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Lord Phillips of Sudbury: I was happy to add my name to this amendment. Most of what needs to be said has been said, but I want to make a few points. First, if this Bill has any popular support, I suspect that in this area it will have more support than in any other for the simple reason that it affects a great and growing number of people. Recently, in these times of difficulties for the National Health Service, we have read of the growth in private health generally. That is true too of the subject about which we are talking. Secondly, it is a matter that affects old people for a long time. They will enter into such a contract for life and it will take a sizeable part of their assets if not, in extreme cases, all of them.
Thirdly, it is clear to me that these products are very complex and sophisticated. The numbers and types of product are legion and none is simple. One has to add to that the personal complications that can beset old people, in particular lonely old people, when trying to decide what is best for them. They need to embark on what one might in effect call a series of gambles on the future. How is their health going to fare? What demands will be put on their assets? What will those assets amount to and what will their families need of them? This is a difficult set of issues for people to face, both personally and legally.
Finally, I turn to a point that is most important to me: the very people who need to confront these issues are those who have reached a stage in their lives when they are least capable of dealing with them. One does not need to conjure up black tales of wicked salesmen. Far more often it is simply the case of an old person pretending to understand that which he or she does not understand and failing to put those questions which in the prime of life he or she would have leapt to ask. Old people are highly suggestible and vulnerable.
Lord Grabiner: Perhaps I may say that my noble friend Lord Lipsey is to be complimented on his persistence in this matter. This amendment identifies a very vulnerable group in society. To omit regulation in relation to this group would send out all the wrong signals. I do not believe that it is an exaggeration to say that these are potentially shark-infested waters, but
Baroness Greengross: I rise briefly strongly to support this amendment. The noble Lord, Lord Phillips, has already told the Committee how complex these products are, as is the whole market. People need to have confidence in it and to be given a feeling of security. For example, for those purchasing an immediate care plan dealing with a situation of personal crisis, it is of particular importance that this area is regulated.
Disputes are another reason for providing good regulation. Disputes that may arise at the time of a claim need a form of independent complaints procedure. The voluntary jurisdiction by the PIA ombudsman is not sufficient.
Finally, I should like to mention training and competence. A person selling this type of product needs a great deal of knowledge of the area. That person needs to be able to explain to the purchaser the interaction between the long-term care insurance product and the state support system. It could be very damaging to some people if they purchased such a scheme. However, in order to explain it, a salesman does need to understand it thoroughly because it is not an easy area.
Furthermore, when selling these products, up-to-date advice needs to be given, balancing the benefits of the different options that are available. Also, a good knowledge of the variations in local authorities' procedures, what they make available, their rules and practices is also necessary. A new classification in training is desperately needed. For those reasons, I strongly support this amendment.
Lord Jenkin of Roding: I agree with virtually everything that has been said on this amendment. I wish to add two points. The first is that this is a market which, despite the figure stated by the noble Lord, Lord Lipsey, of 30,000 policies--that surprises me but of course I accept his word--is still in embryo. The products are extremely expensive. I made a few inquiries a couple of years ago to see whether this was perhaps a way of providing for myself and my wife, but was put off in the end because it was an extremely expensive option.
The second difficulty, which I am sure the noble Baroness, Lady Greengross, has come across, is the test of eligibility when one comes to claim. A year or two ago I took part in a series of discussions initiated by the Medical Research Council--by Professor George Radda--and addressed to the Association of British Insurers and particularly those engaged in underwriting. The MRC wanted to find out if there was a need for research to establish more appropriate tests to find out whether or not an individual would qualify under a long-term care policy. Surprising though it may seem, the tests--certainly the ones I
This is a market which is developing quite fast. I lost touch with the discussions taking place with the MRC. I hope that they are continuing because they seemed to me to be important. In the circumstances of expensive policies in a branch of insurance which is still developing and the vulnerability of individuals as expressed by other Members of the Committee, these plans are crying out to be brought into the Act.
I too am puzzled at the Government's reluctance. It was said in reply that they are considering this along with the response from the Royal Commission on Long-Term Care of the Elderly. Having been both a Treasury Minister and the Secretary of State for Social Services, I understand the Government's difficulty with the Royal Commission. It will surprise me if anything substantial comes forward on that in the next few years. But that is not a reason for refusing to bring long-term care insurance within the Bill. I hope that the Government will respond to the pleas that have come from all parts of the Chamber for that.
