AXA's decision to withdraw from the pre-funded long term care (LTC) market came out of the blue this...
AXA's decision to withdraw from the pre-funded long term care (LTC) market came out of the blue this month. However, the reasons behind the move came as no great shock. Sales of LTC insurance have been steadily falling for years. To be precise, the market has seen a 60% fall in business since 1996.
Without doubt, the market will miss AXA's presence. With just half a dozen players still active in the market, advisers are crying out for more competition. Pension Annuity Friendly Society's (PAFS) product launch last month raised hopes that the market was finally going to see more innovation. And there is no doubt that PAFS has softened the blow of AXA's decision. Other providers are denying they will follow AXA's lead, but it is hard to stay positive when you reflect on the downward spiral of pre-funded sales.
Optimists in the market see forthcoming regulation as the light at the end of the tunnel. Being such an expensive and complex product, consumers should grow new confidence when pre-funded policies finally fall under statutory regulation. The Financial Services Authority may also help to promote the product to a wider audience than it currently reaches.
However, persuading clients that they need to get cover for LTC remains the greatest hurdle. No-one likes to think they will need LTC in the future. For younger clients, when premiums are most affordable, it is even harder to envisage such a time. One point remains certain; LTC is possibly the most advice-driven sector of insurance. The future of the market therefore could lie in the lap of intermediaries. If more advisers embrace what it has to offer, sales could finally receive the jolt they need. However, no-one is holding their breath.
Kirstie Redford, editor
