Targeting and Insurance

This paper looks at the implications of targeting from the perspective of social insurance. Government subsidies to social insurance systems do not appear to be well-targeted. Privatising social insurance would release resources for targeted non-insurance benefits. The discussion suggests that there are some problems with such a policy. The coverage of insurance would tend to fall and claims on non-insurance benefits would increase. An alternative to privatisation is to restore financial balance to social insurance by reducing social insurance benefits and tightening administration to guard against moral hazard. It is argued that such measures may lead to an increase in private (occupational) insurance arrangements. These may undermine the aim of curtailing moral hazard and impede attempts to expand employment and reduce labour costs. I