When a couple separates, the impact on the expenditure and income of the individuals involved is considerable. How should the risk of that separation be covered? This stimulating way of seeing things reflects a change in mentalities concerning separations. Divorce and other forms of separation have become commonplace, and this trend has been accompanied by major changes in civil law, with the divorce reforms of 1975 and 2004 and the acts of 1970, 1993 and 2002 on parental authority. The object of the decisions handed down by family judges has thus shifted from the search for the cause of and “responsibility” (“fault”) for the separation to the question of how to sort out the consequences and organize the lives of individuals – parents and children – in the aftermath. This change in viewpoint is also to be found in sociological and economic research (Bonnet et al., 2015; Lambert, 2009).
Two ways of protecting against the negative financial consequences of separation can be envisaged: either leaving households to handle the separation as they see fit, or promoting public intervention.
Separation of unmarried parents is now more common than divorce
The article mainly examines divorce, for which the range of legal provisions is most extensive, and makes numerous references to alimony or “compensatory allowance” (prestation compensatoire). Yet separations of unmarried parents are now more frequent than divorces of parents with children (High Family Council, 2014), the context of the former being much less “protected” than that of the latter. In particular, fewer formal guidelines exist for transfers between couples in a consensual union or civil partnership than for those between divorcing spouses.
When couples are formed (or at any other moment in their existence), the rules on the management of the partners’ assets and their division in the event of a separation can be organized under a marriage or civil partnership contract. The rules can provide for the specific protection of one of the partners (as with the “regime dotal” system of dowry management still common in some countries). In several countries, the share of “specific” marriage contracts is increasing at the expense of the default community of property regime – of somewhat unsophisticated design – covering the assets acquired during the marriage (Frémeaux and Leturcq, 2013). A recorded or certified agreement between partners is also possible, though much less widespread.
After a separation, “compensatory allowance” exists for married couples only. Where children are involved, court hearings to set child support payments are mandatory for divorcing spouses only. This raises the question of the creation of “parenting compensatory allowance”, which would be open to unmarried parents (Boisson and Wisnia-Weill, 2012) and have a narrower scope than “compensatory allowance”, whose level is determined using a wide range of criteria, each one constituting a reason or justification. “Parenting compensatory allowance” would be designed to offset losses in income following separation and attenuate differences in the parents’ situations resulting from the asymmetric investment in parenting, notably by recognizing each partner’s parenting time, which is often invisible. It could be awarded to unmarried couples with long-term unions and shared children. It could be seen as temporary assistance for returning to work if the financial consequences of the separation are considered reversible for the parent having consented to the greater parenting investment, or take a more consequential form for losses seen as lasting.
Has separation become an “insurable risk”?
Recourse to private insurance is also possible, either as a supplement or an alternative. But designing an insurance policy poses formidable problems. First of all, who signs the policy? The couple or a member of the couple seeking to protect themselves against the risks involved in a conflictual or penalizing separation? Secondly, which risks are insurable? It is technically possible to include coverage of the costs of separation proceedings in a legal protection policy. Covering the costs of the proceedings involved in recovering unpaid child support is more complex, as the risk extends over several years and is difficult to foresee. Coverage for unpaid child support itself is an even more difficult matter, the amounts involved being potentially substantial and the risk once again extending over a long period. Paradoxically, guarding against the risk of falling into poverty after a separation is perhaps easier to envisage. The insurance policy could be aligned with the criteria used in France for setting “compensatory allowance” and take the form of a lump-sum payment or an annuity.
The third delicate point is the level of the premiums determined by the insurer. The high frequency of separation will lead to high premiums, and it is hardly feasible to mutualize risks among households. Fourth, defining rules that take account of moral hazard and adverse selection
In insurance theory, moral hazard is the risk linked... is difficult because this is a human issue and separations and their consequences are considered in part to be attributable to behaviour (and not an exogenous inevitability, despite their statistical regularity). What kind of autonomy should be left to insurers in determining premiums based on the policyholders’ risk profile? Recent developments in suicide insurance have raised similar questions and shown how difficult it can be to assemble an insurance policy. Yet suicide is a risk with a much lower rate of occurrence and for which forward planning makes little sense. In the end, the principle of coverage has been accepted, with a waiting period (generally one year) and capping mechanisms, and with a principle of preference for guarantees on home mortgages
Article L. 132-7 of the French Insurance Code. (Courtieu, 2002; Kullmann, 2002).
The last problem concerns the situation of uninsured households. We can leave them to the hazards of life post-separation or help to insure those who, given their income, are unlikely to obtain insurance.
