Unless people start to consider long-term care as part of their inheritance planning, inherited wealth may become 'a thing of the past,' the market research group Mintel says in a report on health insurance.
The boom in private health insurance spending, which rose 80 per cent in cash terms between 1989 and 1993, has been fuelled by the erosion of the welfare state and the undermining of people's confidence in health service provision, Mintel says.
Paul Hersey, the group's senior financial analyst, said the Government had failed to get its message on reforms across to the consumer, who believed the NHS was being dismantled. 'There is a fear factor helping to drive the market. People are uncertain just how much the state will provide if they are in need.'
Expenditure on health insurance rose from pounds 645m in 1989 to pounds 1.16bn last year. The two fastest-growing areas are critical illness cover - which pays out a lump sum on the diagnosis of serious illness and was almost unknown four years ago - and long-term care, first available in the UK in 1989, which provides funding for people who need constant medical attention in old age. These now take up 13 and 14 per cent of the market.
During the 1980s, many social scientists predicted a cascade of wealth to the baby- boom generation from the sale of houses inherited from their parents. However, the Mintel report says more people are being forced to sell their houses to pay for nursing care.
The predictions failed to take sufficient account of increasing life expectancy and medical advances which have 'perversely' increased older people's dependency. The recent Community Care Act means the state will no longer pay the full costs of long-term care for anyone except the very poor. Anyone with assets of more than pounds 8,000 must meet the bill themselves.
More than 50 per cent of people over 80 have some sort of limiting condition or long- term illness, the report says. Seventy per cent of people suffering from long-term illness are aged 55 and over. In 1992, an estimated 40,000 houses were sold to meet long-term nursing bills.
In a poll of more than 1,300 people, Mintel found that 78 per cent agreed that parents should spend their money looking after themselves in old age rather than storing it up to pass on in inheritance. The highest level of agreement came in the 45- 54 age-group - those most likely to have looked after elderly relatives. Those who disagreed most were aged between 25 and 34. According to Mintel, this age group may have suffered more in the recession and had higher hopes of an inheritance.
Mintel says long-term insurance can be a cheaper alternative to selling a house but only if it is taken out early - in a person's early 40s - and as an addition to a pension. Cover typically costs 4-5 per cent of earnings.
Health Insurance 1994; pounds 1,140; Mintel International, 18-19 Long Lane, London EC1A 9HE.
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