Long Term Care: What can we learn from the international experience? - - PowerPoint PPT Presentation

Long Term Care: What can we learn from the international experience?

Romain Bridet, Bridget Browne

About the authors

• Romain Bridet

– Pricing Long Term Care (LTC) (re)insurance products in France, Italy, Israel, Spain...

• Bridget Browne

– Wondering why LTC insurance was so successful in France and non-existent in Australia

General definition of dependancy

“A dependant person is one, who for reasons linked to the lack or loss of physical or mental capacity, needs substantial care and/or aid to perform everyday activities”

General definition of dependancy

“A dependant person is one, who for reasons linked to the lack or loss of physical or mental capacity, needs substantial care and/or aid to perform everyday activities”

General definition of dependancy

“A dependant person is one, who for reasons linked to the lack or loss of physical or mental capacity, needs substantial care and/or aid to perform everyday activities”

General definition of dependancy

“A dependant person is one, who for reasons linked to the lack or loss of physical or mental capacity, needs substantial care and/or aid to perform everyday activities”

Outline

• Brief review of various countries

– Israel, Spain, Germany, UK, US

• Detailed look at France
• Why does LTCI work in France?
• Why doesn’t LTCI exist in the UK?
• Detailed look at Australia
• Why doesn’t LTCI exist in Australia?

Demographic snapshot

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Germany France UK Spain Australia US Israel Brazil Russia India China

% of the population aged 60+ in 2009

% 60+

Source: United Nations, World Population Ageing 2009

Demographic Snapshot

% Aged 60+ Rank/196 Median Age Rank/196 Germany 25.7% 3 43.9 2 France 22.7% 14 39.9 20 UK 22.4% 17 39.7 22 Spain 22.2% 18 39.8 21 Australia 19.1% 33 37.6 43 US 17.9% 42 36.9 51 Israel 14.2% 61 29.5 75 Brazil 9.9% 79 18.6 81 Russia 17.8% 44 37.9 40 India 7.4% 104 24.7 113 China 11.9% 65 33.9 59 Source: United Nations, World Population Ageing 2009

LTC insurance in Israel

• Social security provides LTC benefits to all citizens (the criteria and benefits vary

according to income and whether at home or institutionalised)

• Most LTC insurance is sold on group basis through health funds as a rider to their

standard health insurance

• The health funds have to cede their portfolio to insurance companies (via a tender

process usually every 5 years)

• This group LTC market in Israel is fairly mature and highly regulated, e.g.:
• Minimum definitions for ADLs (Activities of Daily Living) are provided by the regulator
• Premiums are not guaranteed, but the insurance companies need regulator approval in
• rder to increase rates during cover period
• For group policies there is a requirement for continuation of the cover on a individual

basis if the insured leaves the group or the policy is not renewed

• Further to that, all major insurance companies sell individual LTC products

LTC insurance in Israel

• LTC definitions
• 3/6 ADLs failed or cognitive impairment
• ADLs are
• failed if the insured is unable to perform at least 50% of the activity

a. Transferring (i.e. getting up and lying down) b. Dressing c. Bathing d. Eating and Drinking e. Continence f. Mobility

• no permanence condition
• Cognitive impairment according to a standard definition, to be

confirmed by a specialist

LTC insurance in Israel

• Product features
• Lifetime insurance term
• Subscription before retirement, children are included free of charge
• Underwriting by questionnaire, no ratings (accept/decline policy)
• Benefit cover 5 years or lifetime with decreasing indemnity
• Varying deferred and waiting periods
• Indemnity-based benefits with limits depending on location

(institution/at home)

• Premiums differentiated by age and gender
• Premiums and benefit limits are linked to Consumer Price Index
• Premium increase by age is lower than expected claims cost

increase by age (business mix risk)

LTC insurance in Spain

Social security system compulsory coverage regulated by Law 36 of 14 December 2006 (Ley de Dependencia) – Universal system to be accessible, equitable and stable – Economic contribution from the pensioners – Giving priority to services instead of cash benefits – Covering three levels of dependency, assessment of the level

