If the market shows promise it is because, in the future, the aging population will result in higher health care costs. It is in older people's best interests to obtain coverage so that they will be able to pay for their care.
Today, the average cost of a private room in a Quebec long-term care facility is $1,637 a month. But health care fees are increasing. "They should increase by more than $25 billion every year. Every 90 seconds, a baby boomer celebrates his 50th birthday. No less than 250,000 Canadians reach age 65 every year," remarked Greg Pearson, an independent insurance advisor with Living Benefits Solutions. As a result, he says that 25% of the Quebec population will be over age 65 by 2031. "The province will have one of the oldest populations in the world," he comments.
In Canada, 60,000 long-term care policies were sold in 2009, which represents a total of $80 million in premiums. The market itself consists of 33 million prospective clients, which means that only 2% of the market is covered.
This weak penetration rate can be explained by several factors. First of all, these products are not popular with the general public. "Potential clients who do not need it at the moment, do not want to think about it. But they forget that the government is not going to cover these costs. The provincial governments have cut expenses allocated to health care," noted Dr. Frankel. He pointed out that financial aid for activities of daily living (washing, dressing, bathing, etc.) has dropped from 46% to 35% in eight years.
Secondly, advisors have a hard time selling these products to potential beneficiaries and their families, never mind the fact that they don't always understand the product. As a result, Dr. Frankel says that the introduction of the product to the Canadian market has taken longer than in the United States.
There is a way to overcome these challenges. "We have to make sure agents who sell the product understand it well. Then they will be able to increase prospects' awareness. We must keep in mind that clients are not necessarily over age 65," commented Frédéric Jacques, Assistant Vice President of living benefits at Munich Re.