We need to talk about ageing societies

clock • 5 min read

AIG Life's CEO Adam Winslow says the protection industry needs to look more closely at ageing customers.

Fiona Murphy noted in a recent COVEReditorial that "protection is conspicuous by its absence" in the FCA's Discussion Paper asking how ageing populations engage with financial services.

It's a discussion our industry needs to have as the focus so far seems to be aimed at pensions and retirement assets and doesn't address the role that the protection sector plays in supporting older generations.

AIG Life sponsored a competition in March to encourage innovative thinking on supporting the elderly.

We teamed up with the Legatum Institute, an international think tank focused on prosperity, to support its annual essay writing competition which this year asked "How can we ensure that ageing societies are more prosperous societies?"

Five finalists of the AIG Legatum Prize presented thought-provoking ideas to the problem but two ideas in particular will be of interest to the protection industry.

One finalist, Jonathan Lindsell, suggested we might indirectly improve prosperity and elderly care by introducing a recruitment scheme, much like TeachFirst, called Care First.

It would encourage people to get hands-on training and experience of being a carer and then use their experience and skills to solve problems affecting people who need care, in turn improving prosperity through the solutions they present.

Going the important step further, Kyle Moore, an undergraduate from the National University of Galway and winner of the 2016 AIG Legatum Prize, directly addressed how we might make ageing societies more prosperous for everyone.

He proposes we introduce ‘time banking', much like the "Fureai Kippu" system seen in Japan, which encourages volunteers to do simple tasks for the elderly such as shopping, walking the dog or mowing the lawn, in return for credits they can spend on their own future care or towards a relative's care.

He noted that doing these simple tasks "offers a life of independence, dignity and social inclusion" for the elderly within their own community.

The idea of introducing pan-EU ‘caring credits' is a clever societal solution which would take many years to establish, particularly if it allowed people to buy care credits as they can in Japan.

But such a move would spark greater awareness of society's needs and encourage people to consider how they will pay for lifelong care should they need it. Incidentally, Moore noted in his presentation that "without the work of carers of family members, we would need another NHS".

Anyone with assets of over £23,250 currently has to pay the full cost of their care, though this differs if someone is being cared for in their own home as the local authority will then assess their assets as being any savings, bonds or shares.

But over time, the cost can be significant. Just Retirement estimates around 10% of residential care home residents stay for over eight years, at a potential cost of £314,496.

The government is beginning to address the issue of how we will all pay for lifelong care by proposing that a means-tested cap comes into force in 2020, limiting medical care costs to £72,000 for people aged 65 and over.

It is by no means certain that this proposed introduction date will be adhered to this legislation has a habit of being kicked down the road.

It also doesn't solve an underlying problem: the wider population is reticent to even consider that they may need care later in life.

AIG Life commissioned YouGov in 2014 to gather the views of 2,000 people on elderly care and found:

• 50% felt there was an elderly care funding crisis in the UK;
• 40% of respondents did not know how much their local authority currently charges for residential care;
• 25% said they would probably have to sell their home to cover the costs of their elderly care;
• 19% said they would have to solely rely on whatever was provided by the state / charity / local council; and
• Only 11% said they had made provision through savings for elderly care.

The true cost of paying for lifelong care is higher than people might anticipate too, even for those who plan to use savings.

The proposed cap only covers care costs so there is still the additional challenge of paying for food and accommodation.

As an industry, we have to consider how we support ageing societies and how we take the pressure out of planning for later life.

We have to start that discussion with customers, and offer them solutions which reduce the emotional and financial burden on families.

Of the people we surveyed, 27% felt that an insurance product that could help with care costs represented a ‘reasonable solution'.

This has led to our development of AIG Care Cover with Whole of Life, to help fill a crucial funding gap for people who need lifelong care.

Many people will live long lives without the need for care so can use it to simply leave a financial legacy to their loved ones.

For those people who do need lifelong care, this whole of life insurance pays 75% of the sum assured, up to £300,000, contributing to that essential care and helping to preserve assets for the next generation.

It could therefore be a useful financial support to anyone who wants a parachute in place for managing possible future care costs.

None of us like to think about getting older.

But by engaging the brightest minds of all generations to come up with new ideas to today's problems and encouraging people to put financial plans in place, we can help society to be prepared for tomorrow, to be more prosperous and to enjoy the precious time life offers.

Adam Winslow is CEO of AIG Life

Further reading 

AIG Life appoints new CEO 

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