• f dependency with a national scale (ABVD = Basic ADL)

giving a score between 0 and 100

LTC insurance in Spain

• LTC definition based on ABVD national scale
• Moderate dependency
• Require assistance for several ADLs at least once a day

(ABVD score from 25 to 49)

• Severe dependency
• Require assistance for several ADLs two or three times a day but

no need of permanent assistance (ABVD score from 50 to 74)

• Extreme dependency
• Total loss of autonomy physical or cognitive, implying need of

permanent assistance (ABVD score from 75 to 100)

LTC insurance in Spain

• Following the social system activation, the major companies of

the market launched LTC insurance products

• Product features
• Definition based on ABVD national scale. The insurer

follows the decision of the administration in charge of the social system

• Lifetime annuity in case of extreme dependency, reduced

to 50% in case of severe dependency

• Level premiums by age and gender
• Waiting periods (0, 1 or 3 years)
• Tax deduction of premiums paid for LTC insurance for severe

and total dependence (up to €12 500 pa)

LTC insurance in Germany

individual benefits supplementary nursing care annuity statutory benefits daily allowance reimbursement private social health insurance life insurance compulsory LTC insurance supplementary LTC insurance Long Term Care Insurance in Germany

Compulsory LTCI in Germany

Range of benefits ADL care Medical care Social assistance Nursing home care Home health care Semi-statio- nary care Short-term care Benefits Care in kind allowance Combination of benefits Respite care Technical equipment Social security pro- tection for carers Training courses for carers

Compulsory LTCI in Germany

• Definition built around 4 areas:

A = Personal Hygiene; B = Nutrition; C = Mobility; D = Housekeeping tasks

• Levels of care

* Included in all levels : help several times a week with D = housekeeping tasks Level Degree of care Required assistance Minimum daily time spent on care I Considerable at least once a day for 2 ADLs in A, B or C 1.5 hours* (at least 45 min for A,B or C) II at least three times a day for 2 ADLs in A, B or C 3 hours* (at least 120 min for A,B or C) III round the clock 5 hours* (at least 240 min for A,B or C) Extreme Severe

Private LTC Insurance in Germany

• Life insurance – Product features
• Coverage: lifetime
• Premium: level guaranteed
• Benefit payment period: lifetime
• Definition: either 6-point ADL system or as per compulsory scheme;

specific triggers for cognitive impairment

• Benefit: fixed amount irrespective of where/by whom care is provided
• Partial benefits: 40% / 70% / 100% for Levels I / II / III
• Inflation protection: indirectly via profit participation
• Waiting period: 0
• Deferment period: 6 months
• Waiver of premium: yes

Private LTC Insurance in Germany

• Health insurance – Product features
• Benefit amount

– Daily cash allowance : up to € 200 (occasionally only 50% in case of non-professional care) – Reimbursement of costs: increase of CLTCI benefit of 10% up to max 200%

• Partial benefits: wide range
• No waiver of premium
• Premiums are reviewable

Main public resources presently going into LTC for older people in the UK

• Attendance Allowance/Disability Living Allowance – £6.7 bn.
• Carers’ Allowance – £1.1 bn.
• Local Authority spending (in England) totalling £5.7 bn of

which:

– £2.9 bn on residential provision – £2.1 bn on non-residential provision – £0.7 bn on assessment and care management.

• NHS spending on continuing health care (total not known).
• NHS spending on nursing care – £0.7 bn.

Source: Joseph Rowntree Foundation – Donald Hirsch 2005

Charges to individuals for publicly provided care in the UK

Source: Joseph Rowntree Foundation – Financial care models in Scotland and the UK 2006

Who pays for care today?

