Tue. Oct 19th, 2021

UK social care updates

Chancellor Rishi Sunak has urged Treasury officials to step up talks with the insurance industry on the possible launch of new products that will enable people to finance future social care costs in England.

Sunak wants to encourage insurance companies to bring the products to the forefront, arguing that the government’s social care reform announced on Tuesday provides the certainty the sector is demanding.

As part of the blueprint, Sunak announced a maximum of £ 86,000 on the total lifelong cost of adult social care for any individual in England. The state would intervene to pay costs above the level.

If insurance were available to cover expenses up to £ 86,000, it would help Boris Johnson to claim that he is complying with the 2019 Conservative Party commitment that ‘no one in need of care should be forced to sell their house to pay for it’. pay’.

An insider from the treasury said: ‘The chancellor has asked officials to work with insurers to consider new products to help with the cost of social care. We are hopeful that over time, the new cost constraint will provide the clarity that insurers need to create new products. ”

However, the minister’s hopes for a robust insurance market to ensure that costs are covered below the limit have been thwarted in the past.

The insurance industry was reluctant to design products after economist Sir Andrew Dilnot unveiled in 2011 a social care reform plan commissioned by David Cameron’s government and similar to that announced on Tuesday.

But Rob Yuille, assistant director of the British Insurers’ Association, a trade group, has suggested that the landscape has changed in some respects over the past decade.

Pension reforms have resulted in millions more people saving in retirement pots to access, and there has been continued growth in property value, along with the expansion of equity loans. It was a complement to the small market of existing insurance products designed to cover care costs, pre-purchased or at the point where it is needed.

“None of [the options out there] is a silver bullet solution for care financing, but together it forms a series of options, ”says Yuille.

Consumer demand would be the most important factor in the development of the market, he added. People need access to advice and guidance to understand “what costs they are facing so they can plan for the future.”

According to insurance experts, there are already several options available for people to pay for long-term care needs.

In the first place, there are so-called immediate need annuities, where people pay a lump sum in exchange for a regular income that can cover care needs.

These costs can also be covered by certain types of life insurance policies, which are paid in the long run with an annual premium.

Another way to pay the cost is through exemption schemes, but it usually requires people to stay in their own homes and therefore not be suitable for providing residential care.

However, the consumption of products to cover healthcare costs is currently limited, says Andy Briggs, CEO of life insurer Phoenix Group.

“The challenge of industrial solutions is that people in general do not think it will happen to them, and therefore the individual demand for insurance products is low,” he added.

Some insurers welcome the government’s clarity on the £ 86,000 limit for lifelong care costs. ‘One of the most important issues that has prevented any market in the field of insurance products on a large scale [has been] a lack of certainty “, says Peter Hamilton, head of market involvement at the insurance group Zurich’s British arm.

Products can be designed to meet healthcare costs, but also fund technologies such as sensors and warning systems that help people stay in their homes.

Michael Wade, an industry veteran who advised the government of Theresa May on social care, said he understood the prime minister wanted the insurance sector to play a role in improving care for the elderly who go beyond the supply of products.

This could include using their large portfolios to invest in retirement homes or technology so people can stay in their own homes.

‘It’s basically about how to reduce demand [for care] because if you can reduce the demand. . . you reduce the cost of what you have to finance, ”Wade said.

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