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Innovation and long-term-care provision

This article is part of
Guide to over-50s life insurance

Innovation and long-term-care provision

While sales of over-50s insurance have surged there has been a lack of innovation around policies to cover long-term care needs.

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.

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“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.

“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.”