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Partnership shelves last-remaining pre-funded care product

by William Robins on Jul 08, 2010 at 12:50

Partnership shelves last-remaining pre-funded care product

Partnership has suspended sales of the last-remaining pre-funded long-term care product on the market.

The company was the last business in the UK still providing pre-funded long term care insurance products, where customers make an up front payment for a policy that pays out if they go into a long term care arrangement.

‘No one wants to pay for a product they may never use,’ said Chris Horlick (pictured), Partnership managing director of long term care.

‘We had very poor take-up for a product that is only of use if you go into long-term care…sales were absolutely minimal and there seemed no point carrying on.’

Horlick said Partnership sold just 21 pre-funded policies last year. He said the product will not be completely removed until after the government’s long-term care commission makes its policy recommendations next year.

‘We don’t know what will come out of this long-term care commission. We want to keep it on the shelf until we know whether there are any proposals that have some relevance to pre-funding,’ said Horlick.

Tomorrow minister of health Andrew Lansley is expected to announce a four-member long term care commission that will consult over 12 months with the care industry before delivering policy proposals a year after that.

Partnership director of corporate affairs, Jim Boyd, said: ‘There have been so many talking shops but now we know we will finally have something concrete and we will know how and when people are expected to fund their care. These uncertainties have been big barriers to the market.’

13 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Jul 08, 2010 at 13:51

The reason for the poor take up was the poor policy conditions more than the fact that clients may never use it. I sold pre funded plans prior to 2004 when most other providers withdrew prior to FSA regulation because they were, in the main good schemes, (protection only, not investment linked) however, I have not, in all conscience, been able to recommend this plan to anyone.

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Tony Clarkin

Jul 08, 2010 at 14:12

@Anonymous 1

Jim Boyd says that it was uncertainty that explianed the poor take up

You say it was an inferior poroduct.

Inferior to what may I ask?

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Anonymous 2 needed this 'off the record'

Jul 08, 2010 at 14:28

The fact remains that pre funded products were not in the vast majority of clients interests.However, on a wider point why are so many Networks against selling LTC solutions.It is a growing market that needs specialised advice.Is it because the complance sections of the networks do not understand this market?

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Dave Greenhill

Jul 08, 2010 at 14:28

I suggest that the poor take up is due to poor education, both of advisers and of the general public.

LTC is like cancer - never a favourite topic of conversation, but when it is talked about almost everyone knows someone who has been affected.

There is a huge misconception amongst various publics about LTC and in particular "deprivation". My experience has been that most clients say that "they won't get my house because I have willed it to my children". And they are appalled to be told that they are not yet dead at this point (i.e. when going into care) and that they could indeed be exected to pay for the care fees by sale of their house if necessary.

The bottom line is that the great British public (or various publics, to be correct) do not know what is going on in their own country.

Education (or the lack of it) is firmly to blame.

The media are incapable of assisting.

The government is apparently even less capable of educating.

My opinion is that it is a disgrace that anyone who has been astute enough to have saved for their retirement is penalised by the age allowance trap, IHT or LTC, while others who have saved nothing and spend everything get all the benefits and free accomodation throughout their life.

And surely it is strange that this is huge business in the USA, yet has all but evaporated in the UK?

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Patrick Cann

Jul 08, 2010 at 14:47

Single premium LTC was a great estate preservation tool - and it used to cost £10000 for £10000 of benefit for a 65 year old when NU launched theirs, but requiring 3 ADLs to trigger it. When NU left the market and Partnership took over the mantle, this question was not taken forward - why plan for IHT if you have no estate left to plan for because it has been used up in care costs?

As has been said, it is a case of people putting their heads in the sand thinking it won't happen to them, but with a monthly paid product the attitude is they are continuing to pay for something they might not need, rather than the single premium philosophy of taking care of the problem - pay now when you might not need it and it is 12% of the cost if you do!

It's a good concept, just not the correct product available to take care of our public's attitude, after all in the US pre-funded LTC is single premium cover, and GE made enough at it to have people working full time just selling their products.

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Julian Stevens

Jul 08, 2010 at 15:23

I think Dave Greenhill's comments are pretty well on the mark. What we really need (IMHO) are keenly priced, purely insured WoL products with the encouragement of tax relief on the premiums. Now, at face value, it may seem futile to ask for new tax relief on anything just now, but nobody is denying:-

1. the huge crisis of LTC,

2. the resentment that many families feel about having to sell homes to pay for it,

3. the huge administrative burden on the public sector of having to adminster and debate claims for assistance, not to mention the costs of having to meet LTC fees upfront, even if they'll be recovered at a later date and

4. the manifest dearth of simple, easy to understand and competitively priced insurance products.

