EUROPEAN PAPERS ON THE NEW WELFARE

5. Can Pre-funded Ltc Rise Again?

LTC represents a sound product idea for the UK as it provides a vehicle to fund personal care needs that are extremely unlikely to be provided free of charge by the State. Any Government support that is developed is likely to prove out of reach of more affluent citizens due to means testing. There remains a huge potential insurance market that remains largely untapped.
The UK LTC insurers’ experience is mirrored by the one in the USA. It is well documented that large losses, a drop in sales to the lowest level in ten years, and increased prices have significantly reduced the appetite of US insurers to offer the product. This downturn represents a significant lost premium opportunity.
In both markets, however, growth potential exists. Much of any recovery will depend on developments in the product itself.
A shift to joint life (shared care) policies, reduced benefit and increased elimination periods or even public/private partnerships have been discussed. It seems unlikely that the needs of this large market will remain unexploited. A recent report to the Government Actuary by the Personal Social Services Research Unit estimates the numbers of dependent older people in the UK will double to 4 million over the next 30 years.
6. Reinsurer Response on Underwriting and Claims

The up and down experience in the UK market was shared by Reassurers and their insurance partners on a quota share basis. In any new product field we can expect some development to be required. It is the nature of things. Gen Re LifeHealth UK helped clients with product and pricing reviews and worked to design tougher gate-keepers for both underwriting and claims. Amendments to underwriting practices and increased involvement in claims management enabled closer monitoring of results and improved experience. Significant training and development effort helped make positive shifts in underwriting and claims management philosophies.
Major work was undertaken to review the LTC manual; underwriting guidelines provided for clients. This has resulted in a thoroughly updated version that includes increased ratings for some disorders and has clarified the definition of unacceptable risks and co-morbidity. The ratings build not only on the experience within the industry but also on the increasing body of medical evidence concerning the behaviour of medical conditions in old age (e.g., hypertension).
LTC providers in the UK were not idle while these market conditions were at work.
Improvements in both selection process and claims management are now in place following significant development work, and these are supported by refinements to the wordings of ADL definitions.
7. Underwriting Improvements

Improvements in the design of application form questions and the evolution of medical evidence collection protocols provide underwriters with much improved risk data. Importantly, the medical evidence is designed to mirror that which can be obtained at claim stage. This is important to allow tracking of any decline in functional ability over time.
Examination of aspects such as social setting, personal care, judgement and problem solving become important reference points for accurate underwriting assessment of at-risk individuals. Home visiting nurse agencies supply this service in the UK.
The Mini Mental State Examination (MMSE) was adapted for use and deployed at a lower age on applicants. The MMSE is a cognitive assessment tool that assesses a wider range of cognitive ability than a word recall test. It also satisfies the need to be short, portable and repeatable. LTC underwriters use a high score as a cut off point and indicator of possible mild cognitive impairment.
Overall, underwriters are now encouraged to have a high index of suspicion when assessing all LTC applicants. A tougher interpretation of associated evidence and test results ensures they do not dismiss reductions in functional capacity as representing normal ageing or that the applicant is merely ‘good for their age’. This historic philosophy, together with a silo approach to the assessment of individual components of risk, did much to undermine selection in the past.
8. Claims Management Improvements

Claims management has been tightened up and aligned much more closely to profitability. The claims philosophy that is applied was brought into line with the underwriting approach. Improved training of nurse assessors and the introduction of hands-on protocols to test ADL ability have dramatically raised the bar in claims management. MMSE results backed by consultant reports make the assessment of possible cognitive claims more accurate. Charting changes over the time since policy issue is now possible, since claims evidence now mirrors that taken at underwriting stage.

9. Conclusions

Although there has been a decline in the pre-funded LTC market in the UK, important lessons have been learnt that will inform future practice. More and more countries are moving to an insurance-based system to meet the needs of their growing population of elderly people. It seems inconceivable that the UK will not move in this direction at some time in the near future.
in their report, The State of Social Care in England 2005-2006, the Commission for Social Care Inspection (CSI) warn of an ‘ever-rising eligibility criteria for access to services’. As the number of older and disabled people increases, local councils respond by raising the threshold of entitlement to council-funded services. The effect is that fewer people receive services, and those that do must demonstrate high levels of need including being unable to feed themselves or get out of bed.
For an insurance-based scheme to be successful in providing a solution for a large population at an affordable price, the insurance companies must believe that business can be profitable. The experience of the first wave of LTC insurance in the UK suggests that without stringent assessment of risk and robust claims procedures, companies will be unable to meet the challenges that the market presents, nor reap the rewards that are available.

Pages: 1 2