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Most countries in Europe are grappling with how best to provide long term care (LTC) for their elderly citizens in a way that’s both fair and sustainable. Germany is no exception, with the Federal Statistical Office forecasting an increase in the number of people requiring care, rising from 2.4 million in the year 2010 to 4.5 million by 2050.
Adding to the challenge is that the share of younger, working people in the population is going down, meaning the proportion of those requiring LTC will increase from 2.9% in 2010 to 6.5% by 2050.
The German government is responding, however, and earlier this year implemented the so-called "LTC-strengthening laws" to reinforce the recently introduced state-supported LTC insurance scheme known as the Pflege-Bahr.
It is widely accepted that private personal insurance also has an important role to play in protecting people in Germany against the high cost of care in old age. Yet sales figures are still way below expectations: In a country of 80 million citizens, fewer than three million private LTC insurance contracts are currently in force.
To find out why there’s such low market penetration for private LTC insurance products in Germany, Gen Re, together with V.E.R.S. Leipzig and the Institute for Actuarial Science in Leipzig, carried out a study, Private LTC insurance – Perceptions and Optimisation Approaches in Sales.
We wanted to better understand how sales representatives view LTC insurance and the insight they need when providing consultation on LTC risks.
Encouragingly, the LTC insurance products currently available on the market are considered “fit for purpose" by sales representatives out in the field. The idea that these products are too expensive, complex or not flexible enough, is not generally seen as a problem, according to the research.
Most interviewees agreed that the barriers to sale actually lie in customers being insufficiently aware of their own LTC risk, meaning that the subject is ignored. Too often customers see the insurance of LTC risk as less important than traditional risk areas, such as long life or occupational disability, sales reps said.
The survey results suggest that, rather than placing the emphasis on worst-case scenarios stemming from the loss of personal independence, LTC insurance should instead be positioned as an asset protection instrument. This is because people in the target group of those aged 50+ exhibit a strong desire for value conservation. Such individuals don’t want to be a financial burden and so agents should talk more about what LTC insurance could mean for their client’s children, instead of about long term care itself.
Product design remains important, obviously. Our research suggests a need to strike a balance between having a good range of features and not making the cover overcomplicated or too expensive. Strong selling points mentioned include:
Insuring LTC risks may not currently be deemed as high priority for customers compared to traditional risk areas, but we predict attitudes will change, especially if policymakers and the media continue to highlight the topic.
The insurance industry also has a responsibility. It is our job to bring comprehensive and, at the same time, affordable cover to the market by putting together, for example, combination products and options in connection with occupational disability insurance or pension plan products.
In our opinion, a promising approach would be to optimise and market these in addition to the established LTC products. This way a suitable product for insuring LTC risk can be found for every target group.