The government needs to recognise these things and kick start the creation and development of a private sector solution. Just how much would 20% tax relief on premiums to LTC Insurance policies cost the national exchequer, set against what the national exchequer could save? In the overall scheme of things, precious little would be my guess. There are two sides to every equation.

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Anonymous 3 needed this 'off the record'

Jul 08, 2010 at 16:04

What we need is single premium LTC not WOL. I believe that lots of our clients will pay them if well explained. Clients won't like to pay a monthly reviewable premium forever (until they die) but with good planning we can get them to pay £10k or more. Why in USA there is so much business and here only 21 policies/year ?

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Anonymous 4 needed this 'off the record'

Jul 08, 2010 at 16:15

I have never understood the problem with prefunded LTC. After all, we insure our lives - but we may not die during the term. We insure our household contents - but we may never be burgled. So why is prefunding LTC so different? It is, after all, insurance against the costs when needing care.

If prefunded plans were available to a younger market yes, this may make calculations of likely furture requirements a little tricky but it would be much more cost effective and a less bitter pill to swallow than the alternatives affecting those currently going into care.

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Anonymous 2 needed this 'off the record'

Jul 08, 2010 at 16:18

I am always supprised by the lack of advisors who are qualified in this market. I am also supprised by the lack of providers in this market.

Where can the general public get good financial advice and solutions to what is a growing problem.

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Tony Clarkin

Jul 08, 2010 at 17:00

This low take up rate just doesn't make any sense at all.

IHT eats up 40% of everything you own over £325,000 after you die.

LTC can eat up 100% of everything you own over £23,000 whilst you're still alive

Why is it that people spend so much time obsessing about IHT and yet hardly give a second thought to LTC?

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Dave Greenhill

Jul 08, 2010 at 18:47

Thanks for your comments, Julian.

This is a subject that I am quite passionate about. And everyone should note that there are differences in Scotland (where I am based).

As far as the preferences for regular premium or single premium plans, the single premium was generally based on an insurance bond (with additional pure insurance to fund the LTC benefit and the life cover under trust), which is a non-qualifying whole of life.

My experience of them in practice is that they were sometimes difficult to get underwritten, particularly regarding the ADL's. In fairness to the underwriters, sometimes the applicants were at the upper limits of acceptance - which is understandable, given the product.

And just as an aside, many advisers reckon that they are good at IHT planning. Yet some of these same advisers refuse to even be authorised to do mortgages.

At an informal discussion between the regional education officers of the LIA at the CII in Aldermanbury (obviously a few years ago), it was questioned whether anyone could give full IHT advice if they could not advise on equity release.

The consensus was that they could not.

That same philosophy applies to LTC, particularly as regards the funding of single premium plans.

The question therefore must arise: is it better to risk the whole house and estate, or is it better to release say £20,000 (or whatever the single premium would be) to guarantee the remainder? Tony Clarkin's comments are absolutely correct.

Subject to underwriting (obviously), it really is a no-brainer.

Given the fact that in the region of 80,000 houses are sold every year to pay for care, I am convinced that this product area will eventually return and become a huge seller.

However the government have said that they do want to address personal care. But was that Jeckyll or Hyde's idea? And in any case there is bound to be a further general election much sooner rather than later (just my opinion)!

And being from Scotland, I feel that it is only right to say that LTC fees are still payable up here. The Scottish Executive keep on telling everyone that personal care is free in Scotland.

Well, bed & breakfast, lunch and dinner is not free. To go into residential care is the equivalent of going to the likes of Blackpool and staying in a B & B on a full board basis for the rest of your life - but at an even higher weekly cost! And to go into residential nursing care costs even more.

Think about it!

And think about the cases, especially South Lanarkshire Council v Yule, where on the appeal the question was asked as to why the property had to be gifted and not simply willed to the recipient.

Gifting was deemed to be deprivation, whereas willing it would have lost it anyway to the LTC fees.

A sort of "heads I win, tails you lose!" in favour of the local authority.

We are better than even we think we are - we put the right money in the right hands at the right time.

Who else does?

Our job as professionals is not (in my opinion) just to sell plans, but to also educate, inspire and lead the opinions of the various publics - to put the right money in the right hands at the right time.

Who else does?

In my district, one firm of solicitors has made an attempt to aggressively market their service in this area. They have apparenty been quite successful at it.

But we are the only ones who put the right money in the right hands at the right time throughout a client's life.

Be proud of what we all do. Nobody else does it!

