Care for the elderly and disabled at home is currently enjoying a high political profile. Given the Governments concerns in this area, do you see this sector becoming mainstream for the protection and health insurance industries, rather than its current niche status?
Peter Barnett, policy adviser to Baroness Greengross, House of Lords
No, I do not see the long-term care (LTC) sector becoming mainstream, but let me qualify that – I do not see any significant growth occurring in the market for pre-funded LTC insurance products (LTCI), which is a very different proposition to the clear and present need for insurance to play a key role in improved planning and management of the funding of lifestyle, health, and particularly care, in old age.
A combination of low consumer interest and awareness, complicated products and conflict with means tested state benefits has rendered the LTCI market virtually moribund in the UK, unlike parts of Europe and the USA. Therefore this is not a currently feasible solution for those people who, despite having sizeable savings and pension incomes and because their property value and income are means tested, cannot manage the £1,000 a week required for self-funded care for very long – and in cases of dementia it could be a long time. They are instead obliged to trade down property assets, or buy other financial products, like an Immediate-need Annuity, possibly as a crisis-purchase and at the wrong stage – as now – in the economic cycle.
The Personal Care Bill (PCB) is intended to be the first step towards establishing a new National Care Service (NCS) and will provide those with the greatest care needs free personal care at home.
In its current format it will impose enormous financial responsibilities upon Local Authorities (LAs) and many are of the view that these costs are severely underestimated. It could throw up a complex mix of perverse financial incentive, firstly for individuals against entering more appropriate residential care, because domiciliary care, though possibly less appropriate, is ‘free’. And secondly for LAs, the complete opposite, a perverse incentive to avoid funding domiciliary care by pushing people into lower cost block-sourced residential care which the individual may instead have to self-fund.
Earlier versions of the plans included the possibility of an insurance option, but this seems to have fallen off the radar. But some members of both Houses of Parliament, critical of the haste with which the PCB is being pushed through, see this form of risk-pooling as ‘the only credible basis of reform’.
What is needed is a consensus amongst policy maker, opinion formers and the industry as to both explaining the options and defining the best way forward with LTC.
We have to grapple with the fact that there are too many other financial issues for most working age consumers to worry about for them to give LTC funding high priority, and in the short term the present economic environment will only make that worse. All of the funding options represent different mixtures of funding – general taxation, specific taxation social insurance, individual user charges and insurance. Most are not mutually exclusive, and the selection of which options to pursue will involve delicate balancing of political, economic and administrative criteria.
If all these issues were brought together in a co-ordinated programme of policy and practice and presented to policy makers, opinion formers and the media then a good start would have been made in developing that safe and secure market in which LTC products could thrive and prosper to the benefit of all parties – Government, insurers and individuals.
Dale Tranter, Personal Assurance Services
Care for the elderly will certainly feature on the election agenda, with both main parties doubtless keen to sound as generous as possible while remaining coy about exactly how their plans will be funded. (However much discussion takes place about care networks, frameworks etc, the fundamental problem here is lack of money). Demographics suggest the LTCI market should be bigger, although the same was true 10 years ago and most of the products around then have long since been withdrawn due to a lack of sales. Obviously while LTCI sales remain low there will remain an understandable reluctance on the part of advisers to study for and acquire CF8 because the rewards on the end of it are so low.
LTCI premiums should be given tax relief, which would encourage people to take out policies that would pay for whatever care they needed. (Whatever your care requirements, if you have money to pay for the solution privately the problem can be solved). Fortunately, such policies are already available – from Partnership Assurance, or Universal Provident’s own Living Care. Where people cannot afford a private solution, means-tested public funding can chip in; or, if it is to be funded explicitly and not out of general taxation, by something such as the controversial ‘death tax’.
If incentives were given for the private solution, interest in – and income from – the sector would surge, more advisers would become interested in it and the sector would move more into the mainstream, where it belongs.
Ian Sissons, Munich Health
The delivery and financing of care needs for the elderly does currently have a high political profile but the underlying issues have not changed and a viable insurance market is still some way off.
The challenges are created by the demographic trends. High birth rates in the period from 1950 to 1965, improved longevity, and low birth rates from the mid 1970s result in both an increasing proportion of the population at higher ages and a reduction in the ratio of the young working population to the elderly population. It is the existing population that is ageing so barring any major disease or mortality shocks, the demographic impact is clear and measurable.
On demographic grounds alone the effect of the ageing population indicates that there is great scope for a viable long-term care insurance market to evolve. The current political focus on the subject paradoxically acts as a disincentive to new initiatives from the insurance industry. There is no political consensus over the extent to which the provision of services and costs of care for the elderly should be met by either the public or private sectors. The recent Green Paper outlined a range of options rather than a single preferred approach. The matter may remain unresolved for some time and many organisations continue to seek to influence future decision makers with alternative funding approaches.
Demographic trends mean that ultimately there should be a mainstream long-term care insurance market but it’s unlikely to come about for some time yet.
