Long-term care insurance shake-up

One in four people will need long-term care

The government has announced that long-term care insurance is to be regulated for the first time by the Financial Services Authority.

Long-term care insurance can be expensive... We think consumers need protection when making critical decisions at this point in their lives

Ruth Kelly, economic secretary to the Treasury

An increasing number of people are taking out insurance for the provision of nursing care in old age, and the Treasury is concerned that consumers may not be adequately protected.

It is estimated that one in four people will need nursing home care, and up to two-thirds of those will need to pay towards the costs.

But elderly people will still have to wait a number of years before the Financial Services Authority starts regulation.

The Treasury said it would "take years" rather than months before it was introduced.

Long-term costs

Long-term care policies have been around for 10 years, and there has been increasing pressure on the Treasury to police them.

The government recently introduced "free" long-term care, aimed at helping elderly people with the costs of nursing care.

However, people who have more than £18,500 in capital, tied up in their house, or savings, for example, must pay the cost of staying in a nursing home.

Elderly people in England will also pay for any personal care themselves, such as help with washing or dressing.

Better regulation

Some insurance companies want the system to be tightened up.

Peter Gatenby of Age Concern Financial Partnerships said: "It will afford much greater protection to consumers.

"Long-term care insurance involves potentially large amounts of money, paid by the customer, and therefore they need high quality, appropriate advice.

"Regulation will make sure that everyone will receive that level of advice in the future."

Typical cost of insurance

At age 65, cover of £10,000 a year, rising with inflation, would cost a man £58.60 a month.

While a woman would pay £69.00 a month.

Source: Age Concern Financial Partnerships

Limited appeal

Long-term care insurance is by no means a mass-market product.

Experts say that its appeal is restricted because people are confused by the whole issue of long-term care and people do not want to think about the prospect of going into a home.

"Most people are in denial that they will ever actually need care of that kind and put the thought away to one side," said Mervyn Kohler of Help the Aged.

"The products are expensive and that is obviously going to be a deterrent and I think people are genuinely confused about the product."