Social insurance

• Main Author: HOON, Hian Teck
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: Asian Studies; Economic Policy; Finance; Insurance
• Online Access: https://ink.library.smu.edu.sg/soe_research/2609
• Institution: Singapore Management University

This chapter on social insurance lays out the principles and design features of an optimal scheme for retirement and health provisions that takes into account contingent events such as facing unemployment or suffering disability. With Singapore in mind, it sets up a scenario for a country that has completed its phase of catch-up growth – transiting to indigenous innovation as a major source of growth – and faces the disruptive effects of the fourth Industrial Revolution. Key considerations in the design include (i) a concern for fiscal sustainability; (ii) a recognition of the well-known problems of moral hazard and adverse selection in the provision of insurance; and (iii) taking account of the reality of aggregate uncertainty (as opposed to idiosyncratic risks faced by residents). The scheme is a defined contribution scheme that makes provisions for workers’ retirement spending as well as their healthcare needs both while they are working and when they are retired. Proposals are made on the design of the scheme to cater to workers’ liquidity needs from the risk of being laid off and their financial needs from the risk of suffering disability during their working life.