Critical illness and income protection are not to be regulated alongside LTC
The long term care market has welcomed the Treasury's decision to regulate LTC. However, there is an element of concern that the Government has chosen not to regulate critical illness (CI) and income protection (IP).
Geoff Brown, managing director at BUPA Health Assurance, said: 'BUPA is disappointed the Treasury did not extend its announcement to critical illness and income protection schemes. These products should fall under the same regulatory framework as long-term care insurance.'
This is unlikely to happen in the near future, according to the Treasury.
Liane Farrer, spokesperson for the Treasury, said: 'We looked at whether to regulate just LTC or to do it as a wider package, but LTC is different to CI and IP in terms of how it needs to be regulated, so we decided just to regulate LTC.'
However, the regulation of LTC has been welcomed by providers who hope it will boost confidence in this relatively new market.
While the LTC market has welcomed the Treasury's decision to regulate LTC, Brown said: 'Long term care insurance is complex so providers need to ensure customers fully understand the product and cover they are buying. Regulation will improve protection of the customers interests and can only be welcomed.'
Paul Bennett, marketing manager at Lifetime Care, agreed: 'The complexity of the advice that is often necessary with LTCI products makes it crucial they are sold by regulated individuals,' he said
Commenting on the decision, Ruth Kelly, economic secretary to the Treasury, said: 'Long term care insurance can be expensive and tends to be sold to people at the same time as wider financial planning for the last few years of a person's life. We think consumers need protection when making critical decisions at this point in their lives.
'By asking the Financial Services Authority (FSA) to regulate the sale and marketing of long term care insurance, we hope to protect consumers and allow the market to develop within that regulatory environment,' she added.
Graham Fidoe, chairman of the LTC IFA organisation, IFACare, believes the announcement may not only spur insurers to join the LTC market, but will also provide a benchmark for advisers to work against.
He said: 'We believe full regulation by the FSA will lead to greater confidence in this fledgling market. Since free nursing care in nursing homes was introduced, the cost of care in old age will be reduced for many. Independent advice is more important than ever if people are to make the right decisions.'
BUPA has welcomed this aspect of the decision and has issued documents explaining how the changes will affect benefits and cover.
