The special insurance coverage in industrial accident insurance has expanded rapidly in recent years along with an increase in freelancers
The Industrial Accident Compensation Insurance Act (“Industrial Accident Insurance Act”) is a law that is compulsorily applied to all businesses that employ employees, with the exception of civil servants and mariners who have their own compensation systems for industrial accidents and sole proprietorships in the agriculture, forestry and fisheries industries that employ fewer than five workers.
In government-administered industrial accident insurance, the insurance relationship is established on the day when the business starts, and the employer is obliged to pay the insurance premiums. When an insured accident occurs, the victims and surviving family members have the right to claim proceeds. If they are certified by a Labor Standard Inspection Office, in principle, they can receive proceeds such as medical treatment compensation from industrial accident insurance at no cost. However, if they are not employees (or surviving family members), that is, persons who work under the direction of a company (in other words, under a relationship of employment and subordination with the company), they cannot basically receive proceeds from industrial accident insurance.
In Japan, social security for the self-employed is also being improved. For example, the National Pension and National Health Insurance (NHI) were originally created for the self-employed. If a self-employed who is not covered by industrial accident insurance gets injured at work, he/she will basically receive proceeds from NHI.
Self-employed people enroll in NHI on their own. Although NHI excludes those who enroll in employees’ insurance from application, those who are domiciled are all obliged to enroll. Therefore, self-employed who do not enroll in employees’ insurance must enroll in NHI.
On the other hand, the Industrial Accident Insurance Act provides “special insurance coverage” for the self-employed who work in a manner similar to that of workers to voluntarily enroll in the insurance program by paying the insurance premiums themselves. The Special Insurance Coverage Scheme was established in 1965. Each person chooses the amount of insurance premium that seems to be appropriate for the risk. Small and medium-sized business operators, family workers, independent contractors, workers engaged in specified work, and workers dispatched overseas are eligible. Except for employees dispatched overseas, enrollment must in principle be done through an organization such as a labor insurance administration association.
While small and medium-sized business operators of any industry can enroll, independent contractors of only seven businesses (private taxi operators / private freight forwarders, contractors in the construction industry, self-employed fishermen on fishing boats, contractors in the forestry industry, drug distributors, recyclable resource handlers, and mariners) have been recognized as eligible for a long time.
In addition, “workers engaged in specified work” covered the following seven types, which are self-employed engaged in particularly dangerous or harmful businesses and those whose actual business conditions justify protection equivalent to that of workers: workers engaged in specified agricultural work, workers engaged in designated agricultural machinery work, persons undergoing workplace adaptation training, or training commissioned by employers’ organizations, domestic workers, full-time officers of labor unions, and long-term care workers.
However, in response to social changes and requests from related parties, since April 2021, the Special Insurance Coverage Scheme has added businesses conducted by judo therapists, businesses based on measures such as start-up support under the Act on Employment Security of Elderly Persons, businesses conducted by practitioners of massage, finger pressure, acupuncture or moxacauterization, businesses conducted by dental technicians, entertainment workers, animation production workers, and IT freelancers. (Since September 2021, those who use bicycles to transport cargo have been added to private taxi operators / private freight forwarders.)
Furthermore, in line with the Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operators, or the Freelance Law, which came into force in November 2024, any freelancer who is entrusted with business by a company or other organization is eligible to the special insurance coverage.
Paying insurance premiums for employees, once considered a corporate responsibility, is increasingly being avoided
Today, the term self-employed is no longer limited to those engaged in agriculture, forestry, and fisheries (so to speak, “old types of self-employed”), which were once considered typical examples. If companies start to turn employees who should have been hired into non- employees for reasons such as cost reduction, we will have to think anew about how to protect the “new types of self-employed” who are increasing in number accordingly.
It may indeed be desirable to extend the coverage of industrial accident insurance to the self-employed by using the Special Insurance Coverage Scheme. However, under this scheme, the self-employed themselves bear the insurance premium. Ms. Mari Hirata of the Freelance Association Japan pointed out as a witness in the Diet session in February 2021 that the Special Insurance Coverage Scheme requires self-employed to pay the full insurance premium, including the portion that would be borne by a company for its employees, which increases their burden.
The Special Insurance Coverage Scheme is similar to a contract insurance in that you choose your own insurance premiums and declare the scope of work. This means that for special insurance coverage, the proceeds will not be paid for the part of the work that the person did not declare. It is partly to prevent fraud, but the conditions of the proceeds will be very strict.
By the way, in the statutory accident insurance of Germany, which served as a reference for establishing Japan’s social insurance system, compulsory insurance covers “persons who engaged in work,” which has a broader definition than “employees,” and its coverage has been extended to those who require the same level of protection. This resulted in vocational trainees and certain volunteers being covered by compulsory insurance, which is different from Japan. When one thinks about it, Japanese industrial accident insurance separates the self-employed from employees, and the self-employed who are equivalent to employees are made to enroll voluntarily through the Special Insurance Coverage Scheme. So, is this scheme, which appears to be protecting them at their own insurance premium expense, really appropriate?
It remains open whether the voluntary and self-paid Special Insurance Coverage Scheme is appropriate
I have mentioned the new types of self-employed, which could include people working in the media, cultural or creative industries, as well as in the transport sector or construction. It is possible to go back and forth between being self-employed in some cases and being an employee in other cases.
Of course, the self-employed who are highly sought after may be on an equal footing with companies, but the reality is that many of the new types of self-employed are forced to replace former employees at a lower cost.
By their nature, employees are people who work in a subordinate way and cannot take time off easily even if they wants to. Therefore, the Labor Standards Act intended to make employers liable for compensation if an accident occurs, and the concept of the Industrial Accident Insurance Act is to cover the financial resources with insurance premiums from capitalists (employers).
The Special Insurance Coverage Scheme has been viewed positively as a step forward in moving industrial accident insurance from labor insurance to social security, in the sense that it allows self-employed who are not employees to enroll even if voluntarily. Certainly, it makes sense that people who can manage their own risks, like the old types of self-employed, would enroll in the necessary insurance against injury from using dangerous farm equipment. However, if you are a new type of self-employed, such as an independent delivery contractor, you may be working tirelessly in dangerous, rainy weather for more profit without considering the risks. In fact, there is a case where a delivery staff (sole proprietor) working for an online retailer received an industrial accident certification from the Labor Standards Inspection Office when he was injured during a delivery.
The more we expand the Special Insurance Coverage Scheme, the more people will have to settle for having to pay for their own risk through voluntary enrollment. Is it acceptable to call this expansion a progress in social security and be happy about it?
The Ministry of Health, Labour and Welfare (MHLW) will amend the Industrial Safety and Health Act to require companies that outsource work to report accidents in order to prevent industrial accidents of freelancers and other sole proprietors. But is that sufficient when considering the work styles of the new types of self-employed? I mentioned earlier that group enrollment is the norm for special insurance coverage, but in the near future there may be an option to allow individual enrollment in order to promote this scheme. Recently, I have heard reports that the MHLW has begun a study to review the criteria for determining employee status. I believe that it is time to seek a solution that does not simply resort to the Special Insurance Coverage Scheme, and that mainline industrial accident insurance should cover the work styles with a risk no different from employees rather than equivalent to employees, depending on the degree of subordination.
* The information contained herein is current as of February 2025.
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