Care for the elderly and disabled at home are currently enjoying a high political profile.
Peter Barnett, policy adviser to Baroness Greengross, addresses the question of whether the long term care (LTC) sector can become mainstream for the protection and health insurance industries.
"No, I do not see the 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 the 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 this is therefore 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 £1000 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.
The Government say the PCB is the first step in an ongoing reform process which will be fully revealed in late March.
The PCB in its current format will impose enormous financial responsibilities upon Local Authorities (LAs) and many are of the view that these costs are severely underestimated.
This bill 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 current Government's plans included the possibility of an insurance option but this seems to have fallen off the radar somewhat.
But some members of both Houses of Parliament, critical of the haste with which the PCB is being pushed through Parliament, see this form of risk-pooling as ‘the only credible basis of reform'.
These ‘sales' will of course require some formal advice and who pays for that advice, and the administration and regulatory costs, is however another question entirely.
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, and there are regulatory road-blocks around the sale of LTCI that need to be resolved.
I would argue that in the context of TCF and consumer protection, any well run client fact-find should set LTCI and immediate-need annuities in the context of other protection products, firstly at working age, possibly through Group Schemes, and then in retirement.
With potentially equity release, pension and inheritance tax planning also being in the mix this would seem to be a sustainable, simple and fair way to ring-fence and manage the financial, morbidity and longevity risks and at the same time provide the mix of products and services that the growing numbers of older people require to provide them with the means to protect their lifestyles, health and estate in old age.
This may mean providers having to forge novel partnerships with organisations and agencies strange to Insurers, such as LAs whose predicaments were highlighted above, and even care providers.
At the same time to improve levels of consumer confidence and protection a cadre of accredited advisers needs to emerge.
It is hoped that the Society of Later Life Advisers' (SOLLA) membership, whose members specialise in the financial needs of older people, will be seen as the gold standard for best practice in financial advice in older age.
In conclusion 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-coordinated 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."
Peter Barnett.
As well as being Policy Adviser to Baroness Greengross, Peter is an Advisory Board member of the Society of Later Life Advisers (SOLLA) and Chair of the continuing Care Conference (CCC)
