b) Supplementary insurance funds
They were created only after World War II in order to supplement the benefits provided by the primary funds, mainly in the field of old-age pensions. The coverage of these supplementary funds, also organized along enterprise or occupational lines, was not identical with that of the primary funds, however. This led to a further increase in the complexity and fragmentation of the system.
Until 1955 the setting up of insurance funds was possible due to the conclusion of collective agreements. These insurance funds covered individuals who were not IKA-insured, usually against sickness. Some of them still exist. Since the enactment of a special law in 1955 it has been prohibited for enterprises through collective agreements to take decisions or undertake changes regarding social insurance matters. Sickness insurance funds were aimed at a higher quality of sickness benefits for their insured members in comparison to the provisions made by the statutory insurance system. Sickness funds often do not only have sickness insurance branches, but also providence insurance branches, and one of them also has a retirement insurance branch.
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c) Sickness insurance funds
The 19 funds for sickness insurance form together with the primary and the supplementary insurance funds the main constituents of the Greek social insurance system. They are institutions based on public law.
d) Provident fundsThey were created according to collective agreements to provide their insured members with lump-sum benefits upon retirement. The largest and one of the oldest provident funds is the Provident Fund of Civil Servants, created in 1926. In general the lump-sum benefit is related to the salary and to the number of contribution years. The lump-sum benefits range in average from 1,500,000 DR to 2,400,000 DR (in 1990).
e) Mutual aid societies
These organisations are based on private law and were created by professional organizations to provide additional benefits. There is only little information available about the development of these organizations. About 50 of them were in operation in 1996.
3. Focus on Primary Insurance Funds
The three largest insurance funds for primary insurance in respect of the number of insured persons (in 1996 when the total number of persons insured at primary insurance funds was 4.1 million) are:
- IKA, the ”standard” Social Security Organisation with 1.840.000 in- sured persons
- TEBE, the Professional and Craftsmen Fund with 545.100 and
- OGA, the Agricultural Insurance Organisation with 1.149.000 insured persons.
So IKA, TEBE and OGA accounted for 85% of the total population insured in primary insurance funds.
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IKA
The setting up of the Social Insurance Organisation (IKA), according to Law 6298/1934, was a major turning point in the history of the Greek social insurance. The aim of this law was the compulsory insurance overage of all white- and blue-collar workers within Greece. Many consider this legislation to be the foundation stone of the Greek ..welfare state. For the first time one third of the Greek population was covered by a unified insurance scheme. The IKA insurance covered sickness and retirement due to old age, death or disability. IKA first began its activities in Athens in 1937. The scheme was gradually extended to cover Piraeus and Thessaloniki in 1938, Patras, Volos and Kalamata in 1939. Other regions followed with a delay. Only in 1951, according to Law 1846/1951, began the extension process of IKA to cover all white- and blue-collar workers and their dependants in the whole country. The insurance risks covered by IKA, according to law 1846/1951, are: sickness, death of the head of the family, inability to work due to old age, mental illness or accident.
Financing of the Greek social insurance system
The social insurance system is mainly funded by employees’ and employers’ contributions. Regarding the private sector employees, the contributions are paid by the employees and the employers. Regarding the self-employed and the liberal professions, the contributions are paid by the employees themselves. Some insurance funds receive additional state subventions and social sources. In 1996 the contributions of the insured made up 33.1% and the employers‘ contributions 31.0% of the total receipts of the insurance institutions under the auspices of the Ministry of Labour and Social Insurance. The ratio between the contribution of employees and the contribution of the employers is between 1:1 and 1:6. This form of financing entails certain problems which are, among other things, responsible for the bad financial situation of the insurance system in Greece today. |
4. Future perspectives
Since the 1970s the crisis of the institution of social insurance is a common fact in most European countries. In Greece, the general economic recession, the increase in the costs and the decrease in revenue, the rapid increase in expenditures in the health care services and the unfavourable demographic factors have contributed to this crisis. In 1982 this crisis was at its peak. It was the first time that a very large deficit had been created within the main insurance fund, the IKA. By the end of 1984 this deficit was about 100 billion DR.
* The revenues could not keep up with the growing expenses. This fact led to a public sector borrowing requirement (PSBR) equalling 20% of GDP in 1990. The rapid increase in pension rates was not accompanied by a rise in social insurance receipts. Therefore many analysts see pensions expenditure as the main reason for the increase in both public expenditure and public sector deficit. There are, however, analysts who make the demographic factor, namely the worsening of the ratio between retired members and insured members, responsible for the crisis. However, in spite of the great importance the demographic factor may have for the insurance system, it would be inadequate to focus only on this factor. In his article about the Reform of the Social Insurance System in Greece, Robolis mentions that the main factors responsible for the crisis in the insurance system correlate with the factors which are responsible for the crisis in the Greek economy as there are:
* the legal absorption of the financial reserves of social insurance institutions by state banks, which has led to a worsening of the financing of these funds and created budget deficits.
* the failure to implement tripartite financing. The level of financial support provided by the state is primarily defined on the basis of the access professional groups and their unions have to the state machinery, rather than on the basis of the needs of these groups. Financial support by the state given to IKA, for example, hardly reaches 0.5% of its total receipts, while financial support given to the Fund of Engineers, Architects and Surveyors amounts to 55% (Petmesidou, 1991).
* the tendency of insurance funds to borrow from banks at high interest rates in order to cover their deficits.
- Glossary: DEI: Public Electricity Corporation
- DLOEM: Fund for Family Allowances
- EE: Institute for Workers’ Welfare (Workers’ Centre)
- EIDAP: Athenian Water Supply and Drainage Company
- ETBA: Hellenic Industrial Development Bank
- IKA: Social Security Organisation
- KEPE: Centre of Planning and Economic Research
- NAT: Merchant Seamen’s Fund
- OAED: Organisation of Workers’ Employment
- OGA: Agricultural Insurance Organisation
- OEK: Workers’ Housing Agency
- TAE: Tradesmen’s Insurance Fund
- TEAM: Supplementary Insurance Fund for the Salaried (Insurance branch of IKA)
- TEBE: Professional and Craftsmen Fund Structure of the Social Security System in Greece
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