Regulation  

Letwin urges insurers to fill long-term care gap

Speaking at the Association of British Insurers biennial conference last week, the minister for government policy told insurers that now that the government is creating legislation around care, the industry must come up with long-term care products at a reasonable premium.

The Dilnot Commission’s report, published in July 2011, called for a cap on individuals’ lifetime contributions to social care costs of between £25,000 and £50,000, with £35,000 as the recommended figure.

However the government instead decided to push forward legislation to cap care costs at £75,000 – more than double Dilnot’s recommended figure – and change means-testing rules.

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Mr Letwin said with these rules now clear, government and industry must work in partnership to make sure people can insure against the need to empty their savings pots to pay for long-term residential care.

He said: “As part of a coalition government we have a commitment to look at capping the costs people face in old age.

“It is very clear that it now falls to the insurance industry to fill the gap, with products that allow people to insure against that eventuality in old age at a reasonable premium.

“It is a question of partnership. The industry could not be expected – however it is structured – to solve this problem alone. The government alone cannot solve this problem. It should not try to act as a giant insurer.

“You have an interest in serving more customers and we have an interest in making sure our electors are satisfied with the lives they are leading. It is genuinely a partnership as there is a deal to be struck on both sides.”

Background:

This came as the government announced it would not accept amendments to the draft Bill on Care. In its reading in the House of Lords last week, the government rejected the need to enshrine the need for independent financial advice to be given to families and those in need of long-term care provision.

However, the Lords highlighted the importance of regulated advice, and that it would cover issues on signposting people to financial advice, which Chris Horlick, managing director of care for provider Partnership, said was a “comfort”. He added: “We recognise that it is important to engage with local government on this issue”.

On 15 July Partnership launched a report with the Local Government Information Unit, which looks at how councils interact with and support self-funders.

Adviser response:

Brian Tabor, director of Hertfordshire-based Carematters, said: “If insurers had a magic wand, I’m sure they could produce a straightforward, unambiguous piece of protection. But I do not believe that the real calculation of the cap in the short-term will lend itself to an easy solution. The cap will only be an advantage to people receiving care for longer than the average time.”