Ex-ante and ex-post incentives of disability insurance experience rating: The case of The Netherlands

Pierre Koning, Ministry of Social Affairs and Employment, The Hague, The Netherlands

Abstract

Objective: Since 1998, The Netherlands has stood out as a country with substantial experience rating incentives in disability insurance. Currently, more than one third of the disability insurance costs of workers are paid by employers, together with two years of wage-continuation costs during sickness prior to the disability insurance claims assessment. Although the Dutch system has undergone further changes since 2006, experience rating schemes have persisted, and the inflow into the disability insurance scheme has dropped substantially. This paper examined the effects of experience rating on the inflow into disability insurance in The Netherlands.

Methods: The study used a unique longitudinal administrative data set from the Dutch social benefit administration. The data set covered employers for the years 2000, 2001 and 2002. A special focus was given to the distinction between (and importance of) ex-ante and ex-post effects of experience rating.

Findings: While there was weak evidence for effects of ex-ante incentives, the study found the ex-post impact of experience rating to be significant and substantial, amounting to a 15% reduction in the inflow into disability insurance.

Conclusion: It appears that the decision of employers to increase preventive activities is mainly an issue of being aware of the experience rating incentive. When taking a broader perspective, however, the evidence suggests that the enhanced incentives (also) have led to an increased inflow into unemployment insurance and other benefit schemes.

Downloads

Download: