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Flexible insurance for long-term care: A study of stated preferences


A new study published in the Journal of Risk and Insurance by Dr Shang Wu, Professor Hazel Bateman, Dr Ralph Stevens and Professor Susan Thorp of the ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW Sydney, and the University of Sydney Business School, investigates pre-retirees’ demand for flexible insurance that can finance informal long-term care (LTC).

Ageing societies need efficient and flexible systems to finance care for older adults, and although many people will need long-term care (LTC) later in their lives, LTC insurance is not available in many countries, and even where it is, few people buy it, according to the paper.

To study the suitability of current LTC insurance products, the researchers collected and analysed survey data on pre-retirees' demand for flexible LTC insurance, where the insurance income can be used to pay for formal professional care or support informal care from family and friends.

They find that around 75% of the sample of 1,008 pre-retirees choose to use some of their retirement savings to purchase this flexible LTC insurance, especially women who expect to receive most care from family or friends. Offering this flexible LTC insurance can also boost healthier older adults’ demand for longevity insurance (life annuities) because they do not need a rainy-day fund for LTC risk.

Wu, S., Bateman, H., Stevens, R., & Thorp, S. (2022). Flexible insurance for long-term care: A study of stated preferences. Journal of Risk and Insurance, 1– 36. 

The paper was presented at the Forum on Financing and Future Proofing Aged Care. View the recording here.