Compensation Center TVK turns 100

The Finnish Federation of Accident Insurance Institutions (FAII) was founded on 27 March 1920 in Helsinki. At the time, about a dozen Finnish insurance companies operated in the country, but the founding meeting was attended by seven delegates from six companies. They were Dr. Karl Alfred Paloheimo from Tapaturmavakuutus-Osakeyhtiö Kullervo, Director Karl Oskar Lindberg from Tapaturmavakuutusosakeyhtiö Patria, Director Uno August Jansson and Treasurer Helge Fleege from Yleinen Suomalainen Vakuutusosakeyhtiö, Herman Paavilainen, MA, from Maanviljelijäin Keskinäinen Tapaturmavakuutusyhdistys, Jon Hartman, LL.M., from Keskinäinen Vakuutuslaitos Sampo and Karl Sucksdorff, LL.M, from Suomen Teollisuudenharjoittajain Keskinäinen Tapaturmavakuutusyhdistys.

There were several motives behind the new federation. Private insurance institutions sought to promote their interests and influence future legislation, but also wanted to ensure the best possible accident insurance and care for those injured, and help prevent accidents and harmonise the practices used in deciding on claims.

During its first decades, the Federation took on responsibilities such as the printing and distributing of forms needed to enforce statutory accident insurance.

Karl Sucksdorff was elected the first chairman of the Federation, and the first secretary was Auli Markkula, LL.M., (1920-1921), who was forced to resign the duties due to lack of time. The next secretary was Helge Fleege (1921-1943), one of the delegates in the founding meeting.

Finnish labour and social welfare legislation saw rapid development throughout the 1920s. For FAII, the most notable reform was the employees’ accident insurance act of 1925, which extended insurance cover to all manual workers regardless of industry. The new law was also harmonised with the standards of the International Labour Organisation (ILO), which had been founded in 1919. At the same time, the number of workers insured against accidents at work grew to more than 500,000 for the first time.

From the start of 1927, accident insurance law also covered State employees.

Already from the early years, Finnish efforts to prevent accidents were determined and co-ordinated. After the legislative reform, however, the need for careful and uniform educational work was also recognised. To that end, FAII decided in 1928 to set up its own magazine, Työväenvakuutus – Arbetareförsäkring (from 1963 the Tapaturmavakuutus Magazine) to raise public discussion on themes related to occupational accidents and diseases.

Development of workers’ compensation insurance legislation continued in the 1930s. The new accident insurance act of 1935 clarified certain ambiguities in the old law. In retrospect, it can be said that at that time, a system was created in Finland the foundations of which remained in place until the end of the century.

Section 6 “An employment accident means any accident causing injury sustained by the employee 1) in the course of his/her employment; 2) in circumstances arising from employment a) at the workplace or in an area pertaining to it; b) while commuting from his/her residence to the workplace or vice versa; c) while attending to business for the employer elsewhere; or 3) while attempting to protect or save the employer's property or, in connection with his/her employment, human life.”

The new law once again expanded the number of people covered by insurance, this time to managers, supervisors, oversees and ship officers whose annual income was below 48,000 Finnish marks.

The reform increased the number of insured workers to 600,000 people.

Compensation for occupational diseases was legislated by a separate decree. The list of substances causing occupational disease decreased to seven: arsenic, lead, mercury, petrol, benzene, coal tar and phosphorus. However, powerful radiation and anthrax remained on the list of exposure agents.

The most significant legislative reform was the introduction of the employer’s own liability. Parliament set the limit of the employer’s liability at 200 marks. In practical terms, this amounted to up to three days of disability of an employee.

The increased political tensions in Europe had also been noted in Finland. In 1938, a law was passed on accidents in the armed forces. It ensured that the next of kin of soldiers injured or killed in service received the same compensation as those granted to workers and their family members by accident insurance legislation.

When the war broke out in 1939, just over 740,000 Finns or about one-fifth of the population of 3.7 million were covered by accident insurance. In November, just a few weeks before the start of the Winter War, member companies of FAII set up pool of funds to cover damages due to war injuries.

