If not Dilnot, what? Steve Groves May 2012
Background •
41% self funders.
•
Only 4% of self payers purchase INAs – but 40% can afford and benefit from one (PSSRU).
•
25% fall back on the State costing £1 bn in England p.a.
•
State care for poor and wealthy fund their own care.
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How do we encourage the ‘average’ self payer in the care system to do the right thing?
Andrew Dilnot’s proposals •
INAs likely to be only insurance product to benefit from Dilnot.
•
Criticisms of the proposed ‘capped’ cost model of care: – does not create an insurance market – cap only covers ‘personal social care’
– potentially complex to administer – expensive (£1.7bn) – seen as regressive – benefits the wealthiest who live longer
•
Those who benefit still cover bulk of their care costs.
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No major insurers are developing a specific care proposition?
Without insurance % of assets retained 100% £100k of Assets at Start £150k of Assets at Start
90%
£200k of Assets at Start 80%
£300k of Assets at Start £400k of Assets at Start
70%
£500k of Assets at start 60% 50% 40% 30% 20% 10%
Years in care
0% 0
1
2
3
Assumes Care fees of £35,000 pa are payable
4
5
6
7
With Insurance % of assets retained 90% £100k of Assets ay start £150k of Assets at Start
80%
£200k of Assets at start 70%
£300k of Assets at start £400k of Assets at Start
60%
£500k of Assets at Start
50% 40% 30% 20% 10% 0% 0
1
2
3
4
5
6
Assumes Care fees of £35,000pa payable; Costs based on Partnership experience
7
With Insurance •
INAs – currently insurance benefits the wealthy.
•
For others, insurance defers the date when State steps in – erodes lifetime wealth.
•
Pre-funded has failed.
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For lower amounts it may be logical to deprive assets – benefit from free State care earlier.
Enhancing Dilnot - a Partnership Model •
State incentivizes individuals to ‘do the right thing’ – purchase insurance. – protects citizen and State from catastrophic costs of care.
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Adapted version ‘Partnership’ 1996/7 model developed by No. 10 policy unit. Typical in other countries (e.g. France)
•
Can be implemented at low cost, fast, is easily funded and progressive.
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Rewards people who behave in a socially responsible way and ensures everyone can limit their exposure to LTC costs.
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Can work with or independently of Dilnot’s capped proposals.
How it works •
Partnership’s proposal is targeted at ‘average people’
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State matches each £1 of insurance purchased to cover care costs – by increasing the ‘threshold’ – currently £23,250 including property in England.
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Individuals incentivized to purchase insurance: – more insurance to cover the costs of care – retain more of their lifetime wealth as a reward
•
Everyone who buys care insurance will benefit. – State benefits as more self payers insuring against LTC costs. – Those with least wealth (assets < £200k) have a higher starting ‘threshold’ - £50k.
The Results This results in a fairer equality of outcome for all - with all self payers protecting between 60% to 80% of their total wealth. 90%
£100k of Assets at start £150k of Assets at start
80%
£200k of Assets at Start 70%
£300k of Assets at start £400k of Assets at Start
60%
£500k of Assets at start 50% 40% 30% 20% 10% 0% 0
1
2
3
4
5
Assumes Care fees of £35,000pa payable; Costs based on Partnership experience
6
7
Partnership model - summary •
Protects the ‘average man’ from the catastrophic costs of care – not just 4% of self funders who eventually buy insurance.
•
Rewards people who ‘do the right thing’ – ensures everyone can limit their exposure to LTC costs
•
Fair and equitable – protects between 60% and 80% of consumers’ total assets
•
Relatively low cost, easily funded and entirely progressive
•
Simple to administer and can be introduced fast
•
Protects the State from the catastrophic care costs
Steve Groves, CEO Partnership
Partnership is a trading style of The Partnership Group of Companies, which includes: Partnership Life Assurance Company Limited (registered in England and Wales No. 05465261), and Partnership Home Loans Limited (registered in England and Wales No. 05108846). Both companies are authorised and regulated by the Financial Services Authority. Registered office for both companies is Sackville House, 143-149 Fenchurch Street, London EC3M 6BN.