As an IFA, we fully endorse the conclusion of HM Treasury's Committee on long term care insurance (L...
As an IFA, we fully endorse the conclusion of HM Treasury's Committee on long term care insurance (LTCI) products that CAT standards be set for LTCI products. Funding will remain an issue for long term care (LTC) and products must adjust to this uncertainty and either complement State provision, or assist those seeking independent provision. With this in mind, what further considerations should there be in the proposed CAT standards to protect the consumer? The community proposes, benefits should be payable for life. The Inland Revenue would need to be consulted on this and in order to benefit from tax free status the Inland Revenue will insist that some immediate care plans have benefits suspended, for example, if the claimant were to enter hospital or the NHS were to begin funding the care.
Attention must also be paid to whether benefits are fixed or increasing. It is well known that care costs generally increase more rapidly than inflation so fixed level cover should not be an option. The average buyer of LTC is aged 68, and so it could be 20 years before a claim is made by which time inflation will have eroded the value of the benefit.
Then there must be a complaints procedure. A policy could come to claim 20 years after being sold, by which time the adviser may no longer be around. The Treasury report indicates that there has, to date, been no evidence of mis-selling. This is not true. We have seen a number of individuals in claim who have been sold policies only replacing entitlement to State provision pound for pound and no other benefit. To prevent problems arising advisers must keep policyholders up to date on changes to State provision to ensure cover remains sufficient.
Once a plan is in claim or an immediate need plan is set up, it is unlikely that the client or their family will require annual visits. It is important, however, to review their affairs at least annually. This will ensure that the income being derived from the plans is adequate to meet care costs that could increase with dependency and to make timely claims for any State assistance or increase in benefits.
The need for care often arises when least expected. It is at this crucial time families need the support LTCI offers. Although most policies have a benefit waiting period of 13 weeks this is too long a period for determining eligibility to a claim. It would not be unreasonable to expect such a decision within 14 days and immediate access to care support services.
Attention must also be paid to activities of daily living (ADLs). There needs to be an industry standard and the consumer must be aware of how these complement State eligibility criteria. Policies should state how soon the assessment of ADLs will take place and how soon eligibility to claims based on that assessment will be admitted. Early intervention on the failure of one ADL could offer policyholders an invaluable service when its needed, even if it was a service paid for outside the benefits.
Full information also needs to be provided on what one can expect if premiums cease to be paid and should encompass benefits and entitlement to lump sums for home adaptations and disability aids. Advisers should consider the consumer's ability to afford the premiums over the long term as income may reduce dramatically.
In conclusion, CAT standards are designed to provide the consumer with the confidence to purchase a product they may have to draw upon at perhaps the most vulnerable time of their life. If this is to be achieved, it must be done in a transparent way, enabling the consumer to fully understand the benefits of long term care insurance. Not just the cash, but the control and support that comes with that benefit.
