Articles

Insurance, size and exposure to actuarial risk: empirical evidence from nineteenth- and early twentieth-century German Knappschaften1

Tobias Alexander Jopp^a1

^a1 University of Hohenheim t.jopp@uni-hohenheim.de

Abstract

By the mid nineteenth century, German miners relied on their own job-related social insurance scheme providing them with sickness, invalidity and survivorship insurance benefits. Addressing the period from 1867 to 1913, this article investigates whether the mineworkers' insurance funds, the Knappschaften, could effectively minimise their exposure to the actuarial risk inherent in their operations – and, in fact, inherent in all such insurance schemes – by increasing the scale of pooling. Contemporary observers of the Knappschaften tended to focus on whether financial stability could be improved by exploiting economies of scale, rather than by improving the pricing techniques themselves. Evidence suggests that actuarial risk was minimised at around 5,000 contributors in a Knappschaft's pension insurance section and at about 1,000 contributors in its sickness insurance section.

(Received September 16 2010)

(Revised December 03 2010)

(Accepted March 18 2011)

(Online publication September 26 2011)

Keywords

• actuarial risk;
• economies of scale;
• insurance;
• size

JEL classification

• G22;
• G23;
• I31;
• N33

Footnotes

¹ This article is part of a larger interdisciplinary project entitled ‘Vergangenheit und Zukunft sozialer Sicherungssysteme am Beispiel der Bundesknappschaft und ihrer Nachfolger' funded by the Leibniz-Gemeinschaft. Bartels et al. (2009) provide an overview of the whole project. The economic sub-project, from which the article emerged, was led by the Rheinisch-Westfälisches Institut für Wirtschaftsforschung Essen (Manuel Frondel) in cooperation with Hohenheim (Jochen Streb) and Yale (Timothy W. Guinnane) Universities. The article is a result of the author's work as project assistant at both RWI and Hohenheim. For valuable suggestions, I am grateful to Harald Degner, Manuel Frondel, Timothy W. Guinnane, Christoph M. Schmidt, Jochen Streb, the participants of the 6th BETA Workshop in Historical Economics (Strasbourg, May 2010), and two anonymous referees.