During the Winter War in February 1940, the employees’ accident insurance act was extended in scope. In the new law, all work-related accidents caused by war or armed conflict were covered by accident insurance. Immediately after this in March when the war was over, another law was passed ensuring compensation for bodily injuries sustained in the war for those who were otherwise not covered by the employees’ accident insurance act. The latter of these was soon dubbed the air raid act as it was mainly applied to reimburse those who had been injured on the home front.

Compensations for the Winter War were paid mainly from State funds through a separate office. According to statistics by the office in 1943, compensation had been paid to 19,000 wounded, with 20,000 soldiers and 1,000 civilians having lost their lives. All in all, the wounded numbered at 40,000, of whom 1,500 died in military hospitals. There were approximately 10,000 war widows and 20,000 orphans.

Of those wounded in the Winter War, about 5,000 were estimated to have suffered a permanent disability preventing work. To provide care, rehabilitation and vocational training for these wounded, the Invalidisäätiö foundation was established in 1941. FAII donated one million marks as initial funding for the foundation.

FAII’s pool of funds for war damages was prepared to pay out up to 27 million marks in compensation. Ultimately, the pool was used to pay 9.2 million marks for 571 cases, or about one third of the total cash reserves. Most of the compensation was paid to soldiers wounded in the Winter War.

In 1944, FAII set up a committee to oversee employees’ accident insurance claims. The purpose of the committee was to issue opinions in order to harmonise compensation practices. In 1948, however, as the accident insurance act was again reformed, the committee was replaced by the new Employment Accidents Compensation Board, which still operates today.

The most significant reform in the new Employment Accidents Insurance Act of 1948 was ending the differentiation between manual and intellectual work. The change extended the insurance to cover approximately 250,000 salaried employees.

 “Any person who by contract and for remuneration undertakes work for another as an employee, under the employer's direction and supervision.”

The new law also improved the compensation rates and the status of severely disabled persons. The annuity payable for injuries was now divided into a base rate, which was the compensation for a permanent handicap, and a supplementary allowance that covered loss of income.

Legislative reform had been discussed throughout the 1940s. One of the options considered was to transfer all responsibilities related to accident insurance to the state – to socialise the insurance, as member companies of FAII phrased their opposition to the idea. Ultimately in the 1948 law, the situation remained unchanged and insurance continued to be provided by private insurance companies.

FAII’s secretary was Tauno Angervuo (1943-1945), with Toivo Takki (1945) and J. V. Vakio (1945-1954) serving as representatives.

Over the course of the new decade, the rate of compensation specified in the law of 1948 was shown to be too low. This was partly due to the fact that the rates had been initially set too low, but on the other hand, high inflation rates and rises in living costs and wages had outpaced the compensation rates. Consequently, the rates were increased across the board several times during the 1950s, and the scale for permanent allowances was improved.

In 1958, the law was updated to tie the daily allowance, annuity and survivor’s pension to a fixed percentage of annual earnings. This came with the restriction that for those earning more than one million Finnish markka per year, the excess amount was not taken into account. The aim of the increases was to improve equality between annuities and pensions granted at different times.

As old pensions were ordered for reprocessing, the amounts of compensation paid increased considerably. In 1959, paid claims grew by some 700 Finnish million markka. This was offset by raising insurance premiums by 30.5 per cent at the beginning of the same year.

In 1957, another milestone was reached as the number of employees with accident insurance surpassed one million for the first time.

The decade was also marked by increased internationalisation. In 1957, FAII joined as a member of the International Social Security Association (ISS). The Federation’s representatives were Kirsti Oravisto (1954-1955) and Sven Sirén (1955-1959).

Rehabilitation has long traditions in Finland, reaching as far back as the late 19th century. As a form of compensation for injured employees, it was recognised already in the Employees Accident Insurance Act of 1948: under law, accident insurance institutions had to pay the rehabilitation of recipients of accident insurance compensation. However, the forms of rehabilitation to which recipients were entitled had not been defined.

