Industry experts doubt there will be a surge in insurance products for social care, despite the government saying it wants to work with insurers to develop such products as part of its social care reforms.
On September 7, prime minister Boris Johnson promised a cap on the amount paid by any one person for social care in their lifetime. Set at £86,000 for people entering care from October 2023, those applicable for state support will need to have assets of under £100,000.
At the same time he said the government would work with the industry to develop insurance products to cover the cost of care under the cap.
With a cap in place, theoretically insurers have more certainty to accurately calculate the social care costs facing customers later in life. But experts aren't so sure the cap will lead to "certainty" at all.
Nicky Cave, managing director at Eldercare Solutions and an accredited adviser of the Society of Later Life Advisers, told FTAdviser: “I doubt there will be a rush of new products but hopefully the existing, at need product will start to look like a more affordable way of properly limiting those catastrophic [care] costs.
“Last time around [the care cap] didn’t reassure insurers sufficiently for them to develop products and so I am not sure this time around will be any different.”
Cave referred to the £72,000 cap set out in the Care Act 2014, due to start in 2016 but which fell victim to a government U-turn in 2015. Then health secretary Jeremy Hunt quietly shelved the care cost limit, postponing it until 2020.
“The government realised that getting everyone who needed care assessed, when they can barely cope with assessing only those entitled to local authority support, was too mammoth a challenge.
"There is of course a chance the same could happen again.”
Without knowing what the variable local authority rates of care will be set at, Cave was “not sure how much certainly any of this gives anyone, especially as there will inevitably be regional variation”.
She added that pre-funded insurance “didn’t take off” when the industry “had a very clear and simple system” in the 1990s and 2000s.
“Maybe that’s because the costs were prohibitive and having a cap will make it more affordable. But actually, people’s priorities are paying off their mortgage or paying into their pensions. Or lots of other things that they prioritise above planning for care home costs.”
Cave reckons existing products such as care fees annuities, are an attractive option. That is, “if consumers ever find out about them”.
“These are being purchased by people going into care now, for whom it should be easier to predict when and by how much the care cap will benefit them. Therefore they could potentially buy the annuity for a lower annual income, making it cheaper.