Eldershield - long term care insurance

Eldershield is a long term care insurance introduced by the Ministry of Health in Singapore and managed by private insurers. The benefits are indequate, as stated by Professor Phua Kai Hong. Here is a report http://www.todayonline.com/Singapore/EDC120426-0000068/ElderShield-under-fire

The journalist asked for my views about what can be done to promote Eldershield. Here is my full reply (of which only a small portion was mentioned in the article).

Statement by Tan Kin Lian

For long term care insurance to work, it is important for the Government to take the lead and also to set the framework to ensure that the consumers are treated fairly.

In the case of life insurance, it is easy to determine the eligibility for a claim, based on the certificate of death. The eligibility for a long term care claim can be subject to dispute between the claimant or his family and the insurance company. The definition of eligibility for a long term care payment depends on the inability to perform at least 3 out of the specified 6 activities of daily living - washing, dressing, feeding, toileting, mobility and transferring. As you can see from the definition, each of these disability may be difficult to define.

If there is no Government involvement to set the framework to determine the eligibility for a claim, the insurance company can be quite strict in interpreting the eligibility to the detriment of the consumer, and the consumer will usually not have the financial means to challenge the decision of the insurance company. Due to lack of clarity and transparency, it is likely that consumers will not trust the insurance company or the long term care insurance product.

The involvement of the Government goes beyond the framework for approval of the claims. The Government should also carry out audits to ensure that the insurance companies are pricing the insurance product fairly and are not making excessive profits by over-charging the consumers, or are reckless in under-pricing their product and hence face the prospect of insolvency.

The Government should also consider giving some tax or fiscal incentives to encourage consumers to buy the long term care insurance. At present, the Government allows the Medisave savings to be used to buy the insurance product. This is helpful but is not sufficient. 

It will be more useful if the Government decides to bear 30% (say) of the cost of the long term care insurance, so that consumers need only to pay 70% of the actual cost. This will encourage consumers to buy the long term care product and make it attractive for insurance companies to compete for this attractive market. 

In many countries, the Government has found that some form of tax or fiscal incentives is helpful to develop the insurance market and to overcome the resistance of consumers to set aside money for their future needs. Singapore should follow the experience of these countries, in order to get our citizens to plan for their future needs.

Background: 
Tan Kin Lian was the former chief executive of NTUC Income. He is now the director of a consultancy and software development company called Tan Kin Lian & Associates Pte ltd. He is also the Founder and President of the Financial Services Consumer Association (FISCA), an organisation with the aim of educating consumers on financial planning, insurance and investments, and to promote the interest of consumers. (www.fisca.sg).