In the early 1960s, discussion began over the organisation of rehabilitation activities, and official guidelines were drawn up in the 1963 act on the rehabilitation of recipients of accident compensation.

In addition to FAII, new rehabilitation activities were also being planned by motor and earnings-related pension insurance institutions. The decision was made to combine forces and in 1964, the newly founded Vakuutusalan Kuntouttamiskeskus (VKK) was launched as a joint project between FAII and the Motor Insurers’ Centre. The following year, the Finnish Pension Alliance TELA also joined in the collaboration.

The 1939 law on occupational diseases was reformed in 1967. In the new law, virtually all illnesses could be considered occupational diseases, provided that their principal cause was a physical, chemical or biological factor specified by the law and present in the work. The law required that a causal link must be demonstrated between the agent and the disease. The Ministry maintained an indicative list of illnesses accepted as occupational diseases.

“As a guideline for diagnosing occupational diseases, the Ministry for Social Affairs must issue a list of examples of underlying factors causing illnesses covered as occupational diseases and of the forms of the diseases, as well as of the lines of work known to pose risk of such diseases.”

After the wars, Finland industrialised at a rapid pace and efforts to improve safety at work and accidents developed quickly from the 1960s onwards. The matter was considered important and attracted broad interest. One of the great improvements of the decade was the deepening of co-operation between employees and employers as parties to accident insurance. In 1967, this led to the formation of an advisory committee serving as a body for dialogue and co-operation between parties in the labour market.

In addition, the parties in the labour market agreed in 1969 on the establishment of occupational safety and health committees.

The idea to nationalise accident insurance based on the Swedish model re-emerged in the 1960s, but in the end, no reason could be found for replacing the private system in use in Finland. Still, laws and decrees began to define the position and duties of FAII in more detail than previously.

Työväenvakuutus-lehti, the magazine published by FAII since 1928, was renamed the Tapaturmavakuutus Magazine in 1963. During the decade, the Federation’s representatives were Pertti Niemistö (1960-1961), Juhani Salminen (1961-1963) and Erkki Mänttäri (1963-1971).

Although notable workplace accidents had been investigated in the past whenever possible, systematic investigative work was begun in earnest in the 1970s. In 1971, three years after a ship fire in Turku had killed four workers, FAII set up a system to investigate accidents of a catastrophic nature.

The investigation system soon proved useful as Finland’s worst peacetime workplace accident took place on 13 April 1976 in Lapua when 40 employees were killed in an explosion at a cartridge factory.

Today, the investigation of occupational accidents is referred to by the Finnish acronym TOT. The system has contributed to a significant reduction in the number of fatal workplace accidents over the years. The investigation reports are available online in the TOTTI system.

In addition to accident investigation, FAII began collecting statistics on the level of individual damages and policies of statutory accident insurance in the early 1970s. Statistics have played an important role in monitoring the insurance stock and the development of damages and compensation. Reliable statistics have also greatly helped direct efforts to improve safety at work.

The statistics had no shortage of data as the number of reported accidents reached a peak of nearly 270,000 in 1974.

FAII’s own occupational safety department was established in 1974 with the hiring of an occupational safety manager and an occupational safety engineer.

At the start of the decade, FAII’s representative was Pentti Virtanen (1971-1972) and in 1972, Altti Aurela was appointed the first full-time Managing Director of FAII.  The following year, however, he was elected director of the Ministry of Social Affairs and Health Insurance Unit, and the former representative Virtanen was appointed as the new Managing Director (1973-1988).

A new milestone in Finnish accident insurance was reached at the end of the decade when in 1979, the number of insured employees surpassed two million.

The largest reform in accident insurance legislation since 1948 entered into force in 1982. With the reform, social security benefits became taxable income and employment accident insurance adopted a fully new principle of compensation: whilst the rates of compensation increased, they were now taxable income. The intention behind the new law was to ensure that the total income of recipients of compensation remain unchanged after taxes.

The reform meant an increase in the accident insurance premiums of employers. However, employers had opportunities to impact the amount of that share of the insurance premium used to cover the costs of accidents. This led to increased interest in improving safety at work.

