Long-term care insurance (LTCI) is to be fully regulated to help
prevent the mis-selling and buying of unsuitable policies,
according to the Treasury.
The Financial Services Authority will have responsibility for
regulating the selling and marketing of LTCI products, announced
Treasury economic secretary Ruth Kelly this week.
“If someone eventually needs care, they don’t want to find that
their insurance won’t pay out for the level of care they expected
when they paid the premiums. Regulation seeks to prevent this type
of scenario,” she said.
The government received 39 responses to its consultation
document, of which 24 said LTCI should be regulated by the FSA,
with some insurance companies arguing for a “lighter touch”
regulation, while consumer groups said all medical insurance
products should be regulated by statute.
Launched in 1991, 14 companies now offer long-term care
financial plans with about 34,000 policies in force. However, the
Treasury believes that LTCI could be more attractive to consumers
because of various government initiatives – such as the three-month
disregard of a person’s home in care charges after admission to
residential care, free nursing care, and changes in capital asset
limits – which will have the effect of making insurance premiums
cheaper and more affordable for consumers.