Long-term care insurance: Status and future challenges

Understanding the Landscape

Long-term care insurance is related to population, social, and economic changes. These factors are behind its current progression in developed countries and the reasons why this type of insurance is becoming more important.

The significant increase in life expectancy in the more economically developed countries has changed the pattern of the population pyramid because the older age range is larger and its consequences have led to an increase in the number of dependency cases.

In 1950, approximately half of the world's population was between 20 and 64 years old. As this figure has increased and is expected to continue doing so, it is projected that by the year 2050, out of a population of 9 billion people, the proportion of individuals aged 65 and older will rise (16%) while the proportion of those under 20 will decrease (27%). It remains that over 50% of the population will be concentrated between the ages of 20 and 64.

In this context in which Dependency has started to gain special relevance, it is necessary to reflect on certain aspects related to this issue.

Given that the immediate repercussions of Dependency are the loss of purchasing power and an increase in the costs of caring for the dependent person, it is worth considering who should bear these costs.

Currently, coverage of long-term care is far from the collective imagination, let alone the guidelines for all the resources and services for the care of dependent persons.

For this reason, the aim is to focus on private initiatives, leaving aside the public part, due to its limitations, whose competence corresponds to the State and will depend on its social rights policies.

The coverage offered by the insurance market for Dependency corresponds to an indemnity (capital or income), the amount of which will depend on the degree of dependency legally recognized, intended to cover the costs of care and treatment and complemented with coverage aimed at assistance.

These family assistance covers consist of assistance to both dependents and their relatives, where access by level of kinship is determined by each insurance company, and include services such as:

1. Home help for daily tasks when you cannot carry out daily tasks on your own or when you need the assistance of a third person, physical care, accompaniment to the doctor, home cleaning, and other needs.

2. Tele-assistance to deal with emergencies that may arise.

3. Telephone counseling to resolve any doubt related to medical, nutritional, psychological, and other issues.

Encouraging the purchase of long-term care insurance as a supplement to public coverage will allow the dependent to continue to receive care in their own home. In addition, it will reduce the burden of care on family members or legal guardians who always end up having to provide care, thus avoiding the emotional stress and physical costs associated with caring for dependent relatives and preserving assets.

The costs arising from the care need to be covered in the face of aging due to the increased likelihood of becoming dependent are considerably high (adaptation of the usual dwelling, residence, home help, etc.).

Facing this level of expenditure can lead to a budgetary imbalance in income and even cause irreversible damage to the family's saved assets.

It should be noted that some companies are starting to develop corporate welfare plans for their employees. In this context, the concept of "caring for the carer" is being promoted by allowing flexible working hours and assuming the costs of psychological support for the employee, discounts on materials, and facilitating access to special medical services for the dependent.

Challenges

The great challenges that future societies will have to face are to expand the needs that are currently being met not only because of deficiencies in certain aspects but also because of the professionalization of carers and technological advances.

The priority falls on the care sector as one of the cornerstones, whose staff must be highly qualified, requiring them to have the interpersonal and technological skills to adapt care to health advances and to provide support in cases of complex long-term care needs. If a family network is available to complement care, a multidisciplinary care plan should be defined between the caregiver and the family member to provide the best care for the dependent.

Informal carers should be provided with information, training, and counseling as well as respite care to enable them to take a break from caregiving and psychological support. Also, people with caring responsibilities should be remunerated so that they can devote themselves fully to the dependent person or be given adequate time off to care for dependent family members so that they are not forced to reduce or leave the labor market.

A well-equipped and quality residential area is another basic aspect. While priority is given to home care over residential care, the offer in terms of residential institutions must be extended, increasing the number of care places when sufficient services cannot be provided at home.

Japan Case

In this context of population aging, we want to show the example of how Japan and its society are being affected by these circumstances and how it is beginning to propose possible solutions.

Japan is the country with the highest aging rate, where 27% of the population is aged 65 or over. In contrast, its birth rate has fallen sharply as a result of the lack of work-life balance and low social incentives to have children. These factors have conditioned life expectancy, which has been increasing due to the healthy lifestyle habits of its citizens whose elderly population has grown compared to the working-age population. This scenario does not make Japan the best country in which to grow old, in terms of autonomy.

Because of this, the social pension is being affected in terms of resources for pensioners, and the social pension is non-existent for those who have not worked. This means that there is a lack of income in the family nucleus. Moreover, related to the latter, it can also be observed how changes in family models, which are evolving towards family structures with fewer members, are increasing unwanted loneliness.

The current Long-Term Welfare Insurance scheme obliges people over 40 to pay premiums to cover the costs of services offered to people aged 65 and over, which guarantees them housing or access to health services but does not take into account how to deal with unwanted loneliness or how to ensure the sustainability of the system in the long term. Because of this and the social circumstances outlined above, it is insufficient.

Based on this situation, different solutions are beginning to be considered. On the one hand, to increase solvency and to be able to meet these costs, the state is taking measures to reduce the gender employment gap and to prevent women from having to give up their professional lives, as has been the case up to now. On the other hand, the labor market is beginning to open up to foreigners to increase the active population. In this way, resources are increased insurance can be continued and, for example, social pensions or support networks for the lonely can be promoted.

Key Takeaways

Due to this social change that is taking place, the management of resources dedicated to covering the different casuistry of dependency is lagging behind the needs that have been mentioned.

The private sector has here, therefore, an important challenge to support the public sector in helping the dependent person.

In this field,

• Insurance companies should consider the creation of new products focused on covering the different situations of dependency and making them as accessible as possible. Related to this, and linked to the current savings products, they should be redesigned to provide them with sufficient capacity to cover the new needs that dependency has brought to the table.

• One of the changes seen in the private sector is the focus on the employee that corporations are developing, within the scope of so-called "corporate well-being". Specifically within these actions is the initiative "caring for the caregiver. In addition to helping the employee's situation concerning dependency, the company itself is fostering the employee's sense of belonging and loyalty.

• On the other hand, new technologies will play a fundamental role in the development of tools and means for adequate and early detection of dependency allowing the insurer (to provide a more tailored risk profile and a more personalized product for the client) and improve the needs of the dependent and facilitate the task of the carer (for example by using wearables and gadgets to enable real-time contact between the dependent, the carer and the health services).

To encourage this change, the private sector can rely on the sector's technology companies, which already have a great deal of experience and vision in this field at a global level. This experience, in addition to that of the insurance sector itself, has important support, as we have seen, in the new technologies that are currently being developed.