C6: Long Term CareAn International PerspectiveEdd Moyle, Chris ReynoldsPartnerRe

11 November 2013

2

Disclaimer

11 November 2013

The views expressed today are those of the presenters and do not necessarily reflect those of their employers, and thus, their employers accept no liability as a result of any reliance you may have placed or action taken based upon the information outlined in this document / presentation.

3

Some Statistics

P(X) = 1

11 November 2013

4

Some Statistics

P(Y) < 1

P(Z|Y) < P(Y)

11 November 2013

Progr

ess

Comm

unity

Sessio

nal M

eetin

gs

Educa

tion

Wor

king

parti

es

Volunt

eerin

g

Resea

rch

Shapin

g th

e fu

ture

Networ

king

Profe

ssion

al su

ppor

t

Enter

prise

and

risk

Lear

ned

socie

ty

Oppor

tunit

y

Inte

rnat

ional

prof

ile

Jour

nals

Suppo

rting

Exper

tise

Spons

orsh

ip

Thoug

ht le

ader

ship

DemographicsWe’re getting older

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6

The Demographic Challenge

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Source: Human Mortality Database

7

The Demographic Challenge

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Source: Human Mortality Database

8

The Demographic Challenge

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Source: Human Mortality Database

9

Life Expectancy at 65

Source: HEALTH AT A GLANCE 2011: OECD INDICATORS

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10

What is LTC?

Bathing

Dress

ing Eating

Mob

ilityPersonal

Hygiene

Family

Friends

Home

Care Inst

itutio

ns

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11

UK – The Government’s View

Stephen Dorell Secretary of State

for HealthMay 1996

11 November 2013

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0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

UK – Role of the State

Costs Shared

No Care Paid

Savings and Capital

£23,250

£14,250

Only Income Considered

11 November 2013

Critical

14

UK – Key Recommendations

11 November 2013

Asset threshol

d increased to

£100,000

Cap on lifetime contribution of

between £25,000 and £50,000

Eligibility criteria should be set on a

national basis.

Contribute

£7,000 -

£10,000 p.a to cover “hotel costs”

Dilnot

Upper capital will r

ise to

£118,000 and the lower

threshold to £17,000 from

2016

Cap to be set

at £72,000 from 2016

Pay an annual contribution

of £12,000 towards general

living expenses

Care Bill makes provision

for a national minimum

eligibility threshold.

15

UK – The Insurance Market

LTCI

Pre-funded Care Plans

Immediate Needs

Annuities

Secure / Deferred Plans

Enhanced Annuities

Equity Release

11 November 2013

Progr

ess

Comm

unity

Sessio

nal M

eetin

gs

Educa

tion

Wor

king

parti

es

Volunt

eerin

g

Resea

rch

Shapin

g th

e fu

ture

Networ

king

Profe

ssion

al su

ppor

t

Enter

prise

and

risk

Lear

ned

socie

ty

Oppor

tunit

y

Inte

rnat

ional

prof

ile

Jour

nals

Suppo

rting

Exper

tise

Spons

orsh

ip

Thoug

ht le

ader

ship

International PerspectiveWhere is LTC insurance a success?

11 November 2013

Global Leaders

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Experience

Volume

Over 20yrs

6m inforce 8m inforceGrowth

15% 12-13%

USA - Market Evolution

First product appears in 1974

Market takes off in the 1980s

Introduction of indemnity cover known as “reimbursement” products

Sales decline

6 insurers represent 80% of premium volume

Return to growth

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1980s

Mar

ket

Pro

duct

s

1990s 2000s

Refinement of “reimbursement” products

Strong growth in sales

Poor experience emerges

- Rate increases - Smaller companies exit

Fixed-benefit productsderived from health insurance

USA – Product Design

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Reimbursement model

Premium $ indemnity

$2‘000-$2‘500 pa

(£1‘250-£1‘550)

Limits

$150 (£90) per day5% pa escalation

60yr old

Max 3yrs

France - Market Evolution

Launch of LTC products derived from annuity products

Market dominated by 3 companies

Group contracts first marketed

Expansion of severity-based payments

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1980s

Mar

ket

Pro

duct

s

1990s 2000s

Fixed-benefit only covering severe loss of independence

Introduction of coverage for moderate dependency

New entrants

5 insurers now represent 70% of premiums

Fixed-benefit model

Premium € cash

€400-€500 pa

(£330-£420)

Severity-based

€200 (£170)per month

€600 (£500)per month

France – Product Design

11 November 2013 21

60yr old

Role of the State

11 November 2013 22

Public Private

Role of the State

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Public Private

Role of the State

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Public Private

France - Public Provision

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Public Health

Insurance

Complem-entary LTC

benefit

LTC Tax Benefits

25

Public Health Insurance

11 November 2013 26

Social Assistance

Universal Coverage of Medical Costs

Complementary State Benefit

Hotel costs

Dependence Costs

Medical costs

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Complementary State Benefit

APADependence€

varying by

At Home

InstitutionWealth Severity

27

Tax Incentives

Income Tax Deductions

Group schemes

Insurance payouts

France - Public Provision

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USA - Public Provision

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LTC Coverage

Who is covered?

Scheme

Public Provision

Medicare

Retirees

Limited

Medicaid

Poor

Covers LTC

29

Tax Benefits

USA - Public Provision

11 November 2013

Social Protection

Covers Medical

Expenses

Limited Income

LTC Benefits

In-kind

Not Cash

LTC from approved provider

Eligibility for LTC

Dependence

Personal resources exhausted

Medicaid

30

Global Leaders – Summary

11 November 2013 31

Still Niche Product

Products

Clarity

Range of Policies

32

Global View of LTC Insurance MarketIsrael

60% have some form of LTCI policy

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Israel – Public Provision

LTCIP

National Insurance Institute Providers

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Israel – Public Provision

Ministry of Health

Assessment Copay

11 November 2013 35

Individual Cover

Reimbursement of Actual Care

1st LTCI policy (1978)

ADLs Criterion

First Generation

LTCI 2.0

Highly Regulated

Min definitionfor ADLs

Min gate keeper trigger

Level premiumsfrom age 65

Competitive Pressure on Gate

Keepers

11 November 2013 36

Group Cover

4 sick funds provide basic health insurance

Supplementary Cover

LTCI

Group Policy with Private Insurance

Company

11 November 2013 37

Summary

11 November 2013 38

Progr

ess

Comm

unity

Sessio

nal M

eetin

gs

Educa

tion

Wor

king

parti

es

Volunt

eerin

g

Resea

rch

Shapin

g th

e fu

ture

Networ

king

Profe

ssion

al su

ppor

t

Enter

prise

and

risk

Lear

ned

socie

ty

Oppor

tunit

y

Inte

rnat

ional

prof

ile

Jour

nals

Suppo

rting

Exper

tise

Spons

orsh

ip

Thoug

ht le

ader

ship

Final ThoughtsWhat can the UK learn?

11 November 2013

LTC InsuranceUSA

Clearly defined Public Provision

France

Dovetailing of Public/Private

Israel

Automatic Enrolment

Drivers of Private Market Development

11 November 2013 40

Tax Incentives

Specific State Schemes

Learnings from Abroad

Conviction

11 November 2013 41

Different Approaches

Public/Private in Partnership

Variety of Policies

42

Expressions of individual views by members of the Institute and Faculty of Actuaries and its staff are encouraged.

The views expressed in this presentation are those of the presenter.

Questions Comments

11 November 2013

Long Term CareAn International PerspectiveEdd Moyle, Chris ReynoldsPartnerRe

11 November 2013