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Peter Fisher

Jul 09, 2010 at 10:04

Interesting comments. Here are a few of my own on prefunded LTC

1] In USA no one expects help from the state, so make prudent arrangements out of necessity. In the UK cradle to grave protection via NHS/State is still presumed. [ Wishful thinking] As the joke goes denial is not a river in Eygyt. Also in USA virtually all prefunded LTC had either a "pool of benefit" or a maximum defined claim period. That help sell more and keep premiums lower

2] In the UK insurers mainly promoted lifetime claim policies thereby offering greater peace of mind to policyholders. Higher claims, increased longegivity in care pushed up premiums to a generally unaffordable levels.

3] THE USA still does not heavily promote Immediate Needs Plans. These have proved far more successful in the UK. So if less than one in four need care, maybe a point of need annuity is more attractive to clients.

? at least its an easy way to put off dealing with the problem!

4]I also became unhappy with prefunded plans after a terminally ill client with a 2 ADL plan was denied benefit as she did not meet the claims criteria. So having to shell out premiums AND pay for care at the same time. Extensive "discussions" ensued leading to the well known insurer accepting the claim a week before my client died!

5] Finally i concluded that those most interested in cover were either already too ill to be accepted, or just could not afford the premiums. Leading me to deduce that those who could afford the cost did not need the cover. And those who did need the cover just could not afford it!

6]Oh and as for Partnerships decision, it could have been made years ago. I just hope existing policyholders do not see premium review hikes as fixed costs are borne by so few. they will need good advice more than ever now!

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Anonymous 5 needed this 'off the record'

Jul 16, 2010 at 10:17

Long Term Care - this is another example of how the UK Financial Services industry has been allowed to die on its knees due to the FSA's anti competitive and systematic destruction of the UK Financial Services industry.

Product providers are so scared to innovate they decide not to bother at all or to leave the market completely.

Now that Partnership are not offering Long Term Care policies, this area of the market is now officially laid to rest. Well done the Labour government inroducing the FSA your legacy is all around you, even if it does take a few years for corporates to realise what FSA ethos means for the UK CONSUMER. Yes, one can argue there is a still a role for the true Fee Charging IFA in suggestions such as giving assets away into Trusts disguised for benefit of the local authority etc or subtle income planning. For the few clients lucky enough to take and pay for the 'right' Legal specialist advice (not that easy for the public to find ) they still have some avenues. The UK Consumer's plight (that's vast numbers of vulnerable elderly at risk in this instance) is NOT HELPED by having no option for insurance. Even one insurer (monopoly) is not good sign for the UK consumer.

Now that insurance protection for Long Term Care is no longer available to the UK Consumer, by a process of elimination the only work for advisers is protection in the form of more complex Financial Planning for UK Consumer who is yet again denied on major scale. Post RDR that is made worse.

No product providers = no market = FSA and Labour's continuing legacy to Financial Services Industry

The legacy of the FSA in action is also entwined in the failure of the OFT/ competition commissions who are no where to be seen in encouraging and creating the conditions to make it easier for companies who want to be or need to be in this market.

Product providers are frightened to death to deal with straightforward life assurance and pensions let alone long term care these days thanks to OVER REGULATION and strangulation of the UK Financial Services Market by the FSA courtesy of Financial Services Markets Act of Parliament 2000 as legislated by New Labour. Due to time lag even a well intentioned Lib Conserative govt vamping up competition will take years to reverse if ever as a result of the close to irrevocable damage Labour has done the UK Financial Services industry and markets.

Congratulations to those small numbers of Fee Charging IFAs who can make a profit out of this 'restricted' advice area moving forward.

For the UK consumer that is NOT a solution or Outcome to proud of as this misses the point completely - 99% of the UK populus will be found wanting and in need of advisers and products to run alongside serious planning measures!!

Once again on behalf of the lost 99% UK Consumers, thank you FSA, Labour policy and your legacy, for KILLING competition - we can all see lots of UK and non UK insurers rushing into this market as we speak (not for all the profit or less hassle in China).

In summary - A 'Bitter Sweet' Wake Up Call For the UK Consumer

The UK Consumer is waking up to the damage done by the FSA and Labour govt on a daily basis such as this article epitomising the demise of long term care.

The UK Consumer is still NOT waking up to the irretreivable damage done by the FSA policies in the UK Financial Services Market now under new owners in the form of the Lib Con government. What are you going to do about it, Mr Cameron and Mr Clegg before you depart us?

Less regulation means MORE to the UK Consumer. It means abolishing the FSA and FSMA 2000 . It means no ex FSA staffed successor CPMA is put in place before it even starts - the UK consumer does not need or want another version of the FSA to take the shoes of the FSA to destroy our competitive markets even further!!

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