Innovation and long-term-care provision

Tom Conner, director for Drewberry Insurance, says: “As a whole, there isn’t much innovation.

“Some providers, such as AIG, have released products recently that combine whole of life (WOL) with an element of care cover if someone is diagnosed with a medical condition that means they can no longer live independently or suffer from severe cognitive impairment.

“AIG and others clearly recognise the long-term care problem here but the policy can only pay out once for either WOL or care cover.”

Furthermore, Mr Conner says while there are long-term care insurance products around - and “it is not hard to come up with such products” - he believes they are still too expensive.

He adds: “The problem is the premiums are high due to the cost of care, which prevents some people from taking them out.

“Naturally, cheaper products can be built but then these will not cover the full cost of care.

“At the moment, it seems there is a real head-in-the-sand mentality to funding long-term care.”

Graham Jones, core business director for SunLife, agrees, adding: “There are some products available to help long-term care costs, but the main ‘immediate needs’ market cover is only available from three providers.

“With regards to the pre-funded market, all providers withdrew from this due to uncertainty over government policy in this area, as well as falling sales.

There has been little development up to now and it will be challenging to build a proposition that people want Jennifer Gilchrist

“Customers were paying relatively high premiums for cover they may never need, so it is unlikely that many insurers will want to re-enter the market using these types of products.”

Although the government’s Care Act 2014 aimed to motivate insurers into action to create new products to cover long-term care costs Mr Jones admits “this hasn’t really happened”, although there are some products available.

These are WOL products with additional cover if you fail pre-defined activities of daily living (ADL), or have certain conditions.

There are options that insurers could consider adding onto existing policies, such as adding conversion options to critical illness and income protection contracts at retirement age, which would convert the policy into risk-based cover against the failures of ADL. However, these can be confusing for clients.

Dave Sutherland, managing director of Neilson Financial Services (for British Seniors Insurance Agency) says the market was expecting more providers would look to innovate products to remedy concerns about living longer and needing care, but this has not been the case.

Moreover, he claims: “Some providers have attempted to create product features to remedy this but our customers tell us these policies can be confusing and they’re not sure if they are really getting a good deal.”

However, it seems there is a will among insurers to consider how to bring long-term care products alongside insurance offerings for the over-50s, and create something that is simple and flexible enough to meet people’s needs.

Jennifer Gilchrist, head of proposition design at Royal London, says: “If you look at the statistics in the headlines these days, these are telling us this is a key area for us.

“It is becoming increasingly important. With the Care Act 2014 suggesting funding caps - and the government pushing any decision on these to 2020, there is a gap in financial provision for customer to enable them to plan for their later life.”

The cap on care costs was due to be introduced in April 2016, but has now been delayed to April 2020.

Ms Gilchrist says: “Innovation will be key for us in providing affordable, flexible solutions to meet the needs of later life living and care. There has been little development up to now and it will be challenging to build a proposition people want - and it will be hard to get them to buy these propositions.”

Mr Jones adds: “Long-term care is clearly a big issue and we are continuing to explore avenues within the later life market, including long-term care.

“But it is not just a case of bringing a product to the market - it has to be affordable and relevant to the mass market.”