A group protection insurance solution is necessary to tackle the UK’s impending social care crisis, according to Johnny Timpson.
Last week, writing in Health & Protection Tony Müdd, divisional director development and technical consultancy at St. James’s Place, argued that council tax hikes have meant relying on the government to fund future adult social care is no longer a viable or sensible option.
He added that the sooner advisers start raising this subject with their clients and individuals start planning for private care the better.
Conversations needed
But speaking to Health & Protection, Timpson (pictured) maintained a workplace solution could best tackle the problem, with current provider solutions deemed inadequate to address the scale of the issue.
He added individuals who can afford the £23k necessary to fund their social care are going to have realistically start to make some provision funding their own care provision in later life.
“It seems to me that these are the conversations that we really do need to have with consumers right now,” Timpson said.
“Certainly, it’s part of the mid-life financial health check, but I would argue that we need more than a mid-life financial health check.
“The Money and Pensions Service really need to think about reviewing their financial capability strategy and building in more checkpoints where consumers are engaged with their financial needs.
“And certainly for people within a decade of retirement -as they then transition from the world of work into retirement -we should be revisiting these conversations.”
Inadequate products
But when asked whether current insurer products cater for this need, Timpson said: “I have to be honest and say no, they don’t.
“If you look at the options, people could potentially use equity release and drawdown but we’re not seeing the usage that people were expecting.”
Learn from Europe
According to Timpson, possible solutions lie in Europe.
“So what are the other options?” he continued.
“If you look at what other countries have done, Sweden has had long-term care insurance since 1967. The Germans have had care insurance since the early 1990s.
“The Resolution Foundation 25 years ago were talking about the fact that when you look at the demographic changes coming through, lots of younger people coming through will not have the pension assets or the household equity assets that their parents had.
“And so for them, having an insurance solution would may be be more appropriate.
“And it would be sensible that that was done as a workplace benefit. I think that would make a lot of sense.
“But looking at individual solutions, I’m conscious that there are certain insurers that have got care options built into their propositions.”
Not rocking his boat
Timpson added these options do not “rock” his boat.
“I really do think that we need product and innovation but particularly as an occupational benefit in this space -but one step at a time.
“Because if you look at some of the issues we’re focused on right now, we’ve got employers who are pretty hard pressed with NI [National Insurance] costs.”
Much bigger problem
But advisers have told Health & Protection that the issue is a part of a much bigger problem facing the UK.
Joanna Streames, owner of Velvet Mortgage & Insure Services, said: “Many aspects of state reliance for care and benefits are under threat.
“But as a country, we have a habit of burying our heads in the sand until it’s too late, and this is no different.
“The real challenge is that insurers would need to step up and develop meaningful products to help address this growing problem.
“Right now, there are very few options available in the protection and health insurance market. Vitality and Aviva offer some rider benefits, but beyond that, it’s slim pickings.”
Streames suggested while critical illness cover and income protection can be used to help fund care in certain circumstances, most policies will not extend beyond age 70.
“The reality is that the majority of clients will be far more concerned about care needs after this age,” Streames said.
“So, while advisers can and absolutely should be raising this issue with their clients, the difficulty is that there simply aren’t enough robust solutions available.
“Until the industry innovates and provides better long-term care options, advisers will find themselves highlighting a problem without being able to offer a viable answer.”
Immediate issues
For Andrew Wilkinson, director at Moneysworth Insurance, no matter what financial advice is given to individuals it will not significantly affect the underlying adult social care problem in the short term.
“The immediate issues for councils will not be resolved through financial advisers warning their clients that they should not rely on state adult social care for their future needs,” Wilkinson said.
“The adult social care problem also impacts the NHS who end up with bed blocking problems as a result. A greater emphasis on treating people in their own homes and communities where possible should help.
“While some are able to fund their future social care needs many can not and will not be able to do so, and they need to be supported.”