Foundations and Development
The statutory accident insurance system was introduced as an independent branch of social security by the accident insurance law of 1884 and has existed since 1885. It has the following legal responsibilities:
- The accident insurance system, using all appropriate means, should assist in preventing work-related accidents and occupational diseases. In the future, this role should be expanded.
- In the event of a workplace accident or the onset of an occupational illness, the system has the task of providing comprehensive compensation for injury or damages. In this capacity, the primary goal is to restore the health of the insured to the extent possible and to re-integrate the insured into occupational and social life (medical, occupational and social rehabilitation). Permanent health problems, furthermore, are to be compensated through annuity payments. If the case results in death, the survivors receive pensions and other monetary benefits.
In the course of its development, the system has been continually amended and expanded in many respects. This refers in particular to the enterprises covered (all-inclusive since 1942), the groups insured (e.g., the inclusion of schoolchildren, students and kindergarteners in 1971), the types of claims (1925 extension to include commuting accidents, accidents that occur while operating equipment at work, and occupational diseases) and indexation of monetary benefits (comprehensive since 1957). The continual improvement of measures, methods and practices for prevention and rehabilitation is also of great significance.
Structure and Organization
The implementation of accident insurance is currently conferred by law upon 110 accident insurance carriers (Berufgenossenshaften). These are organized in the public law, mostly as “corporations of public law”. Three domains are to be distinguished:
- industrial accident insurance (including insurance for accidents at sea) with 35 carriers organized by industrial branch (e.g., mining, chemical, trade or health-care system)
- agricultural accident insurance, with 21 regionally organized carriers
- accident insurance for the public sector with 54 carriers that correspond for the most part to governmental divisions (federal, state and municipal groups, with separate funds for the postal service, railways and fire departments).
The most significant sector—industrial accident insurance—is given the most attention in the following discussion. As corporations of public law, the (Berufgenossenshaften) come under governmental administration and, as such, are part of the legal system . On the other hand, they are independent and self-governing in many respects. Both organs of self-administration, the assembly of representatives and the board of directors for each carrier are composed in equal proportion of employer and employee representatives chosen through elections. They make the decisions necessary to apply accident insurance within the legal framework. Whereas the preconditions for and scope of insurance benefits are regulated by law in individual cases, the accident insurance system preserves considerable self-administrative, decision-making latitude in setting premiums and especially in the area of prevention, which the self-administration fills out with concretizing and organizational regulations. The administrative organs of the (Berufgenossenshaften) also decide questions of organization, personnel and budget. Supervision by government authorities ensures that the decisions of the self-administration and administrative personnel are in accordance with the law.
Trends in Accident Rates and Finances
The number of work-related and commuting accidents decreased continuously over many years—until the increase due to the incorporation of the new federal state in 1991. The trend for the industrial accident insurance system can be summarized as follows: the accident rate—that is, the frequency of reportable work-related and commuting accidents per 1,000 full-time workers—decreased to less than half between 1960 and 1990. This positive trend can be even more clearly demonstrated in the case of severe accidents leading to compensation through annuities: a drop of nearly two-thirds in the accident rate. Fatal accidents fell by approximately three-quarters. Occupational diseases diverge from this trend and showed no uniform pattern of change during this time period. As new occupational diseases were progressively added to the list of occupational diseases, the number of cases of occupational diseases has increased, both with respect to prevention and rehabilitation.
The general decrease in the number and severity of accident insurance cases favourably affected costs. On the other hand, the following factors contributed to the increase in costs: indexing of monetary benefits, the general increase in health care costs, the expansion of persons insured, the broadening of insurance coverage—especially for occupational diseases—and the efforts to improve and intensify preventive and rehabilitative measures of the system. Altogether, the expenditures rose less than the salary base that is used to calculate the premiums. The average industrial accident insurance premium decreased from 1.51% in 1960 to 1.36% in 1990. As a result of the costs associated with German reunification, the average premium rose to 1.45% in 1994.
The distribution of costs for the three areas of responsibility (prevention, rehabilitation and financial compensation) have shifted in the following manner from 1960 to 1994:
- The costs of prevention increased from 2.6 to 7.1%. This is attributable to the steady improvement, intensification and expansion of preventive measures of the system.
