Long-term care insurance (LTCI) is booming in France: the market has grown by almost 50% in the last 18 months. Everything is relative, of course, and total sales amount to just 750,000 policies sold, and that is over a 15-year period.
Although LTCI policies have been around for a long while, as in most other markets sales were painfully slow. The product seemed expensive, and elderly care was a subject most people shied away from. But the introduction in 1997 of the prestation spécifique dépendance, a state LTC benefit administered by the départments, stimulated public awareness of elderly care and the need for private funding.
With something of a spotlight on elderly care, LTCI has been seen as a way of topping up the state contribution and taking some of the uncertainty out of funding. Products have been mainly risk plans or variations of deferred annuities, although a few savings-related plans have been available. But the first generation of products has not necessarily brought total peace of mind, paying out only in respect of the more severe degrees of incapacity. Newer-generation plans, though, are more flexible, paying out in a wider variety of situations.
There is market for group products, with premium payments split between employer and employee or being entirely employee-paid. In a labour market favouring employers, some firms are wary of adding to their costs via a new paid-for employee benefit, especially when they are legally required to make the benefit available to all their staff. Nevertheless, group plans account for about a fifth of the total LTCI business written to date.
AG2R, the insurance and pensions provider owned by the association of employers and trade unions, is a long-standing writer of LTCI, with a total of 200,000 policies in force. Naturally, it is strong in group plans. Pierre Aurelly of AG2R says: “We believe there is strong potential for growth in this market. Increasing numbers will be covered while they are at work and will continue paying premiums from their own resources after they retire.”
Three companies have about 90% of the individual market between them. Groupama has been catching up AG2R, and is approaching the 200,000 sales mark. The other significant player is ACM, a Strasbourg-based bancassurer, with 50,000 policies. A new entrant to the market is Predica/Crédit Agricole.
The main buyers of LTCI come from middle-income groups and are typically in their early 60s. Average benefits vary between Ffr1,500 (e235) and Ffr3,000 a month. In the context of average care home costs of Ffr15,000 a month, this is not much, but most people aim to supplement state benefits and relieve pressure on their own finances.
Even though LTCI is gaining a wider acceptance, it is still perceived to be an expensive cover and premiums, therefore, need to be kept as low as is prudently possible. Sales staff need motivation and careful training, including how to approach the subject of elderly care and its funding.
Reassurer SCOR, which has about 80% of the LTCI reassurance market, is not relaxing on the technical side. It is investing heavily in an international research centre funded jointly with INSERM, the Institut National de la Santé et de la Recherche Médicale. INSERM has taken a special interest in loss of independence and is undertaking a major study into the causes and the physical and functional effects of ageing. “Because life expectancy is increasing all the time, we believe that long-term care will become a major product area,” says SCOR’s Fenelon. “By setting up our own research centre we will be able to understand more about the LTC risk and forecast market trends.”
Although the French LTCI market is the biggest in Europe in terms of sales, penetration is, of course, still low compared with other products. There might be growing awareness of long-term care among consumers, but reluctance to put private funding mechanisms in place via an efficient financial tool like LTCI remains widespread. Group plans too could be key: a handful of the big French corporations signing up could point the way for other firms.
But the biggest spur to the market could be a new law already passed by parliament and due to be effected shortly, replacing the prestation spécifique dépendance. Eligibility will be widened, benefits will be paid in respect of lower degrees of incapacity, and the ability of the state to reclaim on death the benefits paid will be rescinded.