For older individuals, a loss of capability as simple as being no longer able to reach down and cut one’s toenails can ultimately be a lead indicator of morbidity risk. How so? The trajectory can move to the difficulty in keeping one’s feet clean, therefore possible fungal infections, resulting in changes in gait and ultimately falls, bringing with them higher probability of broken bones.
Current LTC products may not be meeting evolving needs
In the context of long-term care insurance, a simple element such as this raises several thoughts. Traditionally, LTC insurance products have focused on immediate annuities, whole-of-life plans with long-term care acceleration riders, as well as standalone cover to provide lump sums or income streams to meet the high costs and short durations of end-of-life nursing home care.
Claims are generally triggered by the inability to perform two to three specified Activities of Daily Living (ADLs), depending on a policy’s language and structure, such as feeding, bathing, dressing, toileting, transferring (the ability to get up from a bed or chair without assistance), and continence.
Policies have also recently been incorporating mental health language, such as: “Irreversible mental incapacity loss supported by evidence of progressive loss of ability to remember, reason, and perceive; understand; express and give effect to ideas.”
As seniors worldwide are living longer than ever, current LTC products may not be meeting their evolving needs. “An Aging World 2015” from the US Census Bureau projects people older than age 65, which was 8.5% of the world’s population in 2015, will be nearly 17% by 2050 and global life expectancy, 68.6 years in 2015, will be 76.2 by 2050.
China ageing population a concern
In Asia, the story might be even more dramatic. World Bank research shows several Asian countries already have substantial and fast-growing senior populations: In 2015, approximately 13% of South Korea’s, 16% of Hong Kong’s and 27% of Japan’s were age 65 or older.
China, where 10% of its current population is 65 or older, is a particular concern. Its working-age population began to decline in 2015, and its total population may be ageing faster than that of almost any country in history. Part of its rapidly rising average age comes from the longevity of its one-child policy, which did not end until early 2016. The United Nations project that China’s dependency ratio will rise to approximately 44% by 2050.
These rapidly-rising average ages bring with them trends of increasing morbidity risk in the form of the chronic illnesses specific to older individuals, as well as higher comorbidities and the potential for longer durations of long-term care needs.
This is signalling a strengthening need for new leading indicators of risk. And perhaps, a rethink of several elements of long-term care cover itself.
A significant number of people will need institutional care and support
Talk to older people, they will tell you they want. They want to grow old in their own homes, surrounded by their special possessions and their memories. They want to age with independence, in the communities they know well, where they have friends, social ties and relationships, and want to feel safe, supported and socially valuable.
The unfortunate reality, however, is that this may not yet be possible. No one anticipates not being able to dress or feed themselves, and no one plans actively for dementia, making LTC, perhaps, the ultimate grudge purchase.
However, in the UK alone, one in four will likely need institutional care and support, and in the US, it is one in three. In addition, 80% of UK nursing home residents suffer from dementia or some other serious cognitive impairment, making these facilities difficult environments at best for the remaining 20% of sane albeit frail residents.
Rethinking of products
Today’s LTCI is designed to cover the cost of end-of-life needs, and is triggered by specific ADLs. The signs that capabilities are lessening, however, tend to emerge far earlier than the inability to perform actual ADLs, and unfortunately are usually not noted (let alone acknowledged). As in the example of someone who cannot trim their own toenails any more, these signs can be blindingly simple and therefore easy to miss but are more important today than ever.
Would a product designed to provide the means to push back the point of capability collapse prove attractive? And what would insurers need to get there? It is a much more positive sales message, but it may require some distinctly different thinking.