On 21 May the Government launched a debate on the future of care and support. The case for change - ...
On 21 May the Government launched a debate on the future of care and support. The case for change - why England needs a new care and support system details the Government's concerns. Firstly, the UK has an ageing population. In the next 20 years the number of people over 85 in England will double, the number over 100 will quadruple and the ratio of people aged 65 and over to those aged 20 to 64 is projected to increase from 27% to 48% by 2050. A total of 1.7 million more people will need care and support in 20 years' time. Secondly, it has recognised the current system cannot cope with this, resulting in a £6bn funding gap in social care.
Families, individuals and the Government currently pay for care and support and the long-term challenge is to create a sustainable settlement. The report mentions private insurance as part of this but highlights the UK's small product offering and little take-up in the US despite encouragement from many states. Nevertheless, it raises the possibility of Government support from providing information to insisting on compulsory provision.
The Government is right to seek lessons from abroad. The UK voluntary private pre-funded insurance market is virtually stagnant and cannot provide a basis for meeting the funding needs of a significant percentage of the population. In 2004, the Cass Business School published an international comparison of long term care funding. The need for increased taxation, regardless of the system, was a key finding. The only realistic choice to meet the needs of the population was between a tax-based system as in Sweden with top-ups from individuals - similar to where the UK is now - and a compulsory insurance system as seen in Japan. The Japanese system is financed 50% from taxes and 50% from insurance premiums collected from people aged 40 years and over and is administered by local authorities rather than insurers. Most people in the UK are likely to see this as a taxation solution similar to the situation in Scotland but the Government has made it clear it does not see this as a model.
This has little affect on the insurance industry for the time being but if State entitlements are clearer and the Government encourages take-up, the market may experience a revival. My plea to the industry if this happens is to guarantee new products meet customer needs. We would not want a return to the long term care bond debacle or high levels of declined claims.
Richard Walsh is managing director of SPPR Consulting.
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