Leaving aside the politics, can private insurance help to solve the problem of looking after the elderly? Jason Hurley puts the case.
This is not a small group. The Office for National Statistics (ONS) suggests that the poorest 25% of single households where the person is older than the State Pension Age (SPA) have less than £43,000. Many of them are unlikely to make a significant contribution to their care costs if they are needed. What is more troubling is that 4.9% of those over 65 have less than £12,500. Of those approaching retirement aged 55 to 64, currently 4% have less than £12,500, and they do not have long to accumulate assets if they are looking to retire at the SPA.
Limited income and no assets
For those with some disposable income, there may be demand for cheap health insurance offering limited cash benefits. We have seen significant sales of funeral plans, and some sales of hospital cash plans, but can we see policies offering a small lump sum and modest income on diagnosis of a specified critical illness (such as Alzheimer’s), or on failing a certain number of ‘Activities of Daily Living’ definitions?
Assets but no income
These people will have some assets, and have typically having bought a house and paid off the mortgage, but they have insufficient income from their private and state pension. The government’s proposed initiative to effectively offer loans to be paid on death may damage the traditional equity release market, although another view is that it could spur the market on as people are forced to liquidate their house on death and their aspirations of being able to offer their house as a legacy fades away. The message here would be very simple: “Please, can we sort out the regulation of equity release products?”
We are in the land of ‘unintended consequences’, where well-intended, high-minded regulation may not be in the consumer’s best interest. On the one hand, we are potentially talking about the elderly: vulnerable people, to whom the mis-selling risk is high.
Maybe rightly, we should build in high levels of compliance, which will either lead to fewer advisers offering the product and/or high costs, which will be passed on to the consumer. The government’s proposals to develop information services to direct customers is certainly something to endorse, but it is almost surprising to see all of these public-sector solutions in a place where the private sector could offer a solution.