The new law also emphasised the role of occupational healthcare personnel in evaluating accidents and assessing the causes of occupational diseases at workplaces.

In 1984, Finnish safety at work reached another new milestone as the number of cases of death reported to insurance companies under statutory accident insurance totalled below one hundred for the first time (89).

In 1985, the investigation of occupational accidents of a catastrophic nature launched in the previous decade was reformed to extend FAII’s investigation system to cover all fatal accidents at work.

The world’s worst industrial disaster occurred in Bhopal, India on 3 December 1984. Thousands of tons of poisonous gases leaked from a pesticide plant to the environment. Estimates of the number of fatalities range from 6,000 to 16,000, and half a million people are estimated to have been exposed to the gas.

The Federation of Accident Insurance Institutions first acquired legal status in 1988. At that time, FAII’s tasks were defined in the Employment Accidents Insurance Act. The Federation’s official duties now included the compiling of statistics on accidents at work and occupational diseases, among other tasks.

The most significant new legislative reform was in the decree on occupational diseases, however. During the 1980s, it had been noted that medical examination of suspected cases of occupational disease was not covered by the Employment Accidents Insurance Act. The law also ignored the growing number of employees suffering from asbestos poisoning.

In 1988, the law was updated to extend the coverage of occupational diseases and the costs of justified cases of suspected occupational disease. The aim was to bring all suspected cases of occupational disease within the scope of insurance cover. In this way, conditions such as tenosynovitis and epicondylitis when caused by exposure to repeated and monotonous or unfamiliar movement became covered by insurance compensation. Particular attention was also given to ensure that occupational cancers caused by asbestos were covered by insurance.

At the end of the decade, FAII was joined by a new, long-term Managing Director with the appointment of Tapani Miettinen (1988-2009).

The severe economic recession reduced the number of accidents to record lows. In 1993, the number of reported accidents at work fell below 120,000. The growing unemployment was also visible in statistics: in 1995, the number of insured employees was at its lowest since 1978.

The poor economic times put pressure on public sector finances, and at the beginning of the decade, a working group of the Ministry of Social Affairs and Health looked at the principles of accident and motor insurance compensation in terms of municipal health care. The report assessed options of switching to partial or full cost correlation. In practice, this meant that statutory accident insurance systems would pay a part of the costs of municipal health care.

Ultimately, the working group proposed that insurance systems pay an annual contribution of 330 million marks to offset the costs of treating injured employees in public health care. The insurance sector named the contribution in force between 1993-1996 as the “band-aid tax”. Of the total sum, one half was paid by accident insurance providers.

In addition to the recession, the early 1990s were marked by closer integration with Europe. Finland’s membership in first the EEA and, from 1995, the EU meant increased competition in the national insurance sector. In statutory accident insurance, competition was opened in 1999. The same year, insurance companies were free to set their own premium rates.

The 1990s also saw a restructuring of Finnish working life: after rapid industrialisation and urbanisation in the 1960s and 1970s, the importance of industry began to decline, and the workforce shifted increasingly to the service sector. The change has been reflected in a long-term decline in the number of fatal accidents at work – understandably, as the risk of accident in forestry or industrial work is three times that in service sector jobs.

In 1997, FAII saw significant changes to its operations. As the result of legislative reform, the Federation was given the role of a united centre for occupational accidents, as required by the EU Commission. In this role, the Federation was tasked with ensuring that the rights of insured persons were not weakened by European harmonisation. At the same time, the Federation had to ensure that all parties were consistent in their interpretation of the law.

Under section 64 of the Employment Accidents Insurance Act, “the Federation of Accident Insurance Institutions maintains statistics on employment accidents and occupational diseases under this Act, the Occupational Diseases Act (1343/1988), the Accident Compensation for Civil Servants Act (449/1990) and the compensation paid for them. The same applies to accidents and occupational diseases occurring in State employment for which compensation is paid out of State funds.”

