Long-term Care Insurance: Where are the Opportunities in Europe?

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1 A Datamonitor Brief timely Long-term Care Insurance: Where are the Opportunities in Europe? Reacting to the latest news breaking in your industry focused Publication Date: Jun-04 Product Code: primary research The elderly population across Europe is forecast to grow substantially over the next 50 years. This will place increasing pressure on governments funding of long-term care. All countries are increasingly looking to private insurance to provide alternative solutions. Unique survey data and interview results thought-provoking For details of all Datamonitor briefs, go to: services Fresh opinions and out-of-the-box thinking

2 timely Reacting to the latest news breaking in your industry Scope and coverage Critical assessment of the potential for a long-term care insurance market in the five major European countries rating each on seven key drivers Details of demographic changes, wealth of the elderly, levels of informal and formal care, state provision and existing insurance products Examination of the US market provides insights into emerging issues for Europe and innovative product development Prospects for the medium- to long-term are assessed, examining the speed of market development and the changes that need to happen for growth to occur Key findings and highlights Reasons to purchase The very old will become a large section of society placing pressure on public sector provision. The number of 'very old' will account for 9% of the total European population by Countries expected to have the highest proportion of the population aged 80 or over in 2050 are Italy, Germany, Spain, and Sweden. There are a number of countries where the fundamentals suggest there are excellent market opportunities for LTCI. The key issue is timing. Prospects for the next five to ten years are rosy as the fast growth in those needing care starts to bite. In the meantime, there are pockets of opportunity as care delivery comes under pressure. US experience suggests that pricing long-term care insurance is fraught with difficulties and there is a strong need for a stringent underwriting process. Alternatives to insurance are emerging which may prove to be a more viable solution for Europe. Rank each country's potential based on long-term forecasts for key drivers Explore formal and informal care, the state system, entitlement conditions, and insurance products for each country Draw on lessons learned from the US to determine what should be done to ensure the European market is viable Contact us...

3 focused Table of contents EXECUTIVE SUMMARY Demographics Informal care Wealth Opportunities for long-term care insurance Lessons from the US Is there a future for long-term care insurance? INTRODUCTION What is this report about? Who is the target reader? How to use this report DEMOGRAPHICS Europe is getting older but not significantly more disabled - European population is getting older - But the old are staying healthier for longer Substantial increase expected in the numbers requiring care - Fastest growth in the numbers requiring daily care can be seen in the Netherlands, the UK and and Spain. HOUSING AND WEALTH OF THE ELDERLY - Owner occupation level vary considerably - Legal restrictions mean equity release schemes are too difficult in some countries - Elderly individuals account for around 40 per cent of the wealthy population - France and Germany show good growth opportunities Key markets FACTORS INFLUENCING DEMAND FOR LONG-TERM CARE INSURANCE - Family structure - Female labor force participation - Social attitudes to care giving - Formal care - Environment WHERE ARE THE OPPORTUNITIES FOR LONG-TERM CARE INSURANCE? France - Entitlement conditions - Homogenous risk definition means easier claims estimation - Datamonitor long-term rating 6/10 Germany - In kind and cash benefits are based on ADLs - Premiums are regulated - Entitlement conditions - Costs of care are high - Take up of supplementary private insurance is low - Datamonitor long-term rating 5/10 Italy - Costs - Supplementary private insurance - Proposals for Reform - Datamonitor long-term rating 6/10 Spain - Entitlement conditions - Funding - Supplementary insurance - Ideas for reform - Datamonitor long-term rating 8/10 UK - Supplementary insurance - Innovative products - Equity release - Datamonitor long-term rating 5/10 WHAT LESSONS CAN BE LEARNED FROM THE US? State provision - LTC insurance market - Policyholders - Policy conditions - Care at home rather than in a nursing home - Short claims history causing pricing issues in LTC - LTC as an employee benefit - Regulation ensures suitability Contact us...

4 primary research - Alternative solutions to LTCI are emerging - Individual or pooled? - Issues IS THERE A FUTURE FOR LONG-TERM CARE INSURANCE? Long-term care way behind pensions on the political agenda but will increase as assets disappear Consumer education is not the Holy Grail Pre-funding more attractive than immediate needs for insurers, but not for the public Underwriting is key Lack of interest from reinsurers will hinder development Change will take time Alternative propositions are worth exploring Bundled products may be an attractive alternative to pure LTC APPENDIX Sources of data Datamonitor Financial Services Consulting Current publications Forthcoming publications Life & Pensions Analysis Team Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Number of over 60s in Europe requiring daily care is likely to increase by 55% by 2040 UK, Spain, Netherlands and France will have faster than average growth rates of the number of over 60s requiring daily care Large variance in elderly home ownership across Europe Older customers make up most of the wealth market in 2002 Germany has the highest number of wealthy individuals, Long- and short-term growth in major European wealth markets, by number of wealthy individuals, 2002 Fastest growth is in the number of disabled people at home rather than receiving care in institutions Provision of formal care in the home varies greatly by country today Summary of potential for long-term care insurance Majority of LTCI is sold to the over 60s LIST OF TABLES Table 1: Number of wealthy individuals in major European countries, Table 2: Wealthy individuals in the UK have the highest average holding of liquid assets, 2002 LIST OF FIGURES Figure 1: Summary of potential for long-term care insurance Figure 2: Key drivers of the market for long-term care insurance Figure 3: Around 10% of Europe's population will be aged 80 or over by 2050 Figure 4: The number of over 80s will grow rapidly over the next 50 years Figure 5: European adults need care for around 8% of their life Figure 6: 'Compression of morbidity' means the percentage of disability free years is remaining constant over time Contact us...

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