In-depth - health & social care: Insuring the carers

Social care is always in the news, but it never seems to be for good reasons. Problems surrounding funding, treatment of those in care, and the ageing population regularly dominate the headlines.

As a result of these pressures, care insurance is a market undergoing transformation, with significant upheaval expected in the future. Is there an opportunity for general insurance brokers to capitalise on this emerging landscape?

The extent of the funding gap in the public sector will partially determine the space for brokers to participate in this market. Local authorities are currently under extreme strain from spiralling costs and tightening budgets.

The statistics alone paint a daunting picture. The National Audit Office estimates that between 2010-11 and 2016-17, the number of people needing care aged 65 and over rose by 14.3%. According to the Alzheimer’s Society, there are now 850,000 people living with dementia. Demographic pressures like these are costing local authorities £400m a year, the Local Government Association (LGA) told Parliament in 2018.

Combine this with a 28.6% reduction in the spending power of local authorities since 2010, and the funding gap is expected to balloon to over £2bn by 2019-20, according to two separate estimates by The King’s Fund and the LGA.

The government has been promising a green paper on social care since March 2017. It has since been delayed multiple times, with the UK’s impending departure from the European Union used as the latest excuse.

“The green paper is really crucial. We need to make changes because there is just not enough funding,” comments Carolyn Baker-Mellor, head of care at Towergate’s caring professions division. “It’s important we get a government that thinks more about investing in health and social care, because it’s absolutely lacking and you’re seeing care homes close as a result.”

“The government needs to get this green paper out sooner rather than later because this is not a problem that is going away,” agrees Stuart Scullion, chairman of the Association of Medical Insurers and Intermediaries. “There is likely to be either a change in taxation during the period that people work or the government allowing people to borrow money towards their care, which will be repayable when they die.”

So, the political quagmire of Brexit has claimed another victim, but how can the insurance industry get involved in the meantime?

The green paper is really crucial. We need to make changes because there is just not enough funding… It’s important we get a government that thinks more about investing in health and social care

Carolyn Baker-Mellor

Appetite
Much rests on the willingness of insurers to participate in the market. Two major players completed their exits from care insurance in 2014, referencing a desire to return to the bread-and-butter work of general insurers.

“It’s not an area that general insurers broadly like, and we find they come in and out of the market,” says Baker-Mellor. “The premiums aren’t overly attractive, particularly at the smaller end.”

David Taylor, divisional director at Howden Care, agrees: “It is certainly one of the more competitive commercial insurance sectors and clients are regularly looking for better deals in what is a limited market.

“Part of the challenge is that insurers can struggle to make expected margins, particularly around the legal liability covers, so their appetite to risk is tailored accordingly.”

Concerns over an awkward fit between social care and general insurers has not dampened Aviva’s enthusiasm for the market. The insurer has highlighted health and social care as sectors particularly suited to the new mid-market offering it launched in January 2019.

It remains to be seen whether this appetite for health and social care marks part of a wider trend amongst general insurers. Despite the headlines of previous years, the brokers we spoke to remain broadly optimistic about their ability to find cover for their customers.

Specialism
For a general insurance broker looking to participate in the care sector, the level of specialism that may be required is a key consideration.

To illustrate the complexity of the area, Scullion mentions a provider that doesn’t even advise on particular a policy it offers: “They get a specialist broker to conduct an assessment and they then consider whether or not the plan is suitable. That’s quite strange, really, because you’d expect the insurer, if they’re offering the product, to also give the advice.”

It’s no surprise, therefore, that the overarching message from current participants in the market is one of caution.

“If you’re talking to a care provider, you really need to understand how their business ticks,” advises Baker-Mellor. “This isn’t something that you could go to a small broker who’s never seen a care risk before.”

And for brokers who are set on entering the area?

“You have to go into a care home. Until you actually walk around and understand the commitment of people and that potential risk, you could have the same perception that other people have.”

