In the government’s view, long term care (LTC) insurance is different from other forms of insurance, certainly as far as regulation is concerned. In part, this is because elderly consumers are considered to be particularly vulnerable, but there are other important reasons to consider bringing LTC insurance under the control of the Financial Services Authority.
Now that the consultation period on the Treasury’s proposals for regulating LTC has drawn to a close, I would like to spell out why we think regulation makes sense:
l LTC is complex both in terms of its funding and its delivery. Insurance contracts can involve tens of thousands of pounds of investment. As a consequence, advisers working in this field should be properly licensed through an appropriate training and competency scheme and be subject to regulatory scrutiny l the potential size of investments are just as high, if not higher, than in standard investment contracts which are already subject to full conduct of business rules l LTC should form an integral part of the advice given to clients for retirement planning and estate preservation for inheritance. Whereas most of the advice required in these two areas would be regulated, if the advice relating to LTC funding was not, it would lead to potential consumer misunderstanding l if someone finds out that they need LTC, possibly for the rest of their life, that individual and their family could be very vulnerable. Regulatory protection is crucial when financial advice is being given on immediate needs contracts at such traumatic times.
We included these points in our response to the Treasury’s consultation process on regulation of the LTC industry. Dealing with the risk of LTC costs is integral to planning for retirement income and estate protection, but, of these three areas, only the advice for LTC insurance remains unregulated.
Yet the cost of care can have a major impact on income and assets, in some cases wiping them out completely and, therefore, making any financial plans for the future irrelevant.
For a market which is set to expand, statutory regulation for product providers and financial advisers makes good sense and must now be on the cards.