Baroness Dean of Thornton-le-Fylde: I too support the amendment and everything said in its favour this evening. It is probably appropriate that I declare an interest. I am a member of the General Insurance Standards Council. I do not seek to speak for the council tonight. Indeed, I have no idea what its members' views are. I am sure that if the majority of my colleagues on the council were asked, their view would be that we have not discussed it because we assumed that this area would be covered by the Financial Services and Markets Bill. It is right that it should be.
I am pleased to support the amendment. I am reluctant to be drawn into the view that regulation will deter growth in this sector. Rather, I believe the reverse. If we look at sectors which are well regulated, the consumer has confidence in them to support and buy the products. We are still suffering from the mis-selling of pensions. Many people who would be in the appropriate bracket to buy long-term care packages, will be the very people who were victims of mis-sold pensions. They will be looking for some kind of confidence and guarantee that what they are entering into--an enormous financial commitment for the individual--will be properly regulated.
The proper way to regulate would be for it to come within the purview of the Bill from the beginning, not waiting to see if there is any mis-selling and, if there has been, what damage has been done when it is too late to rectify that damage. Many of these people will be elderly. I hope that the Minister will respond positively to the amendment.
Lord Desai: If the Government are minded not to follow the recommendations of the Royal Commission, it is all the more necessary that the market should be regulated. That should be the most important priority.
I have read that most of us use care services or health services in our lifetime, and 90 per cent of that use is in the last two years of our lives. Therefore, these decisions will be very important to a lot of people. Their anxiety about choosing the right product will be all the greater. Given the mental strain that people are under when they are elderly, it is very important that they can be sure that what they buy is guaranteed to deliver the service that is claimed.
Long-term care insurance is extremely important because so many people are potentially affected by it. There are currently half a million people in nursing and residential homes, and the costs per annum are extremely high, of the order of £18,000 to £23,000 depending on the area of the country in which you live.
Most of us can confidently predict that the Government are unlikely to pick up a substantial part of that cost, and in view of their very delayed reaction to the report of the Royal Commission, it appears that they are terrified to make a decision on the subject. In view of those costs, I am not surprised.
Even personal care that is provided at home can be a substantial cost. It can be of the order of £15,000 per annum. The investment required in order to cover those costs is potentially very large indeed.
The products designed to provide all or part of these costs and to allow older people to plan with confidence are extraordinarily complex. I have carried out an exercise in relation to some of these products. I have looked at them as if I were insuring for my own future at the age of 50. It is as if there is a huge set of multiple choice hurdles in front of the intending insured. These are some of the questions. Will it be a lump sum capital bond? Will there be an insurance product linked to it? Will the capital growth pay the premium? Will it be a pure insurance product with a single premium or a monthly payment? If it is a bond, what type of bond will it be? One company has three types of bond: capital growth, capital reserve or the protection select option. Others have more types of capital bond. What conditions are excluded from the insurance? Mental health conditions like schizophrenia are often excluded from this type of insurance. When is the insurance triggered?
The noble Lord, Lord Jenkin, spoke of the rather archaic activities of daily living that are included in these insurances. How many of these activities of daily living must a person be unable to carry out before they are regarded as being severely or moderately disabled? Is there an option of a capital sum to pay for assisted devices, for example stair lifts? Are the services of an
All these options affect the cost of the insurance or the bond, and I have not even begun to address the issue of growth assumptions and how much a person may need to insure or put aside for this purpose. There are widely differing assumptions about what the cost of care will be in 10 or 20 years' time, and insurance companies use a very wide range of cost projections indeed, some of them of doubtful accuracy. In that context, is the product indexed? What charges are made and what is the administration fee? What is the establishment charge? What is the annual fund management charge? What are the encashment charges? What commission does an independent financial adviser receive?
Just looking at some of these options--this multiple choice set of hurdles--one can see that there are clearly massive traps for the unwary. At the very least, such products should be brought within the scope of the Bill. At present, they are covered only by the ABI codes of practice. In the light of the ABI's performance as regards genetic testing, I suggest that a voluntary code is not good enough. If anything, the ambit of the current amendment is rather narrower than it should be. Some of the products are not insurance products, yet they still purport to be long-term care products. Disputes and complaints should also be covered by the Bill, but the amendment does not cover them. Nevertheless, I very much hope that the Government will see the enormous sense in these proposals and that they will agree to accept the amendment.
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