Taylor highlights partnering with a specialist broker as a potential solution to this knowledge gap: “New brokers do enter the market sector, usually linked to a broker already well versed in care and looking to develop this line of business. It is necessary to demonstrate to insurers knowledge and capability of working within this sector to gain traction.”

Going about gauging the perceptions of insurers around broker capability can sometimes be difficult. Jonathan Smith, head of UK mid-market underwriting at Aviva, is keen to emphasise that the insurer is open to the potential involvement of all brokers in social care, but stresses that there must be clear reasoning behind the decision.

“I would be quite nervous if someone is going into this sector without any knowledge at all,” clarifies Smith. “The question would be ‘why do you want to go into it?’ because without that detail and depth of knowledge, how best are you going to serve your customers?”

So, it’s clear that entering the care market is a sizeable leap for a general insurance broker, but the knowledge gap need not be an insurmountable obstacle to participation.

By demonstrating a growing understanding of the sector, be it through strategic partnerships or education of the risks involved, an insurer can be convinced that the leap will prove successful for all parties involved.

Growth is really going to be around domiciliary care. The overall ambition of this is to keep people in their own homes

James Bright

Technology
The broking community is familiar with the ongoing need to stay ahead of industry trends – and social care is certainly no exception to this requirement.

Care insurance is experiencing considerable change. Staying informed of these developments is yet another facet of demonstrating competency in the area.

As with many other markets, technological innovation is a primary driver behind many of the current and anticipated changes in social care.

Baker-Mellor and Smith both describe monitoring technologies as revolutionising patient care and the products designed to cover them.

“There are all sorts of new technical, innovative products on the market. We’ve been looking at notification of falls,” explains Smith. “People with dementia are more prone to falling over and not being found. We’re looking at technology that can keep an eye on those individual patients. When they fall, it will alert an alarm to a care worker.

“That’s the sort of area that we want to get into – having more personal protection and safety – which is linked to technology,” Smith adds.

Looking even further forward, Baker-Mellor predicts that the main advantage of technological change will be the granting of greater independence to those who require care.

“More technology-based solutions will go into care. I would see more supported living areas, where people perhaps don’t want go into a care home, but can’t stay in their own home,” she envisages. “I hope you’re seeing more people who can get into where they want to be. So, if someone wants to stay at home, we’re giving them more support at home.”

And this is just one area where today’s monitoring technologies can form part of tomorrow’s solutions: “It would be fantastic to have those sorts of things in somebody’s own home, as opposed to a care home.”

James Bright, head of sales and marketing at Jelf’s care division, sees a similar future for care: “Growth is really going to be around domiciliary care. The overall ambition of this is to keep people in their own homes.

“It’s proven through various studies that people have a better standard of living if they stay independent for longer. Advancements in technology allow people to do that.”

At this very early stage in care’s technological revolution, there is significant scope for new entrants to make their mark.

The sector is ready-and-waiting for innovative products that modernise the provision of care and consequently improve the lives of patients.

Brokers observing these developments from afar must consider how they can utilise tomorrow’s technology to build an attractive proposition that sufficiently addresses these needs.

Participation
As we have discovered, social care is a sector on the verge of significant and transformative change.

A ticking demographic time bomb and the speed of technological innovation are exerting substantial pressure on the industry to rethink its offerings.

However, until the government articulates a vision for how care should work in future in the UK, participants in the market are left operating in a grey area – the calm before a legislative storm.

“The government won’t attract insurers back into the space if they know they are going to lose money or pay out substantially more than they can charge on day one,” says Scullion.

It might be prudent for a cautious broker to wait until the government has defined the exact parameters for how private companies can get involved, but there are still opportunities to enter the market today.

One lesson is particularly clear: a general insurance broker looking to enter social care must fully educate themselves on the market and the risks involved.

“Brokers should definitely refrain from advising on areas which sit outside of their own expertise,” Taylor warns prospective entrants.

After all, the consequences of getting it wrong are only magnified when handling the lives of the vulnerable.