• For those with £23,000 and up:

– Private LTC insurance products – Private savings – Selling of assets – house, car, land etc – Support from family, friends and other organisations

• For those with £23,000 and under:

– Supported by Local Authority

Source: Association of British Insurers, Kirwan, UK Health & Care conference May 2009

LTC Insurance in the UK

• No longer any private LTC insurance

products as such, currently ABI mentions: – Equity Release – Immediate Needs Annuity – plus a variety of simplified plans

Source: “A Sustainable Future for Long Term Care: The Insurance Industry Perspective”, Association of British Insurers, 10/2010

LTC in the US

• US Government compares options for paying for LTC

and advises:

Financing Option Risk of Insufficient Funds 1Family Support and Caregiving Moderate 2Personal Savings High 3Long-Term Care Insurance Moderate to Low 4Limited Long-Term Care Insurance Moderate to Low 5Life Settlement Moderate to Low 6Viatical Settlement Moderate to Low 7Accelerated Death Benefit Moderate to Low 8Reverse Mortgages Moderate 9Continuing Care Retirement Community Low 10Veterans Benefits Moderate to High 11Medicare Moderate to High 12Medicaid High 13PACE Moderate to High

Source: http://www.medicare.gov/LongTermCare/Static/PayingOverview.asp?dest=NAV|Paying|PayingOverview#TabTop

LTC insurance in the US

• Indemnity based
• Limited or Lifetime cover (regular and/or single premium)
• Premiums reviewable with Regulator approval
• Waiting/elimination periods
• May be Tax Qualified if pays out when insured is:

– expected to require care for at least 90 days, and unable to perform 2 or more ADL (eating, dressing, bathing, transferring, toileting, continence) without substantial assistance (hands on or standby); or – for at least 90 days, need substantial assistance due to a severe cognitive impairment. – in either case a doctor must provide a plan of care. Benefits from a TQ policy are non-taxable

An Overview in France

Demographic environment

• French population: 63.1 M people (Jan 2011)
• Increase in life expectancy at birth

– In 2010: M = 77.2 years and F = 84.2 years – Forecasts for 2040: M = 85.9 years and F = 90.9 years

• Increase of the elderly

– Baby Boom generation – over 60: 14.1 M in 2010 (22.7% of the French population ) 21.4 M in 2040 (31.0%) – over 75: 5.4 M in 2010 (8.8%) 9 8 M in 2040 (14.3%)

An Overview in France

Optimistic Pessimistic

Baby-boom generations Generations born after WWI

• Projection of possible numbers of dependent persons

Source: Gisserot Report – DREES projection 2006

LTC insurance in France

• Social Security
• APA created in 2002
• For dependants > 60
• AGGIR definition
• Means tested
• A fifth pillar for Social Security?
• Private Insurance
• Individual insurance
• 4 major companies
• Group insurance
• 1 leader

LTC insurance in France

All Private home Institutions

• Numbers of recipients of APA Long Term Care allowance from the

State, by type of accommodation

LTC insurance in France

Prevalence rates of dependency (per cent) by Age & Gender

Females Males

Source: Gisserot Report (2007), INSEE, HID Study; GIR1-4

LTC insurance in France

Characteristics of the LTC population

Age Range Private Home Institutions 75-79 85% 15% 80-84 82% 18% Over 85 70% 30% Source: DREES, 2008

LTC insurance in France

Source: FFSA-GEMA, April 2010

At home Nursing home Total

LTC insurance in France

Source: DREES and AXA (Brom & Fischer Geneva Assoc 7th Health & Ageing Conference, Nov 2010)

Monthly Fees: €1800 Moderate Dependency Monthly financial resources: avg pension + avg APA (€1 100 + €300) €400 out-

• f-pocket

Monthly Fees: €3600 Severe Dependency Monthly financial resources: avg pension + avg APA (€1 100 + €500) €2 000

• ut-of-

pocket

LTC insurance in France

Private voluntary insurance (as at 1/1/2010)

As at 31/12/09 Lives Split @ 1/1/10 Insurers 1 500 000 30% Mutuals 1 200 000 Provident Societies (IPs) 300 000 6% Total 3 000 000 From 01/01/10 Mutuals + 2 000 000 64% Total 5 000 000 Source: FFSA-GEMA, April 2010

An Overview in France

Insurers + IPs (as at 31/12/2009)

