‘Social insurance’ is a term which I have been using for many years without being entirely clear about its essential economic features. When asked about its economic consequences, or the effects of reforms to social insurance, I have been increasingly unsure as to the appropriate framework within which to attempt to answer the question. The existing economic models do not seem to capture fully what is at the heart of social insurance.

Social insurance is one of those comfortable short-hand expressions which people tend to use without close examination of its precise content. When I began writing this chapter, I looked at a variety of sources for definitions of ‘social insurance’. The International Encyclopedia of the Social Sciences contains no entry under this heading, nor does it refer the reader to another entry. The New Palgrave Dictionary of Economics contains an entry on ‘Social Security’, but does not tackle the definition of social insurance. And those reference books which do provide information are not always very enlightening: for example the Penguin Dictionary of Economics, under the heading of ‘Insurance’ says that ‘there are also many other kinds of insurance, including sickness and unemployment insurance, some of which … are not carried out by the traditional insurance companies’ (Bannock et al., 1979, p. 240).

There is indeed a lot of the proverbial elephant about social insurance: we may not be able to define an elephant, but we recognise one when we see it. We know what programmes people have in mind in Britain when they speak of National.