The problem of care insurance

An effective care insurance model has been outlined as one of the core goals of the Dilnot Commission’s review, into the long term financing of elderly care, yet insurers will tell us that previous attempts to establish a care insurance market have never taken off. Nevertheless, the Commons discussion that followed Health Secretary Andrew Lansley’s presentation of the review poured no scorn upon this faith in flatlined insurance packages, with Conservative backbencher Oliver Heald, for example, keen to discuss insurance in relation to the proposed cap upon care costs, pointing out that ‘the level of cap [is] key for a growing insurance market’.

Insurers who have long given up on selling care packages might be excused some cynicism over the sudden attempts by politicians to make the market work, but a more in-depth look at the issues involved reveals the problem runs far deeper than simply convincing customers that insurance is a worthy sale, as has sometimes been suggested. The motivations for buying care insurance cannot, after all, be that much different from those that convince people to take out life insurance.

The review’s ‘limited liability model’ is the tool that Government is hoping will allow care insurance to prosper in a freshened marketplace, aided by the comfort blanket of Government backing for care needs that reach a certain cost and, in effect, protecting against spiralling insurance costs due to the difficulties in predicting individual care requirements. Insurance might only be one attribute of the wide-scale care reforms the Coalition is looking to implement, but if it cannot be made to contribute in some way to the overall financial restructuring of the sector then health experts agree that the reforms will be poorer as a result.

The enthusiasm of potential insurers is, therefore, a key component that ministers will need new care legislation to attract; promoting the opportunity for a new business model to take advantage of a gap in the market, rather than being scared off by previous failures, with the incentive being that care market demands are virtually guaranteed to increase over the coming decades.