- The portion of rehabilitation costs (including payments) rose from 20.4 to 31.2%. In this area, the increase of costs in the health-care industry cannot be absorbed by the decrease in accident frequency alone.
- The portion of costs for annuities and pensions decreased from 77% to 61.7%. Despite indexation of annuities and pensions, this did not increase to the same extent as did the rehabilitation costs.
In other branches of the German social security system, the burden of premiums rose considerably during this time. On average, the cost of premiums for all branches of social insurance in the German Federal Republic was DM25.91 per DM100 wages in 1960; this figure rose to DM40.35 per DM100 paid by 1994. The portion of the average accident insurance premium to the premium burden of the total social insurance system decreased from 5.83% in 1960 to 3.59% in 1994. The proportion of accident insurance to the gross national product remained at approximately 0.5%. Thus only in the area of accident insurance could the economy be relieved to a certain extent of social taxes.
A decisive cause for this positive trend was the decrease in frequency and severity of accidents, as depicted above. In addition, the accident insurance system has succeeded, by further developing rehabilitation practice, in preventing or minimizing long-term disabilities in many cases. As a result, annuity cases have been almost constant despite the 40% increase in persons insured over that time period.
The decrease in the frequency of accidents can be traced to many causes and developments—the modernization of production methods (especially automation) and the structural shift from the production sector to the service and communications industries; the efforts at prevention undertaken by the accident insurance system have made a substantial contribution to this financial and humanitarian achievement.
Basic Principles and Features of the German Accident Insurance System
The system is supposed to provide comprehensive social security to individuals afflicted by work-related accidents or occupational diseases. It also relieves those who are responsible for such accidents and diseases in the plants from the burden of liability to the injured. The following basic principles can be traced to these twin objectives of the system, which have marked it since its inception:
The liability of employers for industrial injuries is replaced by a public-law obligation of the accident insurance system to provide benefits (“relief of employers’ liability”). Any civil damage suits by the insured against the business owner or other company employees are precluded.
Business owners alone make payments to the accident insurance system, as they bear responsibility for industrial hazards and are relieved of liability risks by the accident insurance system.
Insurance benefits, based on the principle of compensation for injury, substitute for civil liability claims against the employers.
Insurance benefits are provided independent of formal proof of the insurance relationship and independent of employer notification to the accident insurance carrier. A more reliable and effective safeguard is thereby provided for all persons legislatively covered by insurance protection.
The insurance benefits are provided, as a general principle, regardless of who is at fault and without suit by the entitled person. The employment relationship is thereby freed from disputes over the question of fault.
As an important supplement to the task of providing insurance benefits, the accident insurance system is responsible for preventing work-related accidents and occupational diseases. The system frees the employer from liability, but not from responsibility for organizing a safe and healthy work environment. The close connection of prevention with rehabilitation and financial compensation is of fundamental importance.
The basic organizational principles have already been discussed above (organized as a corporation of public law with the power of self-administration and structured according to industrial branch).
The relationship of the various areas of responsibility to one another is marked by two principles: The primary goal must be to keep the number of insurance cases as low as possible through appropriate preventive measures (“priority of prevention over compensation”). In the event of an insurance claim, the primary goal must be to rehabilitate the injured party medically, occupationally and socially to the extent possible. Only then shall any remaining disabilities be compensated in the form of monetary payments (“rehabilitation before annuity”).
The following sections will show how these basic principles operate within the specific areas of responsibility of the accident insurance system.
The task of prevention is based upon the following considerations: the accident insurance system, which bears the costs of work-related accidents and occupational diseases within the framework of rehabilitation and compensation, should first of all have the ability to prevent the occurrence of injuries insofar as possible. Employers should be aware that they remain responsible for health and safety in the workplace, even though their direct liability to the employees has been replaced by the accident insurance system. The connection between accident insurance and accident prevention should make clear to the parties involved—particularly the employers—that capital investment in workplace safety pays off, primarily in the humanitarian sense, by preventing human suffering, but also in an economic sense, through the reduction of accident insurance premiums and company costs resulting from injuries. Structuring the industrial accident insurance system by branches and involving the concerned parties within the framework of self-administration results in a high degree of practical preventive experience, as well as acceptance and motivation by those affected. This close connection between accident insurance and prevention distinguishes the German system from the systems of most other nations, which generally provide for the inspection of workplace safety by government officials. Such workplace safety authorities also exist in Germany in addition to the technical monitoring service of the accident insurance carriers. The two institutions complement and cooperate with one another. The responsibilities of the government supervisory authorities (factory inspection) go beyond those of the technical monitoring service of the accident insurance carriers (regulation of work hours, protection of especially high-risk groups such as juveniles and pregnant women, environmental protection).
