Leaving aside the politics, can private insurance help to solve the problem of looking after the elderly? Jason Hurley puts the case.
We are not politicians: we design and market insurance products. Politicians should cover the questions of social justice and fairness, which could translate into the size of caps and thresholds; inheritance tax policy and similar issues. Working on the assumption that the government wants to encourage people to make their own provision, all that the insurance industry should need to ask from the government is:
- Stability of regulation and cross-party support, so that we can plan and develop products and services that will work in the long term.
- An incentive to save. This means tax incentives and other tangible benefits to encourage saving in the first place. This also means that we remove any disincentives (for example, the state providing nothing if you have assets in excess of a particular threshold).
There are major challenges as to whether people will buy, or whether insurers will sell, these products, but it is fair to say that until the above points are agreed to, we will be wasting our time. But what would the right products be? We all recognise that people will have different financial positions and different needs.
Not everyone will need care, and when we look at people based on their financial position it is useful to segment the market based on combinations of net asset wealth and current and projected income. It is helpful to consider both the pre- and post-retirement population cohorts separately, because in the latter, the potential for asset accumulation is limited. We now consider each group in turn.
On the bread line: No assets, no income
Some people have neither assets nor income. They live from week to week on a low level of income. For a modern society, there is realistically no alternative to a basic offering from the state: a combination of care and health services. These people do not have the funds to buy private-sector products, and are likely to be unattractive to insurance companies.
