The challenge for the LTC industry was laid down by Alan Milburn, secretary of state for health, wh...
The challenge for the LTC industry was laid down by Alan Milburn, secretary of state for health, when he said the Government intended to explore in collaboration with the financial services industry how it could best design long term care insurance products, to see if they could be made attractive to a wider audience.
The key phrase here is 'more attractive.' It is well known that long term care insurance (LTCI) has struggled to establish a strong foothold in financial services planning, and clearly the Government is suggesting that it should be more widely considered. The prime motivation for Government wishing these plans to become more attractive has to be that more of the population will protect themselves, with confidence, against the risk of having to fund their own care in later life. Insurance will therefore reduce the risk that some elderly people will have to return to the State for support because their own resources have run dry.
CAT standards in LTCI will go a long way to providing reassurance to an uncertain public that there is merit in the insurance philosophy. For almost a decade, the more common consumer attitude to long term care insurance has been that it may be a worthwhile consideration, but not until the Government clarifies what it is prepared to do in terms of State support. Furthermore, the mere existence of CAT standards will go a long way in educating the public on what LTC planning is all about. The proposed standards are not restricted to a prescriptive list of features which have to be made known at the point of sale. There are real actions called for in terms of how customers should be treated when a claim is being handled. There are also numerous questions which the public will be encouraged to ask their advisers. These are to ensure that consumers buy with confidence, but they will also provide real discussion opportunities during the advice provision process from the adviser's point of view.
The whole premise of the CAT standard process is that the consumer will be well informed before making a buying decision. Government participation in that process will strongly reinforce the role of the financial adviser in this market. There is absolutely no suggestion that CAT standards are there to circumvent the need for professional advice. Insurers will be swift to ensure that their plans will match or surpass the CAT standard requirements, but more importantly, the arrival of the CAT will be signify the arrival of LTCI in the mainstream market of financial planning. The public will finally have clarity on what might be paid for by the State, and what will not. The rules will be clear and well publicised. Reliable, endorsed products will complement that setting.
The Treasury's committee, had the primary mission of defining financial products that offered reliable, efficient and effective means of saving for long term care costs. Perhaps saving was not quite the right word, as the real function of these products is to protect people from financial loss and to protect their savings. However, that apart, the proposed CAT standards will undoubtedly pave the way for financial advisers to approach LTC with fresh confidence.
