of individual choice, encompassing programs like National Health Insurance, National Pension, Employment Insurance, and Industrial Accident Compensation Insurance.
The background for introducing social insurance is significant not only for purely economic reasons but also for strengthening social solidarity and community consciousness. In modern society, individual lives are becoming increasingly uncertain and complex. In this environment, it is nearly impossible for individuals to bear all risks alone. In the past, families or local communities shared these risks, but nuclear family structures and urbanization have weakened traditional safety nets. Consequently, the need for the state to step in and build new forms of social safety nets has grown. It is against this backdrop that social insurance was born.
However, some people raise objections to this compulsory nature. One reason is the perception that they pay relatively high premiums. Since social insurance premiums are calculated by multiplying a fixed rate by one’s total income, high-income earners face higher premium rates. Yet, their pension payouts do not increase proportionally. Consequently, social insurance may offer a lower rate of return for high-income earners compared to private insurance. Similarly, high-income earners must pay higher premiums for National Health Insurance, despite receiving the same benefits. Thus, in social insurance, high-income earners face relative losses while low-income earners gain benefits. However, this aspect clearly demonstrates the nature of social insurance as fostering social solidarity among community members, thereby justifying its mandatory nature.
Another crucial role of social insurance is ensuring social stability. Whenever the economy becomes unstable, low-income and vulnerable groups suffer the most severe impacts. Lacking the capacity to respond to economic shocks, they easily fall into the trap of poverty. Social insurance serves to mitigate these economic shocks. For example, unemployment insurance compensates for income loss due to sudden job loss, promoting household economic stability. Furthermore, the national pension serves as a crucial means of preventing poverty in old age within an aging society. Thus, social insurance functions not merely as a mechanism for distributing individual risks, but as a vital device for enhancing the economic stability of society as a whole.
Some argue that social insurance constitutes unjust state intervention in the insurance market. However, applying this argument to employment insurance clearly reveals its lack of validity. Generally, for private insurance products to be offered, the risks covered—such as cancer or traffic accidents—must be mutually independent. However, unemployment is highly interdependent in nature; as seen during the foreign exchange crisis, the probability of one becoming unemployed increases as others lose their jobs. Consequently, private insurance companies are reluctant to offer employment insurance products. Furthermore, national pension and national health insurance must prioritize the public interest pursued by the state and cannot be entrusted to private insurers driven by commercial profit. Therefore, social insurance must be led by the state.
There is another reason the state leads social insurance: the protection and support of the socially vulnerable. Private insurance companies, being profit-driven enterprises, have limitations in providing insurance services to economically less profitable groups, such as low-income individuals or those in poor health. In contrast, state-led social insurance can provide equal benefits to these vulnerable groups. This promotes social equality and contributes to ensuring all citizens can lead a minimally dignified life. Therefore, social insurance transcends being a mere economic tool; it becomes an important means of realizing human dignity and social justice.
The state must establish a safety net enabling individuals to cope with risks. The state has introduced the social insurance system as this mechanism, which inevitably carries a degree of compulsion. Recognizing the importance of social insurance, continuous attention and effort are needed to ensure all citizens can lead more stable and dignified lives through it.