Main benefit Annual change

• # of lives

1 868 000 +1%

• Premiums

403 M € +3%

• Benefits paid

127 M € +12%

• Reserves @ 31/12

2 612 M € +13% Rider benefit

• # of lives

157 000 +8% Source: FFSA-GEMA, April 2010

An Overview in France

0% 20% 40% 60% 80% 100% Reserves Benefits paid Premiums Number of Lives

Split Individual/Group

Individual Group

Annual Change Individual Group

• Number of Lives

1%

• 2%
• Premiums

2% 23%

• Benefits paid

16%

• 13%
• Reserves

12% 33%

Source: FFSA-GEMA, April 2010

An Overview in France

Private voluntary insurance (as at 31/12/2009) Market

–

Network: bank insurers + 51% traditional insurers + 49% – Players: 30 companies – 4 companies representing 81% of lives insured and 74% of premiums

Source: FFSA-GEMA, April 2010

LTC insurance in France

• LTC definitions
• Heterogeneity of definitions but two main ones
• Activities of Daily Living (4 or 6 ADLs)
• AGGIR Grid (APA definition)

– Defined by the national syndicate of gerontology – 6 groups ( from GIR 6 = healthy to GIR 1 = totally dependant) – Existence of a protocol to complete the declaration form of dependency (used for assessing APA benefit) – Classification made after the evaluation of 10 criteria (Coherence, Orientation, Toileting, Clothing, Food, Urinary and fecal continence, Transferring, Movement indoors, Movement outdoors, telephone communication)

LTC insurance in France

• Individual product features
• Periodic premiums (Level Premium Basis)
• Type of benefit: Fixed indemnity cover (Annuity + Lump sum)

– Pricing reviewable – Definition: ADL or GIR – Maximum age at entry around 75 – Waiting periods (0, 1 or 3 years) – Deductible (90 days) – Medical Underwriting depending on entry age, level of coverage – Paid up value after 5-10 years possible – Waiver of premium in case of loss of autonomy – Inflation protection plus profit participation – Exclusions

An Overview in France

Why is LTC relatively successful in France ?

• France: a financially prudent nation
• Protection of the legacy/inheritance
• The power of the bancassurance network
• The weakening of family ties
• Activities of the State and regional bodies

Why doesn’t LTCI exist in the UK?

• Informal survey conducted for UK Health & Care

Convention 2009 involving practitioners from insurance, reinsurance and consulting

5 Questions on Long Term Care

1. What do you view as the main reasons why LTC hasn't taken off in the UK market? 2. What obstacles are there in terms of the tax code, regulation, NHS integration etc.. 3. Is there a place for LTC in the UK market or is there in reality too much overlap with existing UK products in this space – annuities (especially medically underwritten ones), equity release, critical illness/TPD etc... 4. What else could providers such as insurers or reinsurers do to assist this product? Is there an alternative approach which perhaps the market should consider? 5. Any additional comments you may have not covered by the above queries?

Classic British Responses!

• “Is LTC underpriced in France?”
• “I advised my company not to proceed with LTC. I was called a

dinosaur by the then CEO, but the board was with me. That decision saved a lot of money.”

• “The typical story is going into a home with three month's life

expectancy and 18 months later still having three months' life expectancy...). That blew many of the assumptions that actuaries actually believed to be quite conservative back in the early 90s.”

Q1 What do you view as the main reasons why LTC hasn't taken off in the UK market?

• Pre-funded LTC is very expensive and very hard sell.

– “People who need it often can’t afford it at their time of life and people who can afford it when they are younger never believe they will need this sort of cover!”

• Lack of incentive for customers to 'save'/pre-fund for their care costs in

retirement. – “The logic here is simple: if it is difficult to persuade people to take out disability insurance in their working years or to contribute fully to their retirement income needs, then it will be even harder to persuade them to protect themselves from disability in their 70's and 80's.”

Q1 What do you view as the main reasons why LTC hasn't taken off in the UK market?

• There is huge faith in the NHS and a feeling that the State will provide. The

reality is very different.

• Degree of apathy with the British public around LTC. Many think they'll use

proceeds from their house to pay for it if needed.

• FSA Sales Regulation in 2004 drove out a lot of IFAs who felt that low

sales volumes didn’t justify effort.

