Actuaries' professional body, The Actuarial Profession, has said that, if implemented, the Dilnot Report will present significant opportunities for the long term care insurance market.
Sue Elliott, chair of the Actuarial Profession's Health and Care committee said: "If individuals have to pay no more than £35,000, no matter how long their care lasts, it will help them better prepare for their future.
"This greater certainty would also allow insurance companies to design more affordable and simpler products to help individuals with their financial planning."
Dilnot suggested individuals' lifetime contributions towards social care costs should be capped at between £25,000 and £50,000. Dilnot considers £35,000 as the most appropriate and fair figure.
The UK over 65 population is expected to double by 2058, while ne in four over 65 year olds can expect to have some kind of care and support requirement in the future and the average cost of care can range from £25,000 per year for basic private provision to over £50,000 per year for high end offerings and specialised care.
The average length of stay in residential care is two years, but for self-funders the average increases to four years and for one in ten residents the length of stay is eight years.
The Actuarial Proffession noted that this problem is compounded by a change in demographics where the population is increasing faster at the older ages than at younger ages.
This change will have a significant effect on the age-dependency ratio (the number of people not in the labour force versus the number of people in the labour force). Currently this stands at 25% but by 2056 it is projected to stand at 45%, before taking into account the changes to state pension age.
Elliott added: "In terms of what products will be designed to meet the costs of an individual's care requirements and how much these might cost, it is too early to tell. It will depend on a multitude of factors including, of course, what the Government does with the recommendations.
"But if Dilnot's proposed cap becomes law, then the uncertainty which many face as they attempt to plan for their future will be significantly reduced."
The Actuarial Profession added private insurance could take many forms, such as immediate needs annuities (which are currently available), pre-funded insurance of various types, a link to pensions (e.g. disabled life annuity) and a link to housing wealth using equity release as a funding mechanism.
The immediate needs annuity market currently averages about £95 million of premium per annum. It reached its peak sales in 2004 at just over £110 million based on 1,730 policies which is significantly less than the 435,000 people in nursing or residential care where a significant amount would have been private pay.
