Regulating the LTCI market is welcome, but it may not kickstart the market into action, says Peter Elliott
The Government's announcements on the type and level of care to be provided by the State have certainly brought some clarity to the issue. But if we are to ask whether these developments have made it easier for product providers and advisers, then the answer must be no.
To see why, we simply need to look at the different situations applying throughout the UK. England offers free nursing care payable at three bands from October 2001. The complication for long term care insurance (LTCI) providers and advisers is that it will not be known in advance which level of care a person will receive. Northern Ireland will give free nursing care sometime after April 2002. In addition a working party has been set up to look at the implications of introducing free personal care. In Scotland free nursing care at a flat rate plus personal care at a variable rate will be available from April 2002. Personal care includes the provision of non-medical services which involve close personal contact and touching, but is also extended to cover psychological support and counselling. Wales will also have free nursing care at a flat rate from April 2002.
There are factors within each of these regions which mean that a generic product or advice is not possible. For example, according to Laing and Buisson, there is a North of England/Home Counties variation of around £8,320 pa for single occupancy in a nursing home. There is also large variation in bed capacity between different regions ' what if your client were to up sticks and move to another region? The issue of insuring care provision is still far from clear.
What is clear is that there will be no big State 'give away' and many elderly people will have to rely on their own resources to fund long term care needs. Unfortunately many do not realise this, and the recent announcements did little to drive home the need for individual protection in old age, nor what is not covered. Let us take Alzheimer's disease as an example. The Alzheimer's Society states there are 700,000 people with dementia in the UK. Dementia affects one in 20 over the age of 65 and one in five over the age of 80. Three-quarters of residents in long term care have dementia. Symptoms may include: failure to recognise close relatives; inability to walk, wash, dress or feed themselves; difficulty in understanding what is said or happening around them and; gradual loss of speech.
Yet under the current proposals, such a sufferer in a care home in England will receive no State assistance, as they do not require services provided by a registered nurse. Until the public is made aware of such realities, it is hard to envisage a rush to buy LTCI products.
On announcing the regulation of LTCI, the Government said the move was to give consumers greater protection. While regulation may lead to increased consumer protection and therefore increase confidence it is unlikely to have a significant impact on the number of policies sold and if not handled carefully, could even have a detrimental effect.
There is no evidence of consumer detriment in the LTCI market. This is a small market and there needs to be scope for innovation and competition among providers if products are to be made attractive to a wider audience. It also goes without saying that the additional costs will in turn lead to higher premiums for the customer. It is essential that the costs do not make premiums unaffordable for potential customers or form barriers to entry into the market for providers. We welcome the current activity being seen in this area, but it is unlikely these changes will kick start the LTCI market.
