The insurance market has a part to play in solving the social care crisis by promoting immediate needs annuities to younger people, experts have said.
The Society of Insurance Broking’s New Generation Group - made up of future leaders of the insurance profession – said immediate needs annuities, which are already available, should be marketed to younger people rather than at the point they are needed.
An immediate needs annuity is designed to cover the shortfall between income and the cost of care for the rest of the resident’s life.
The price of the plan is based on how much income the individual needs and the insurance company’s assessment of how long the person is likely to need it for.
In their 19-page report Caring for the Elderly: Is there an insurance solution published yesterday (May 2) the experts looked at how an insurance solution could work hand-in-hand with evolving government policy.
The report stated that immediate needs annuities could work like a life assurance policy that is cheaper if bought younger, and runs in monthly instalments for lengthy periods, with a lump sum payment in the event of death.
The experts said: "There may be a market for a similar product that is paid into throughout the life of the purchaser and is activated upon entry to a care home or when care at home is required, working like an annuity at that point."
This concept would allow individuals to plan for their long-term care, without having to worry about selling assets such as houses or using lifetime savings to fund their long-term care needs, they added.
The insurance professionals analysed the current social care system, which they consider is in urgent need of reform.
Liz Foster, non-executive director of the Society of Insurance Broking, said: "The results from this project show that the insurance market in the UK is ill prepared to adequately manage the care for an ageing population.
"With one in five people expected to live past their 100th birthday, it is important that the system is evolved from its current state to deal with the future demographic, wherein more than 25 per cent of the UK population will be aged 65 and over."
The government, which is working on a green paper on social care, has already said the future model of social care won’t be solely funded by taxpayers.
It is estimated just 12 per cent of adults aged 55 or over are currently putting aside money to pay for social care later in life.
Former prime minister David Cameron had promised to implement a cap on the cost of care of £72,500, which was supposed to come into effect in April 2016.
But in 2015 the government pushed this back to 2020, because it would have added £6bn to public sector spending at a "time of consolidation".
In December the government confirmed the proposed cap would be scrapped while a green paper on long-term reform was put together.