5 December 2011
In its submission, the Institute and Faculty of Actuaries highlights a range of existing barriers to the development of financial products to address long term care needs. These include a lack of certainty and consistency of treatment towards public and personal provision of long term care and the complexities of means testing and care assessments. Together, these could make it more difficult to design affordable products to suit individual needs and, as a consequence, this could lead to a lack of affordable provision, especially for people with less means.
Sue Elliott of the Profession’s Health and Care Committee said:
“If there was a consistent system, we would expect that this would improve stability and portability. It is also important that there is consistency between public provision and private financial services. This includes alignment of public and private assessment systems both at the initial point of need and at the point where Dilnot’s proposed £35,000 cap or some other threshold is reached. Sustainability of the system would also need to be considered to ensure that it is future-proof and encourages individual planning.
“It may be anticipated that the reforms may lead to an increase in the number of long term care products being taken up, but potentially a decrease in value as people may only seek cover up to the value of the cap. If the extended means testing system continues to penalise those taking out one or more financial products, this could prevent more private money coming into the care system particularly at the lower end of the income-wealth distribution. Since this covers a large proportion of people, the impact on the potential market for private finance products is likely to have a constraining effect. There is, however, a potential market for top-up coverage or alternatives to what the State will provide; some may seek better quality homes than those which the State provision would cover, where the general living costs will be higher.”
On the lack of reliable data on long term care, Sue Elliott said:
“When the Commission on Funding of Care and Support published its report in June of this year, the data on the report was necessarily reliant on various assumptions. To ensure that informed decisions are based on robust data, we would recommend that these assumptions are more robustly tested and take into account disease rates at older ages, as well as movement in pensionable age. We would also like to see more research carried out into the effects of early intervention on the later care needs of individuals. Both of these are areas where the modelling and analytical skills of actuaries would be of value and we would be willing to work with policy makers to fill in these knowledge gaps.”
Enquiries: Tel. Michael Scanlan on 020 7632 1453 or email michael.scanlan@actuaries.org.uk
Notes to editors:
- Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.
- Members of the Profession have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.
- The Profession is governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of the Profession in society.
- The Profession is available to provide expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.