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

Abstract

Aging societies need efficient and flexible systems to finance care for the frail elderly. We study pre-retirees' demand for flexible insurance that can finance informal long-term care by paying income in poor health states instead of reimbursing formal care costs.We collect and analyze stated preferences for this longterm care income product, and preferences for informal care. When asked to allocate wealth to a life annuity, a liquid investment and flexible long-term care insurance, around 75% of our sample of 1008 preretirees choose some long-term care cover. Study participants treat long-term care income insurance as a complement to informal care from their families. Females who expect to rely exclusively on extensive care from family members prefer more cover than similar males. We also find that if long-term care income insurance were available, some healthier seniors would purchase additional longevity insurance, using liquid funds otherwise set aside to self-insure long-term care risk.

Long-Term Care Insurance Financing Using Home Equity Release: Evidence from an Online Experimental Survey

“…In the following discussion, we discuss the association between demand for each of the three long-term care financing products and the covariates. We compare our results to those of related studies on the demand for long-term care insurance conducted in Australia (Wu et al, 2021), Canada (Boyer et al, 2017), France (Courbage and Roudaut, 2008), Hong Kong (He andChou, 2018), Spain (Costa-Font andRovira-Forns, 2008;Jiménez-Martín et al, 2016), and the US (Brown and Finkelstein, 2008;Brown et al, 2012;Chatterjee and Fan, 2017;Gottlieb and Mitchell, 2020;McGarry et al, 2014;Schaber and Stum, 2007;Sloan and Norton, 1997;Van Houtven et al, 2015). We note that these studies did not assess the demand for products that combine long-term care and home equity release (as in the present study).…”

Life care annuities to help couples cope with the cost of long-term care

“…In particular, their results show that uptake for integrated products is likely to remain concentrated among wealthier and subjectively healthier individuals. Wu et al (2022) measure potential purchasers' interest in LTC income insurance by collecting the stated preferences of a representative sample of over 1,000 Australian preretirees. Their results show that LTC income insurance is seen as complementary to informal care and is attractive to seniors who plan to rely on family members for extensive care.…”

Long-Term Care Insurance Financing Using Home Equity Release: Evidence from an Online Experimental Survey

“…We developed a first draft of the survey based on related studies on the demand for long-term care insurance (Wu et al, 2021) and reverse mortgages (e.g., Dillingh et al, 2017;Fornero et al, 2016;Davidoff et al, 2019;Hanewald et al, 2020a). We used focus groups to pre-test the survey design-particularly the wording and level of detail of long-term care insurance product descriptions and the format of the choice tasks.…”

“…The participants then saw a screen titled "Facts about health states and long-term care", which explained long-term care, health status, and other key technical terms used in the survey in easy-to-understand language (see Figure 2). We developed this description based on insights from the focus group testing and previous research (Wu et al, 2021). We provided estimates for the chance of requiring long-term care for men aged 60 and women aged 55.…”

“…We also included an instructional manipulation check (IMC), which allowed us to identify inattention by repeating a question in the survey and asking the participants whether they had seen this question before (Oppenheimer et al, 2009). Questions eliciting bequest preferences, subjective views on retirement plans, and house price expectations were adopted from related studies on life care annuities and reverse mortgages (Davidoff et al, 2017;Wu et al, 2021;Hanewald et al, 2020a). We also measured the time taken to complete the survey.…”