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Code comfort for clients

The launch of a code of practice for long-term care insurance sales by the

ABI will be seen as good news for consumers but is it good news for IFAs?

In fact, given the low levels of LTC sales over the past decade, is this

development of any interest at all to most IFAs? At IFACare, we believe the

answer to both questions should be a resounding yes.

Since IFACare was launched in 1996 as the voluntary association for IFAs

giving advice on long-term care, we have advocated that all LTC sales

should be statutorily regulated. As well as giving clients and their

families the highest protection, such a move would also help create the

right atmosphere of trust. For older clients, especially, peace of mind is

essential. To give them investment advice backed by law but care fees

advice that is not is an anachronism.

Although that particular argument has now been won, we will have to wait

until October 2004 before LTC comes under the Financial Services and

Markets Act regime.

While a code of practice has existed since 1995, many consumerists believed

it was too soft on insurers. The new code aims to remedy that by requiring

insurers to:

•Market LTC as if it were a regulated product.

•Provide a key features document and a personalised illustration to


•Provide for products and benefits to be changeable if state benefits


•Have an appeals procedure to handle disputed claims.

•Vet intermediaries more closely.

Most reputable insurers already adopt similar rules. For the first time,

however, the code gives guidance on some of the factors insurers might use

to ensure that IFAs are competent to give LTC advice.

Naturally, IFAs should also abide by the code, as well as belong to an

organisation such as IFACare and pass the CII&#39s G80 exam, which has a high

LTC content.

IFACare membership is likely to become high on the agenda of any IFA

looking to operate in this market sector. For our part, we will continue to

operate our own equivalent code of conduct and require members to commit to

continuing professional development by attending regular training workshops.

Such activity enables IFAs to share expertise and benefit from the

networking opportunities that membership of such organisations give. For

example, for our AGM in February we are now planning an impressive

programme of speakers and workshops designed to enable members to voice

their opinions and listen to the views of a range of experts.

One concern of many IFAs is that this market is perceived as a bit of a

waste of time, given that sales of LTC remain low. In practice, LTC

statistics are misleading. A straw poll of IFACare members shows that

advice often concerns clients&#39 investment portfolios or equity release

schemes, with LTC being only a part of the equation. There is also an

attitude that LTC is an all-or-nothing product. In practice, LTC is only

ever needed to cover part of the care fees bill. State benefits such as age

allowance, free nursing in care homes and existing pension and investment

income mean that LTC is typically only needed for a quarter to half of a

client&#39s total care costs.

Even so, at 65, men have a one in five chance and women a one in three

chance of needing long-term care before they die. Care fees are likely to

amount to £20,000 or more a year.

The idea that LTC is expensive and must be taken out to cover all fees in

every case is incorrect, yet that is what many non-experts believe. We can

learn a lot from the situation in France, where LTC is rightly seen as a

partial but vital solution. There, over a million people now have LTC cover

compared with just 35,000 in the UK.

The ABI&#39s new code of practice will not change peo- ple&#39s views of LTC

overnight but it is a key step along the path that must surely lead to a

much stronger market in the UK. A new opportunity is also emerging for IFAs

to become recognised as the consumer&#39s champion in an area where a lack of

planning can quickly see a lifetime&#39s savings eaten up by care fees that,

in some cases, go on for many years.


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