Every second counts

Did you know the average age of someone buying a long term care insurance (LTCI) policy is 67? If you look at single premiums the figure pushes up into the 70s.

This is not really surprising considering a great many people have been leaving long term care protection until the last minute in the hope that more state support would be forthcoming. However, this is still a comparatively new market and public awareness is only starting to build up, so many people are not yet aware of the full extent of their financial liability.

By the time people reach their late 60s they will inevitably start to see friends or acquaintances affected by long-term medical problems. According to research by Swiss Re, one in four people will need long term care, so the question of who will provide that care becomes harder to ignore the older you get.

From an adviser's point of view, you may be thinking about long term care more in terms of retirement or inheritance planning for clients in their 50s and early 60s. As the market grows we do expect the average age of new customers to come down. But it is important to understand the issues surrounding the slightly older age group who want and need your advice on protection now.

Immediate needs

Your first request for information about LTCI products may come through a solicitor or an accountant looking for advice on an immediate needs product for an elderly client who has fallen ill. The immediate needs market has been a growing area of business and its growth illustrates how many people are leaving it until it is almost too late.

It also highlights the fact that even though the premiums are generally higher than pre-funded products and reflect the immediate need, it can still be worthwhile putting a cap on what is otherwise an open-ended financial commitment.

When older people do decide to look at long term care protection, they have concerns about how their state of health might affect their policy application for a pre-funded LTCI plan.

To help you deal with some of the questions you may get about whether or not current medical conditions will have an impact on the level of premium for a pre-funded LTCI plan, it is important to understand the main areas of concern for the underwriters. Of course, each case is looked at on its own merits, with particular reference to any impact on functional or cognitive ability. The examples shown in the tables ' from our own underwriting guide ' will give you an idea about areas of illness that lead to a policy being rated.

The underwriter acknowledges there are health changes associated with increasing age. However, an older life is more likely to attract an increased premium due to the increased occurrence of disabling conditions. It is better to take out cover at a younger age than risk paying for an additional premium at an older age.

As you can see from the tables, from an underwriting perspective the medical problems people face in later life are different from the conditions which threaten us at a younger age and to those which a critical illness (CI) policy might take into account. High blood pressure or smoking will shoot a CI premium up, but may have no effect on an LTCI policy.

Greater understanding

We understand more about the nature of some of the medical conditions which elderly people are prone to. Underwriting the lives of people showing early indications of dementia was a problem a few years ago, but we now have more reliable tools for measuring cognitive function.

Much has already been taken into account on standard premiums in the overall assessment of risk, and in our own experience only one in four cases will be rated. But as an IFA, you need to have a point of view about how you will handle this if a client of yours makes an application and is rated by the underwriters.

The elderly people you are talking to may have seen their friends' health deteriorating, but it may just as easily be their own health starting to fail. This is why you need to have some sort of discussion about their health before you start talking about the cost of LTCI products. There is no point in starting to quote standard premiums only to discover shortly after that your potential customer has a medical problem that is likely to be rated.

If you think your client is likely to be rated, do not talk about premiums until after the application has gone and the underwriters have taken a look at it.

Also, it is worth bearing in mind that a single premium might be more relevant to some rated cases so, again, if your client has explained the sort of medical problem they have, leave the discussion about premium and terms of payment until after the provider and the underwriter have had a look at the case.

There is nothing worse in any sales process than having to go back and explain that the figures you quoted first of all are too low, because you could have to start the whole process again.