Boris Johnson Blindsides Insurers Under Pressure to Act on Care
(Bloomberg) -- When U.K. Prime Minister Boris Johnson laid out plans this week to raise taxes to their highest ever to reform the country’s social care industry, he suggested that private insurers would help plug a funding gap.
Thing is, nobody appears to have warned the insurance companies.
Johnson’s brief remark sent industry executives scrambling. The plan potentially opened the door to an instant new market or novel products -- but also brought dozens of questions about rules and risks. One senior executive warned the industry is unlikely to rush in and help.
The package seeks to address a years-old problem that sees older people forced to sell their homes to pay for full-time care. The proposal will see the government pay for costs above 86,000 pounds ($119,000), with the prime minister implying that insurance companies could offer products to help protect people against that initial expense.
“The private insurance market will now have the certainty to come forward,” a spokesman for Johnson said on Wednesday.
For now, firms are resigned to wait for the government to publish a consultation document that spells out what ministers have in mind. The lack of coordination with industry isn’t unusual when it comes to recent U.K. government announcements, people familiar with several major insurance company deliberations said.
“The simpler and clearer the rules about what the state will provide, the easier it will be for insurers to respond to and support customers with what is not covered,” Huw Evans, Director General of the Association of British Insurers, said in a statement. The industry body is currently trying to flesh out what the government has in mind, a person familiar with the group’s plans said.
The head of Zurich Insurance Group AG, one of Europe’s largest insurance companies with a significant life business in the U.K., said he hadn’t been involved in any discussions about the potential opportunities.
“I haven’t been talking to the government lately myself,” Mario Greco said in a Bloomberg TV interview on Friday.
“This is the first time that the state has come in to deal with the threat of these catastrophic costs, thereby enabling the private sector -- the financial services industry -- to supply the insurance products that people need to guarantee themselves against the cost of care,” Johnson said in Parliament on Wednesday.
The idea of a cap on social care costs is nothing new. A commission held under former Conservative prime minister David Cameron in 2011 made a similar suggestion, though proposed setting the cap lower at around 35,000 pounds. The implementations were delayed and finally ditched.
The industry wasn’t keen on that plan because the cap excluded some accommodation expenses and it wasn’t clear who would decide or administer peoples’ ultimate costs, said an executive at a major life insurer, who asked not to be identified.
After these latest proposals, the industry won’t roll out a slew of care products until they start to get answers from the government, the person said.
©2021 Bloomberg L.P.