FAII’s role also shifted from operating as an association to increasingly function as a central body and co-ordinator with a legal status. Compensation for damage in uninsured work was transferred from the State Treasury to FAII, as was the management of cases related to places of stay and residence, which were previously the responsibility of Pohjola. In order to carry out the new tasks, FAII set up a compensation department.

As the economy picked up, employment rates rose and along with them, the number of employees insured against accidents. At the same time, the number of accidents at work again began to rise. Between 1999 and 2008, statistics by FAII showed an increase of 20 per cent in occupational accidents.

Still, the changed economic structure, increasing digitalisation and information technology and globalisation had transformed Finnish working life: fewer and fewer people now earned a living from traditional industrial work or manual labour.

The structural changes posed new challenges for safety at work in areas such as workplace wellbeing, coping and the mental load of work. The proliferation of new, atypical forms of employment, such as temporary labour and subcontracting, also called for new practices and ways of thinking. The trend toward longer careers and aging employees was also visible in statistics, as the number of accidents involving employees over the age of 60 had doubled in a decade. Elsewhere, issues related moisture damage, problems with indoor air quality and diseases related to these were discussed increasingly often at workplaces.

The worst occupational accident in world history occurred at the very beginning of the new millennium. In 2001 in United States, nearly 3,000 people were killed in the September 11 terror attacks. The attacks caused total financial damages of about 230 to 330 billion Finnish markka. Of these, the share of accident insurance was approximately 30 billion markka. In addition to the victims of the attacks and rescue personnel and their family members, compensation was expected to be payable to Manhattan residents who inhaled asbestos released into the air when the World Trade Center towers collapsed.

The EU approved the changes made to Finnish legislation on accident insurance and ended the monitoring of the accident insurance system in 2002.

In 2005, statutory accident insurance adopted the full cost responsibility system to cover the costs of medical care. With the introduction of the full cost responsibility contribution, insurance companies began to pay the costs of treating occupational accidents and diseases in municipal health care directly to the relevant municipality or joint municipal authority. The new system meant that employees injured at work had faster and more flexible access to complicated surgeries.  

The number of accidents at work again fell after the financial crisis in 2008 and the euro crisis of the following year resulted in an economic recession. Before the crash, the number of accidents had grown every year for five years.

At the end of the decade, FAII received a new Managing Director as Jussi Kauma (2009-2017) was appointed to the position.

In the early 2010s, slow economic growth and increased unemployment were again reflected in the number of accidents at work. In 2012, statutory accident insurance covered a total of 128,264 occupational accidents suffered by employees. Of these, 105,919 took place at the workplace and 22,345 during commutes. The numbers were down from previous years as in 2008, for example, the number of covered accidents was 141,427.

For the insurance sector, the most significant change was the new Workers’ Compensation Act (TyTAL), which entered into force from the start of 2016. After a decade of preparation, the new law merged three previous laws: the Employment Accidents Insurance Act from 1948, the Occupational Diseases Act from 1988, and the Act on Rehabilitation Compensation Paid under the Employment Accidents Insurance Act, from 1991.

The aim of the reform was to not only update the law in terms of existing legal and compensation practices, but also to clarify the legislation on accident insurance that had become quite the patchwork of policies over the years. Increased clarity and transparency reduced ambiguity as well. At the same time, the compensation process became more efficient and quicker.

For the first time, the law explicitly defined what was meant by an accident. It also outlined the circumstances of occurrence of occupational accidents, what is covered and how and under what grounds.

Even so, the insurance was still not fully inclusive as it was tied specifically to gainful employment. This way, groups such as informal carers and professional athletes were excluded from cover. The accident insurance of these groups of people is governed by other legislation.

In connection with the legislative reform, the name of the Federation of Accident Insurance Institutions (FAII) was changed in 2015 to the Workers’ Compensation Center (TVK).

Publication of the printed Tapaturmavakuutus Magazine ended in 2017 when TVK introduced digital communication channels and products. That same year, the Center received a new Managing Director as Janne Reini took on the position in June.

The introduction of the real-time national Incomes Register in 2019 simplified the processing of insurance premiums based on wages and salaries and the settlement of insurance claims in earnings-related accident insurance.