Someone once famously said that we get the politicians we deserve. I have no idea who it was and I am not altogether convinced that he or she was right.
At least as important though is, do we get what we deserve from our politicians when we have got them? On the basis that this is actually what matters to us at the end of the day, then it does seem a question we need to ask.
So I will ask the question in relation to the current debate over the regulation of long-term care insurance, and the possible introduction of Cat standards. And at this stage, I am not sure that we are getting what we deserve.
What do we deserve?
Well, let's take it for granted that we do deserve to see long-term care insurance regulated by the FSA. After all, we have older people parting with what can be quite sizeable amounts of money.
It is also a benefit which by its very nature will only be paid when the person claiming it is no longer at the peak of their condition.
And let's not forget that long-term care is also an insurance. So unless some other form of protection is wrapped up with it, the customer could well see no return if he or she dies without claiming. That it certainly not to say that the insurance is not a good idea, nor that it is not value for money – because it is both. But do these customers not now deserve the benefits and comfort of regulation?
What we did not deserve was the enormous delay in getting to the stage where the Treasury finally concluded that it was in favour of FSA regulation.
If the industry had not wanted and volunteered to be regulated and had argued against it, the delay might have been more understandable. But this was not the case.
So having converted the Treasury we must now make sure that we do secure the prompt completion of this particular part of the long-term care insurance jigsaw.
And how about the Cat standards which the Treasury is putting forward? Are they good enough? Are they what we deserve?
As they stand, I do not think they are. They might be a reasonable start point, but they do fall well short of what is needed from a set of Cat standards. If we assume that Cat standards should deliver clarity and transparency – which does not sound too much to ask when the customer is paying good money for a benefit he or she may well not need for many years in the future – then they just do not pass this test.
I should have liked to think that our politicians – through their departmental officials admittedly – could have got us further than they have at this stage.
After all, clarity and transparency will help everyone – customers, advisers and insurers – not to mention the Treasury, which should find it attracts less unwarranted criticism.
So why are these Cat standards not what we deserve? Let's look at just some of the Treasury's suggested Cat standards, and how they stack up against my clarity and transparency requirement.
I will use a certain degree of paraphrasing in describing the suggested Cat standards but I am happy that I have captured the essence of each one.
What degree of disability triggers my benefits – when can I claim?
The Treasury suggestion is that normally this will be the failure of three activities of daily living.
To which my response is what does “normally” mean? Which ADLs? The ones we have got now, or some new ones? Any three or a particular three? And what about the new long-term care insurance policy just about to be launched which has only got three ADLs – do you have to fail them all to claim? And does the customer have to fail them all the time, most of the time or only on Wednesdays?
As you can see, there is still a lot of work to do on this particular Cat standard before it comes up to scratch on anyone's clarity and transparency index.
How soon will I get my money after I can claim?
Total silence on this one. No indication from the Treasury as to what might or might not be reasonable.
Given that all of the current policies on offer have some sort of deferred or waiting period – often three months but by no means always – is it not important to cover this one?
For the customer a waiting period operates like an excess – he or she is more than likely going to have to pay their own care bills during this period. We all know how much a care home room costs each week – so knowing how long it will be before the insurance actually kicks in is important information to say the least. This really ought to form part of the Cat standards.
Can the insurance company alter my premiums or benefits?
This sounds fairly fundamental to making a purchase decision on any type of contract, let alone a long-term care insurance which might be extrem-ely difficult to rearrange at a later date if premiums did rise unexpectedly.
Again, no mention of this in the list of terms which the Treasury thinks the insurance company should set out for its customers. As it happens, this is a feature which, in my experience, advisers make sure they are familiar with when talking to their clients, and which the insurance companies are also good at dealing with.
But should it not be a basic Cat standard? At the very least, the position must be described to the potential customer so that he or she knows what is what.
As I have said, companies and advisers are doing it, but if we are going Cat let us include what should be included.
How much benefit will I get if I have to stop paying my regular premiums?
The Treasury seems to think that this one can be covered by a statement illustrating potential paid-up values. But is there not a stage before this one? Making sure the plan will actually have a paid-up value if for any reason regular premiums do stop. Not all current plans go this far.
Some customers might actually prefer to stop premiums voluntarily at some stage in the future – building up a policy value which can make a contribution to their care bills even if it is not as large a benefit as if they had maintained their payments.
So should the basic plan not at least ensure that there is some value there?
I have not covered all of the Cat standards – either those proposed by the Treasury or those proposed by Age Concern Financial Partnerships. But I think it is pretty clear at this stage that so far we have not got the clarity and transparency we deserve from the Treasury. I am looking forward to being able to help provide the clarity and transparency we deserve if asked to do so.