• Lack of effective integration with state benefits
• Lack of tax incentives
• Lack of state compulsion for minimum cover

Q2 What obstacles are there in terms of the tax code, regulation, NHS integration etc..

• FSA Regulation

– “FSA regulation is a real barrier to entry, both for providers and (especially) for advisers. Passing the necessary exams is really tough for most advisers. Beyond that, the barriers are surmountable, but not really for any one provider on its own.”

• NHS Wealth Trap

– “The NHS requirement to draw down on any assets before receiving state benefits (even to extent of selling home) makes people feel that their self provision is used to finance their LTC benefits anyway, so why save even more to reduce cost for state.”

Q3 Is there a place for LTC in the UK market or is there in reality too much overlap with existing UK products in this space?

• Pension Provision

– Already insufficient for retirement needs so can’t be expected to provide for LTC needs as well

• Immediate Needs Annuities

– “I think the immediate needs market is the only way that Britons en masse would be prepared to consider LTC without a tax break and I don’t see a tax break forthcoming.”

Q3 Is there a place for LTC in the UK market or is there in reality too much overlap with existing UK products in this space?

• Home Ownership

– “While home ownership is high, there's probably limited scope for sales as people feel they can fall back on equity release.” – “Before the property crash equity release was seen as a very

• bvious way that LTC could be funded.”
• State/NHS Provision

– “Lack of historical and current clarity around Government provision means people may think the State will look after them or that things will change, putting their LTC pre-planning in jeopardy (moving target etc…)” – “If the Government pulls away from providing LTC due to the aging population, then LTC products could see a large increase in sales.”

Q4 What else could providers such as insurers or reinsurers do to assist this product?

• Major Industry Marketing Initiative

– “To get any breakthrough may require at least 6-12 good providers, saturation marketing (so that advisers cannot hide!), a huge PR campaign (which, in turn, will mean working hard with an established care industry, with its existing intellectual and charity infrastructures) and a new generation of product solutions.” – “People are generally unaware of the costs of LTC (something like £600 per week for fairly basic care and in London more!) and unaware of the lack of state support. I think this extreme lack of awareness is a major factor. An awareness campaign could be a positive contributor to improving demand, but not in itself enough to generate a market, in my opinion.”

Q5 Any additional comments you may have not covered by the above queries?

• Target Customers

– “key target customers are probably children of currently elderly relatives as they will be most conscious of need and most likely to be able to afford cover, if they start now”

• Equity Release

– “Releasing equity from pensioners homes is the most immediate method with which care costs can be funded through private means. Of about 11.5m pensions, some 9m own their own homes representing a substantial level of equity that can be released to provide for care.”

Q5 Any additional comments you may have not covered by the above queries?

• Advertising Message

– I first committed time to LTC in 1990.we looked at what advertising messages could be used to sell these (pre-funded) products. – The most effective was an old lady praying in Church “please Lord don’t let me be a burden to my children”. At that moment more people understood what LTC was all about than through any number of product specs. – But translating that into action given the

• bstacles involved has proved beyond us as

an industry despite some superb specialist advisers in this market

LTC in Australia

• International comparisons are often difficult to make but

anecdotally at least, Australia is regarded as having one

• f the best aged care systems in the world. This is

perhaps best interpreted in an overall sense rather than a consideration of any one aspect of aged care. … it is fair to say that in Australia, almost every form of care and service is available, or potentially available, to the entire older population, with a markedly high level of quality and affordability.

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra Joint submission from ECH,Eldercare and Resthaven (sub. 453, p. 4)

LTC in Australia

• International comparisons are often difficult to make but

anecdotally at least, Australia is regarded as having one

• f the best aged care systems in the world. This is

perhaps best interpreted in an overall sense rather than a consideration of any one aspect of aged care. … it is fair to say that in Australia, almost every form of care and service is available, or potentially available, to the entire older population, with a markedly high level of quality and affordability.

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra Joint submission from ECH,Eldercare and Resthaven (sub. 453, p. 4)

LTC in Australia

• International comparisons are often difficult to make but

anecdotally at least, Australia is regarded as having one

• f the best aged care systems in the world. This is

perhaps best interpreted in an overall sense rather than a consideration of any one aspect of aged care. … it is fair to say that in Australia, almost every form of care and service is available, or potentially available, to the entire older population, with a markedly high level of quality and affordability.

