What Lessons Can the UK’s Social Care System Learn From Other LTC Insurance Markets?
Long Term Care (LTC) insurance is neither bought nor sold in the UK, so how can financial products help to pay for care costs in the future? This was the big question posed at the recent Social Care Summit in London, organised by the Association of British Insurers. Sarah Montague, the BBC News HARDtalk presenter, chaired a day in which discussions focused on what the UK’s social care system could learn from other markets.
The summit began with the ABI and the UK’s Department of Health signing a statement of intent to work together and help people plan and prepare for the costs of their long term care. More than 100 participants from the financial services industry and other interest groups discussed solutions from other countries and examined how the UK could develop its market.
A majority of the participants voted against a compulsory system, when asked at the beginning of the conference how to fund LTC expenses.
I personally presented lessons from two markets: Germany with a compulsory LTC insurance system and Singapore with its opt-out scheme. In both markets, additional or top-up LTC insurances are sold successfully when compared with other markets without compulsory LTC insurance.
In Singapore, more than 25% of individuals with the basic ElderShield plan bought additional cover. Similarly, in Germany more than 2.5 million additional LTC insurance plans have been sold so far. This is a far cry from what is needed to grow old with peace of mind. However, a new government-sponsored LTC insurance plan promoting personal responsibility is predicted to help double in-force business by the end of this year.
There is no silver bullet for how best an ageing society can fund the future burden of care costs. Having said this, a combination of compulsion on a population-wide basis, and incentives for additional private funding, raises the awareness and penetration rate of LTC insurance.
In the immediate future, alternative solutions - particularly for those with assets (homes) but low incomes - are needed. In the UK, the focus is on “help with financial decisions", i.e., advice about care planning at the right time, and saving for old age with options for decumulation based on needs, including immediate needs annuity to fund for care against a single premium.