The accident insurance system’s prevention mandate stipulates only the basic premises, allowing the self-administration of the carriers considerable latitude in the particulars—especially with respect to special features within specific branches that are applied to the individual plants or to the entire facility and by general regulations.
The most important aspects of the system’s conception of prevention include the following:
The (Berufgenossenshaften) are required to issue accident prevention instructions on specific danger areas. These instructions must be regarded as law by the employers and insured persons. Compliance with these instructions can be enforced by the carriers through sanctions (fines). These regulations are based on industrial experience and will be continually adjusted to the requirements of technical development.
Each carrier maintains its own specialized monitoring service, which advises and oversees the businesses. These are staffed by specially trained monitors—especially engineers and scientists—and are supported by experts in other disciplines according to the branch of industry being served. The authority of the monitoring services ranges from giving advice on binding regulations to closing down part of a plant in the case of an acute threat to health.
The carriers provide company doctors and safety specialists with advice, training, informational literature and work assistance. These internal work safety experts are important consultants for the monitoring services. This industry-specific cooperation strives to uncover accident dangers and work-related health hazards in advance, and to enable appropriate protective measures.
The monitoring services for the carriers check whether the employers comply with their obligation to engage company doctors and safety experts. Some trade associations maintain their own doctors and experts, to which their member companies can turn in cases where they have not arranged for their own.
The training and continuing education of the individuals assigned to implement occupational safety measures in the plants is mostly in the hands of the carriers. The training programmes are adapted to the needs of the individual branches of industry. They target and are differentiated according to the various levels of plant responsibility. Many accident insurance companies run their own training centres.
Accident insurance carriers address questions concerning workplace safety to the employers and managers, keeping them informed and motivated to improve prevention. Attention to small and middle-sized businesses has recently become the focus of preventive efforts.
The carriers’ technical monitoring services also advise the employees on health and safety risks in their workplaces. Cooperation with the workers’ councils, which represent the interests of the employees within the company, takes on greater significance in this connection. The employees should participate in organizing the working environment, and their experiences should be made use of. Practical solutions to safety problems can often be found by strengthening the participation of the employees. Improving safety can promote the employees’ motivation and job satisfaction, and have a positive effect on productivity.
The carriers’ technical monitoring services routinely inspect factories and investigate cases of accidents or occupational diseases. They then make many individual measurements corresponding to the dangers present, in order to work out necessary protective measures. The results of these measurements, of the analysis of the workplace and of the problems, together with knowledge derived from occupational medical care, are compiled using modern data-processing methods and are used throughout all plants to further promote prevention.
The carriers maintain specialized testing sites in which particular kinds of equipment and safety features are tested. Through this and through the advice of manufacturers and operators of technical equipment, the carriers obtain detailed information which they translate into the practical work of prevention in the plants and which they also introduce into national, European and international standards.
The (Berufgenossenshaften) have themselves conducted, initiated or financially promoted many need- and use-oriented research projects to advance knowledge in the field of safety and health protection.
In the interests of the employers as well as the employees, all the accident prevention work of the carriers aims to organize workplace safety and health measures as efficiently and economically as possible. Implementation strategies must also be practical. The effectiveness of preventive work is also monitored.
Scope of Insurance Protection
Employees who are working or in training are insured persons under the accident insurance system. Insurance protection is awarded regardless of age, sex, marital status, nationality, level of remuneration or length of employment. Insurance coverage is also guaranteed in the event that the business has not yet registered with the accident insurance carrier or has not paid premiums.