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra Joint submission from ECH,Eldercare and Resthaven (sub. 453, p. 4)

LTC in Australia

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra

Over 1 million receiving some service, at a public cost of $10 bn Of which 160,000 in residential care, at a public cost of $6.7 bn and total cost of $10 bn

LTC in Australia

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra

LTC in Australia

• Annual costs range from:

– $ 1 000 for basic home support – $50 000 for intensive community support – $65 000 for high level residential care

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra

LTC in Australia

What does the individual contribute? Non residential

• HACC

Nominal eg $10 / wk

• CACP, EACH/D

Maximum of 17.5% of Age Pension + up to 50% of income above Age Pension Residential plus one of:

• Basic daily fee : max of 84% of Age Pension
• Income tested fee : depends on income and care
• Extra service charges : for higher standard
• Additional service fees : eg hairdressing
• Low care

Accomodation bond : means tested; Set by negotiation

• High care

(not extra service) Accomodation charge : means tested max $28.72 per day

• High care

(extra service) Accomodation bond : means tested; Set by negotiation

LTC in Australia

Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra

LTC insurance in Australia

• No private voluntary insurance product other

than Equity Release style (reverse mortgage and home reversion)

LTC insurance in Australia

• Productivity Commission aligns with the view that the

risk is effectively uninsurable (although more suited to an insurance solution than a savings solution) due to: – Difficulty to predict need – Affordability, especially with increasing age – Low incentives to insure (safety nets) – Long term incidence and duration uncertain – Adverse selection

• In general, assets are available and it is generally

accepted that these should be run down => nothing to insure against in the presence of safety nets

Other reasons why LTCI struggles

• Economic theory provides a variety of explanations for the limited reliance
• n such insurance coverage, such as

– a low risk perception by younger people, – low willingness to pay for insurance coverage, – difficulties in calculating the costs of long-term care dependency – preference for family-provided care

• Moral hazard, whereby individuals alter their behaviour in the knowledge

that future support is available to them, and adverse selection whereby only those consumers who perceive that they have a high risk of needing long- term care enrol in insurance-based schemes, are challenges that have to be faced by both market and (non-compulsory) state solutions.

• Moral hazard also raised in UK – why should savers

subsidise non-savers?

LTC insurance penetration

Internationally, private insurance plays a relatively small role in financing aged care.

• In the US, where insurance is voluntary and privately provided, less than 10

per cent of the population aged 65 years and over are insured for aged care, despite the presence of tax incentives.

• In Germany, private insurance is available for high-income individuals and

as supplemental coverage for all. Participation rates are less than 10 per cent.

• In France, 25 per cent of people over the age of 60 have private insurance

Source: Productivity Commission 2011, Caring for Older Australians, Draft Inquiry Report, Canberra p215

So how/why do the French do it?

Difficulty to predict need Affordability, especially with increasing age Low incentives to insure (safety nets) Long term incidence and duration uncertain Adverse selection

So how/why do the French do it?

Difficulty to predict need

Inherently financially conservative, strong emphasis on planning ahead

Affordability, especially with increasing age Low incentives to insure (safety nets) Long term incidence and duration uncertain Adverse selection

So how/why do the French do it?

Difficulty to predict need

Inherently financially conservative, strong emphasis on planning ahead

Affordability, especially with increasing age

Insurers encourage take up at younger ages + introduction into Group schemes during working life

Low incentives to insure (safety nets) Long term incidence and duration uncertain Adverse selection

So how/why do the French do it?

Difficulty to predict need

Inherently financially conservative, strong emphasis on planning ahead

Affordability, especially with increasing age

Insurers encourage take up at younger ages + introduction into Group schemes during working life

Low incentives to insure (safety nets)

Is this the key difference? Inheritance laws and means testing

Long term incidence and duration uncertain Adverse selection

So how/why do the French do it?

