Principles of Risk Management and Insurance, 13th Edition

Social Insurance

Reasons for Social Insurance

Although the United States has a highly developed system of private insurance, social insurance programs are necessary for several reasons.

• Social insurance programs are enacted to solve complex social problems. A social problem affects most or all of society and is so serious that direct government intervention is necessary. For example, the Social Security program came into existence because of the Great Depression of the 1930s, when massive unemployment required a direct government attack on economic insecurity.

• Social insurance programs are necessary because certain risks are difficult to insure privately. For example, unemployment is difficult to insure privately because it does not completely ...