Homeworkers and persons who are active as employees in home industries are mandatorily covered, as are persons who receive rehabilitation measures from a social insurance carrier, and employers in some branches. All other employers can voluntarily insure themselves through the system.
In the agricultural accident insurance system, the employees, agricultural employers and employers’ spouses who work are obligatorily covered.
In the governmental accident insurance system, many groups are insured in addition to employees (but not the civil service and soldiers). These include students, schoolchildren and kindergarteners. Persons who are active in the interest of the public good and prisoners who work are also covered. A large portion of those insured by the government programme enjoy premium-free coverage, financed by federal, state and local governments.
The insurance cases
Insurance cases, or incidents, in the accident insurance system are workplace accidents and occupational diseases. Accidents which occur during the use or operation of equipment and commuting accidents also count as work-related accidents. The decisive criteria for insurance cases are as follows:
- membership in an insured group
- bodily injury resulting from a sudden work-related accident
- exercise of an activity covered by insurance at the time of the accident or at the time of injury to health; covered activities are those closely connected to the employment relationship
- an accident or an injury to health caused by an activity covered by insurance.
Fault on the part of the insured does not invalidate a claim. But if the only substantive causes of the accident are from the private sphere, then coverage will not apply—for example, an accident while an individual is under the influence of alcohol or as the result of a violent dispute. No insurance coverage is applicable to injuries which, though they occurred in the course of an insured activity, nonetheless arose as the result of a pre-existing health problem; this applies mostly to heart attacks and slipped disks.
Occupational diseases (those that are medically known to be caused by particular effects that certain groups are exposed to in their work to a higher degree than the general public) are included on an official list. If new information exists regarding an illness that does not appear on the list, the carriers can compensate the illness as an occupational illness.
Notification and statistical recording of insurance cases
In general, the benefits of accident insurance do not need to be applied for by the injured party, but are to be furnished at the initiative of the carriers. This presumes that cases are reported in some other way—employers, doctors and hospitals are obliged to inform carriers. This is the basis for a comprehensive statistical recording of occurrences of accidents and occupational diseases.
The system has the legal responsibility to provide comprehensive medical, occupational and social rehabilitation benefits upon the occurrence of an accident or the onset of an occupational disease. The objective of this mandate is, insofar as possible, to restore the health and the reintegration of the injured into work and society. Alongside the aforementioned principle of “rehabilitation before annuity”, the system provides all rehabilitation benefits of an accident insurance carrier “from one hand”. This guarantees a speedy and consistent rehabilitation programme, coordinated to the individual’s health, level of education and personal situation. The carrier is not confined to paying benefits and ensuring the care of the injured. Rather, the carrier optimizes the rehabilitation with specially qualified and equipped doctors and hospitals, through establishing carriers’ own clinics—especially for the care of severe burn victims and spinal cord and skull and brain injuries—as well as through observation, attendant care and, when necessary, corrective steering of the rehabilitation process. The following particulars apply:
The carriers must ensure that proper treatment begins as rapidly as possible after the incident. If necessary, this should include care from specialized physicians or occupational medical care. Physicians should participate in the treatment who are specialized due to training in accident medicine and have experience as surgeons or in orthopaedics, are equipped with a technical medical practice, and are prepared to fulfil certain duties with respect to the insurance carrier, particularly submitting forms and expert opinions.
After an incident occurs, injured persons should immediately go to a physician who is on contract with the carrier and who must prove the above-mentioned qualifications. They are empowered by the carrier to begin further treatment and to decide whether general treatment or special treatment—in cases of serious injuries—should be provided.
In the case of especially severe injury, the accident insurance system exacts the highest requirements in treating the injured person. Therefore, the insurance carriers authorize only specially qualified hospitals to undertake this treatment. These hospitals are subject to special guidelines and supervision.
The carriers use certain doctors to monitor and direct the treatment, who are required to supervise the treatment, to make reports to the carrier and, if necessary, to propose further rehabilitation measures.
The treatment and medical rehabilitation benefits are fully assumed by the accident insurance system (without copayment by the insured). This fulfils the injury compensation principle of the system.
