The Association of British Insurers has warned politicians that ignoring the Dilnot commission reforms will lead to a care system crisis.
The Commission on Funding of Care and Support published its recommendations for reforming the care system last week. It called for a cap on adult social care costs of £35,000, an increase in the means-tested threshold from £23,250 to £100,000 and a limit on general living costs of between £7,000 and £10,000 a year.
ABI assistant director of health and protection Nick Kirwan says Andrew Dilnot, who chaired the commission, is right to push for implementation of the proposals by 2014.
Kirwan says: “I am very concerned about inaction because I think Dilnot is the only game in town. There is no plan B. If we do not get Dilnot, I think we are heading for a crisis.”
The commission refers to a £35,000 cap on care costs as being an “appropriate and fair” figure but recommends that the cap should be broadly between £25,000 and £50,000. The proposals based on a £35,000 cap have been costed at £1.7bn.
Kirwan says this gives the Treasury scope to implement reform at a lower cost.
The commission has also recommended that deferred payment schemes should be improved and expanded to be available across the country. Under these schemes, local authorities agree to pay for the cost of care if individuals cannot afford care costs without selling their home. Costs are then recouped when the house is sold. Such schemes are not widely used as local authorities cannot currently charge interest on the loans and have to run them at a cost.
Kirwan believes deferred payment could pave the way for long-term care to be added as an option on life insurance policies. He says: “A deferred payment scheme means people can pay the fees after they are gone. Of course, a life insurance policy pays out money after you are gone, so one way forward would be to take out a whole of life insurance policy which would pay the care fees. There might be some innovative products that emerge into this area which would be more affordable and easily available to people.”
Kirwan says the current extremely high costs of long-term care have made insurance products prohibitively expensive in the past.
But if the cost is capped, as Dilnot proposes, Kirwan says insurers can once again start developing products for the long-term care market such as care options on critical-illness policies. He argues that these could be underwritten at point of sale, with the option of converting the policy into a long-term care product at age 65.
He says the move in 2005 to classify long-term care products under insurance conduct of business sourcebook rules while protection advisers were regulated under conduct of business sourcebook rules needs to change to allow long-term care options on CI policies to return to the market.
Kirwan says: “Most insurers are pretty keen to try to differentiate their life and CI policies by adding an extra feature. This is an extra feature that could be very valuable. It would mean that when people get to age 65, they have those choices.”
He says although the long-term care market will not suit every insurer, it is a market that other insurers are willing to develop. He says: “We will be supporting Dilnot’s report all the way. We want to do whatever we can to see it implemented and that is where our members are. We want to persuade the Government that we will not be the reason this reform does not happen.”