Difficulty to predict need

Inherently financially conservative, strong emphasis on planning ahead

Affordability, especially with increasing age

Insurers encourage take up at younger ages + introduction into Group schemes during working life

Low incentives to insure (safety nets)

Is this the key difference? Inheritance laws and means testing

Long term incidence and duration uncertain

Participating products with reviewable premiums and benefits

Adverse selection

So how/why do the French do it?

Difficulty to predict need

Inherently financially conservative, strong emphasis on planning ahead

Affordability, especially with increasing age

Insurers encourage take up at younger ages + introduction into Group schemes during working life

Low incentives to insure (safety nets)

Is this the key difference? Inheritance laws and means testing

Long term incidence and duration uncertain

Participating products with reviewable premiums and benefits

Adverse selection

Medical and other underwriting

To close

• Have some answers as to why LTC insurance is

so successful in France and non-existent in Australia

• But then again:
• Why is Trauma insurance so successful in

Australia and (virtually) non-existent in France?

• Vive la différence!

Background, surplus & graveyard

March 9, 2010

LTC insurance in Spain

7 3

• Following the social system activation, the major companies of

the market launched LTC insurance products

• AEGON
• Agrupacio Mutua
• Allianz
• Caser
• CNP Vida
• FIATC
• MAPFRE
• Mutual Medica
• Sanitas
• Caja Madrid
• Caja Canarias

Compulsory LTCI in Germany

• Definition of an LTC Claim

A – Personal Hygiene B – Nutrition C – Mobility/Motor Functions D – Housekeeping Tasks

8 Wise Men!

• Peter LeBeau – LeBeauVisage
• Cliver Waller - CWC Research
• Andy Couchman – Protection Review
• Andrew Francis – Munich Re
• Dave Heeney – Pacific Life Re
• Ian Sissons – Munich Re
• Adrian Pinnington – TSAP Consulting
• Chris McFarlane – LV=

THANK YOU!

Q2 What obstacles are there in terms of the tax code, regulation, NHS integration etc..

• Public/Private Partnership

– “There is potential to develop a working partnership between public and private sectors, potentially involving tax incentives & / or developing a national LTC fund.” – “Some national taxation systems 'encourage' private provision of healthcare through tax penalties and it is possible to see this extended to LTC. In Australia, people who do not take out private medical insurance face additional taxes at least equal to the value of the PMI itself. Hence private take-up is high!” – “It is easy to see that healthcare is considered a 'public good' and such a tax incentive/disincentive system is called for, we will increasingly see LTC seen as a 'public good' with the ageing of the population and the drain on the public purse.”

Q4 What else could providers such as insurers

• r reinsurers do to assist this product?
• Prevention Vs Cure - Learn from PMI & Motor Insurers

– For PMI, increasingly the insurance element is only a part, and in some cases a very minor part, of the proposition to the policyholder. – The proposition is all about wellness with the insurance acting as a backstop in case things go wrong. This is particularly marked in the propositions of two out of the top 5 UK providers of private medical insurance. – Protecting the insured peril is the first consideration and payment of a benefit in case of harm to the insured entity is secondary.

Q4 What else could providers such as insurers or reinsurers do to assist this product?

• New Products

– “To sell effectively to younger lives the best approach would probably be a rider insurance alongside a savings plan or whole of life insurance.” – “Innovative product design such as accelerated whole of life insurance payout, or accelerated annuity benefits may generate interest.”

• Crystal Ball

– “There may be an opportunity in 5 years plus. I think it will require a strong property market and, probably, strong stock markets too.”

OECD 2010

• myopia in planning for the risk of

dependency

• failure to recognise the potential risks of

needing care into the future

• high cost of care
• are factors explaining the relatively small

size of the private long term care insurance market in the above countries

• In France, UK and Australia all have some expectation

that “the State will provide”

• But in France actually, it doesn’t?
• In France, access to cash benefits is strictly means

tested and depending on income, the level of co- payment for services in a care package can range from 0-90 per cent of the total cost.

• What happens if money runs out?
• Is this the real reason voluntary LTCI is so successful in

France?

• In the UK it doesn’t either, but no voluntary LTCI ?!?