If medical rehabilitation alone cannot render injured persons capable of returning to their jobs, then the carrier must provide for occupational rehabilitation. The law provides for rehabilitation that conforms to the circumstances of each individual case (severity of disability, level of education, occupational qualifications and inclinations, age of the injured). The rehabilitation can result in measures specific to the plant, such as adapting the workplace to the disability; assistance in obtaining a position in the plant where the accident took place or in another plant; or financial support for the employer who is prepared to provide employment. Occupational training, including retraining for an entirely new occupation, is also covered.
As the system is responsible for providing medical as well as occupational rehabilitation, necessary occupational rehabilitation measures can be planned and started during the medical rehabilitation with the participation of the injured and the physicians. This task is performed by occupational counsellors—specially qualified and experienced employees of the carriers. They visit the severely injured while they are still hospitalized, attend to the insured persons, especially in searching out and selecting appropriate and promising rehabilitation measures, and stay with them until they are reintegrated into working life.
Medical and occupational rehabilitation are essential preconditions to injured persons’ ability to resume living as much as possible as they did before the injury. Beyond this, however, it must also be assured that those suffering long-term health effects can not only resume work, but also social, family and cultural life as well. To this end, the carrier also provides social rehabilitation benefits; for example, vehicle assistance to promote mobility, handicapped sports to help promote health and participation in social life, household assistance or creating and equipping an apartment adapted for handicapped individuals.
During rehabilitation, the injured have a claim to continued payment of wages by the employer in the first period of the inability to work as a result of the incident (at least six weeks by the union contract). Then the carrier must provide “replacement pay” during the period of the medical rehabilitation. The disability payment corresponds, generally, to the net salary at the time of the incident—with deductions for the employees’ contribution to social security and unemployment insurance (at present almost 13 per cent). During occupational rehabilitation, a transitional wage replacement benefit is paid, which is somewhat less than the disability payment. These benefits are paid throughout the duration of the medical and occupational rehabilitation so that the insured and their families are financially secure. Continued payment of premiums to the other branches of the social security system prevents any gaps in insurance coverage.
Financial Compensation through Annuities
Insured persons receive annuities as compensation for remaining health problems from a work-related accident or occupational illness. These pensions are granted only at the close of the rehabilitation process and assume a definite decrease in earning capacity (generally 20%) for a minimum time period (beyond 13 weeks after the work-related accident). The annuities are calculated according to the degree of decrease in earning capacity and the annual earned income.
The principle of “abstract injury rating” applies in determining the degree of decrease in earning capacity. Accordingly, the loss of earning power on the general labour market and not the concrete loss of earnings (lost wages) caused by a work-related accident or occupational disease is taken into account. Measuring the decrease in earning capacity depends primarily on the severity of the health problem, which is in turn assessed by the expert opinion of a physician. This helps to minimize administrative costs and also keeps the burden on the insured and their employers to a minimum. In most cases, the abstract injury rating for annuities works out so that the insured are not in a worse overall economic position after the insurance incident than before. In many cases, indeed, a certain improvement of position results so that the annuities contribute in fact toward compensating for immaterial damages. The principles of the abstract injury rating and of “rehabilitation before annuity” work against the danger of an “annuity mentality” developing among the insured. The insured are motivated, despite any continuing health problems, to seek gainful employment.
The principle of the abstract injury rating is supplemented by factors of concrete damage assessment to ensure that appropriate compensation is made in all cases.
Annual earned income is the second basis upon which annuities are computed. By this is meant the sum of all wages and self-employed income an insured person earned during the year preceding the insurance incident. The annual earnings should reflect the standard of living that the insured had attained at the time of the workplace accident.
Under certain conditions, disability annuities can be fully or partially indemnified.
Survivors’ pensions and other death benefits
Widows, widowers and orphans—and under specific conditions also parents—have a claim for survivors’ pensions upon the death of insured individuals from work-related accidents and illnesses. The function of these pensions is to replace support lost through death. The computation is, as in the case of injury annuities, based upon the earned income. It is graduated according to the survivors’ need (especially widows with versus without children; children orphaned by one or both parents). Earned income and earned replacement income is taken into account in the case of survivors’ pensions, with the exception of orphans under 18 years of age. In the latter case the principle of loss replacement is applied: only those actually dependent upon support receive the benefits to the requisite and proportionate extent.