Methods of “protecting” against the negative consequences of divorce based on transfers between former spouses are available only to couples with substantial wealth or income or if the husband (in general, the wife more rarely) is solvent at the time of the divorce. These coverage methods are uncertain and rather inegalitarian, as is the use of voluntary insurance. State intervention to support the standard of living of families after separation is thus indispensable.
The state plays a multiple role in supporting divorcing or separating parents
While the choices of parents should be respected, the state intervenes in at least three respects, ensuring its tutelary and judicial functions as well as its function of financial and social protection.
The state plays a tutelary role by determining the principles to be respected by the parties and the procedures for their implementation. This applies to decisions on child support and “compensatory allowance” payments, with the state ensuring that the child’s interests are respected and that none of the parties are disadvantaged. To help judges in their work and foster agreement between parents, it distributes decision-making tools such as (guideline) scales, developed by the ministry of justice, for setting the amount of child support.
The High Family Council report suggests ways of improving... It also provides the receiving parent with the relevant tools for recovering unpaid amounts of child support. It could define public policy rules for separation insurance policies, as it did for “responsible contracts” in supplemental health insurance.
The state also plays a judicial function, with 250,000 civil proceedings, whether for initial decisions or revisions, and 5,000 criminal proceedings, in all likelihood the most painful.
Lastly, the state has a function of financial and social protection. As parents become poorer after a separation, the state is required to introduce benefits that partly offset that impoverishment, for those with the most modest incomes at least. This is the case in France. Lone parents have been able to qualify for benefits since the creation of the lone-parent benefit (Allocation de parent isolé) in 1976, as lone parenting is considered to generate particular difficulties. The main welfare schemes are “family support allowance” (Allocation de soutien familial, subsidiary to a maintenance obligation, however), lower taxation for lone parents (approved in all cases) and increased RSA (Revenu de solidarité active) welfare benefit. Lone-parent families also have higher ceilings for some benefits, and the income of the ex-spouse is “neutralized” when calculating the income basis on which the right to benefits is reviewed. However, our system takes poor account of the parents who do not have primary custody of the child (with the exception of the possibility of sharing child support in cases of alternate residence and the guidelines for setting child support payments where the type of “right of visit and accommodation” is taken into account). To favour co-parenting and bonding between the child and the parent without primary custody, the High Family Council has also proposed that custody of the child be taken into account when calculating the housing benefit of the parent exercising his or her “right of visit and accommodation”.
There are also “general” family allowances, to which lone parents, often on low incomes, are generally entitled (even including means-tested allowances). Likewise, lone-parent households, more affected by poverty, are often recipients of minimum welfare payments, such as the RSA, the last safety net of our welfare protection system. The “guarantee against unpaid child support” (Garantie des impayés de pension alimentaire), generalized on 1 April 2016, can also be seen as a guarantee of income – corresponding to the amount of “family support allowance (ASF, roughly €100 per month per child) – for lone parents receiving a low level of child support.
The public authorities also support families by providing them with services, often at below-cost prices. These include child-care places for young children, which can contribute both to the ex ante coverage of divorce risk, by improving the work-life balance, and ex post support when lone-parent families take priority in the allocation of places.
The differential impact of separation on women and men
The loss of economies of scale following separation is not reducible. It is the counterpart of the economies of scale made possible by forming (or reforming) a couple. However, action can be taken on asymmetries in different areas (occupational and domestic: the asymmetry of income, employability, child care, etc.) that (understandably) appear to be the main factor behind the high costs following separation or divorce and the fact that women generally find themselves in more difficult situations than men. Some of the measures to guard against financial losses following divorce or separation – such as remaining in the job market and dividing parenting tasks more equally – can be taken ahead of the separation, while still living as a couple.
The coverage of divorce risk (through “compensatory allowance” or another means) poses a dilemma concerning the potentially perverse effect of ex post protection against the risk of income loss relating to specialization in the couple: might the existence of such protection actually serve to maintain such a situation? This seems highly unlikely in the case of “compensatory allowance”, which does not appear to play a major role in the organizational choices of couples, but the question might arise with a better known and more predictable insurance system.
In the article, the way in which specialization within the couple should be viewed remains ambiguous. Is specialization “optimal” or rather a major source of difficulties after separation? The scope and time frame associated with each of these cases are probably different, casting doubt upon the supposed “rationality” of the choices made by the partners in a couple.
The article mainly deals with the financial consequences of divorce or separation, principally for mothers. The negative impact for fathers lies elsewhere, in the risk of losing contact with the children (Régnier-Loilier, 2013).
The impact of separation on men and women – who are affected differently – is an important question. But it is also useful to examine the situation of children. Apart from the economic impact on children, there are few studies based on French data that analyse the effects of parental separation from the child’s viewpoint.