Along with survivors’ pensions, costs of conveyance and burial costs are guaranteed.
Widow and widower pensions are granted until remarriage; in the event of remarriage a settlement of two times the yearly annuity is paid.
Financing and Law on Premiums
There exist considerable differences among the three branches of the accident insurance system (industrial, agricultural and governmental) on financing and the law on premiums. The following discussion deals only with industrial accident insurance.
The costs of the industrial accident insurance system are financed almost exclusively by premiums from employers. Additional income received from indemnity claims against third parties (especially for traffic accidents), capital gains, late charges and fines is of relatively little significance. It should be emphasized that the industrial accident insurance system functions without financial assistance from the government. Revenues are raised and utilized solely to fulfil the legal obligation—attempting to turn a profit is forbidden.
Premiums for individual businesses are calculated based upon the employees’ wages that are subject to premium (or of the income from work or the insurance amount of the employer). The law on premiums takes particularly into account the occurrence of accidents and the attendant threat of accident in the branches of industry and individual businesses. Three levels are distinguished:
The first level of premium is conferred by collecting one or more branches of industry into an industrial insurance carrier as a common risk group. For example, more, and more severe, insurance incidents occur in the construction industry than in precision tool manufacture. Thus the premiums for a construction carrier are considerably higher on average than those for a carrier in precision tool manufacture.
At the second level, at the level of each individual carrier, the industrial branches included in this carrier—the bricklayers, roofers and janitors in the construction industry, for example—are classified according to the costs of accidents in the different risk groups. The general allocation of branches of industry into risk groups produces risk tables for each carrier. Each individual business is assessed by the carrier according to risk group on the basis of the risk tables. Different constituent parts of a business are assigned to various corresponding risk groups. The risk tables are actualized on the basis of five-year statistical surveys of accident frequency and costs. By means of the risk groups, the amount of the premiums for the individual branches of industry grouped within the same trade association are differentiated.
At the third step, the premiums are once again modified at the level of the individual enterprises. Here the criteria can be the number, severity and cost of the work-related accidents (excluding commuting accidents) over the last 1 to 3 business years. The insurance carrier can reduce the premium of an enterprise with a below-average incidence of accidents, or impose a premium surcharge in the case of an above-average incidence of accidents. The carriers are authorized to rule independently on the further detail (imposing surcharges or granting premium reductions, or combining the two).
Graduating the premiums for the various branches of industry and the individual enterprises according to accident trends is supposed to make the employers aware that the cost of accident insurance premiums also depends on efforts at—and the success of— prevention, and to spur efforts in this direction.
The accident insurance system is financed by a procedure of retroactive apportionment to cover costs. The amount to be apportioned is the excess expenditure over income, calculated retroactively for every budget year. The apportionment debit is divided among the individual member companies of the respective insurance carriers according to the premium computations (risk group of the company, total wages paid in that premium year and, if applicable, the premium surcharge or reduction). Naturally, ongoing costs must be financed in advance. This comes from collecting working funds and from pre-paid premiums. In order to compensate for long-term fluctuations in premiums, the accident insurance carriers must build reserve funds. These funds are preferentially invested in establishments that serve to fulfil the tasks of the accident insurance system—for example, training facilities or accident-care hospitals.
As accident insurance premiums cannot be calculated by the employer, the insurance carrier does the calculation and notifies the employer.
In the German accident insurance system, which is organized by industrial branch, structural changes in the economy can lead to an indefensibly heavy financial burden for some insurance carriers. This is especially the case for the coal mining industry. The number of working coal miners has declined substantially in the last decades, but the insurance carrier for mining must nonetheless pay annuities which date from a period when several times as many miners were employed. To remedy this extreme, no longer sustainable increase in the burden of premiums for that branch of industry, a method for sharing the burden among the various insurance carriers was introduced through legislation in 1968. The other insurance carriers are obliged to raise an additional apportionment to fill the financial gaps among those insurance carriers that have a right to equalization. Legislators thereby extended the fundamental notion of solidarity, which applies within each individual accident insurance carrier, to all industrial enterprises.