Matters of life and death

If you go to see a financial adviser, nearly always expect them to mention insurance. Sometimes, people do need it. If you are the sole breadwinner for six young children who would be sent to a hostel if you die without life cover the case is clear-cut. But in many cases, it is not.

Over the next few pages, we tell you about four kinds of cover you may want to consider: life, critical illness, permanent health and long-term care. We explore developments that may reshape the insurance market in the next decade or two. You will want to think about the implications, particularly if you are young, since many financial advisers will urge you to take out policies now to lock into cheaper rates than you would get in middle age.

Life expectancy is key. Babies born in the UK at the start of this millennium can hope to live to see in 2100. While men can now expect to live until they are 74 and women until 79, life expectancy is growing dramatically. At times in the last century, it was rising two years every decade.For the insurance world, this will mean a diminishing emphasis on life cover.

In the past, insurers - who always like to have a moral case - told customers they had a duty to provide for their dependents in case they died.

The firms even used to make this case for single people who had no dependents but might, as the insurers saw it, want to ensure that all their bills were paid so that if they died young, their parents did not have untidy finances to clear up.This nonsense is now dying out, and most financial advisers now accept that childless singletons have little need of life cover.

But generally as people live longer, premiums should go down on term assurance - life policies that cover a particular period, usually the lifetime of a mortgage.

Work and disability

In the past, an injury or illness could have ended your job as a miner, nurse or maid. But John Knell, of the Industrial Society think-tank, says: 'As jobs shift from physical work to being knowledge-based, fewer people will find that having a bad back or a chronic problem with their knee stops them doing their job.'

This means fewer people will need to claim on permanent health plans for losing their jobs because of ill health.

Changes are already starting to work through here. The Disability Discrimination Act of 1995 made it illegal to discriminate against people who have long-term medical conditions. Many cases have been brought under this law, and employers are increasingly trying to accommodate workers who have diabetes, industrial accidents, depression and other problems.

A demographic shortage of twenty-something workers is making employers search harder for older employees. 'The balance of power has changed in the South of England,' says employment lawyer James Davies of solicitor Lewis Silkin. Employers now have to work far harder to retain staff.

The bosses' changed attitudes will, in turn, raise the employment rate among disabled people. Only half of the disabled of working age now have jobs, though some groups do better: 68 per cent of the country's 300,000 diabetics are employed, for example.

As employers become better informed and better equipped to deal with individual cases, employment rates will rise among other disabled people.

Breakthroughs

One of the biggest medical stories so far this year has been the successful work in the search for a cure for Alzheimer's disease. Since an estimated 700,000 people suffer from dementia, the implications of scientific research are enormous.

A cure for Alzheimer's would change the equations that long-term care insurers build into their formulae for setting premiums. Govern ment campaigns to reduce the numbers of cancer deaths could also have a significant effect. And if you live in an area that has a first-rate approach to the treatment of stroke sufferers, your chances of maintaining a good quality of life after such an illness will also be substantially improved.

Yet people do have to die of something in the end. The ideal would probably be to go suddenly after a lifetime of good health, but we cannot be sure this will be the pattern after we reduce the impact of the current big killers. One of the spooky questions for the new millennium will be to discover the modern causes of death after science does away with the traditional ones.

The NHS

Promising 7,000 new NHS hospital beds by 2004 and 100 new hospitals by 2010, the Government is increasing health spending.

But will this, in the long run, make us healthier? And might this policy change if the Conservative Party ever came to power again?

British politicians are unlikely to dismantle the NHS much further, although they have already privatised discreet areas such as dentistry, says Brendan Donnelly, former Tory MEP and healthcare specialist.

'The NHS is one of the things that defines us as a country,' he says. 'If there are going to be fundamental changes to the NHS it will be because the Labour Government spends a lot more money on health and concludes that the extra did not make a difference.'

Genetic testing

The principle was accepted last November that insurers would be able to make use of some kinds of genetic testing information. If such tests become more widespread and insurers are given greater access to the results, a lot of the insurance market could disappear altogether in the long run.

If buildings insurers jack up premiums on houses in floodplains, you can bet the same will happen to vulnerable people's medical cover, permanent health insurance, critical illness, life cover and long-term care plans.

Well-cushioned against the worst

William Stolten is one of that unusual and
quite small band of people who are quite happy
to pay large sums of money to insurance
companies to buy protection.

William, a 43-year-old recruitment consultant from
Ashford, Kent, pays about ?50 a month into a
permanent health policy, which would pay out
about ?400 a month if he was struck down by a
serious illness and unable to continue to work.

This PHI plan - arranged through his financial
adviser, Torquil Clark - is a relatively uncommon
form of insurance for ordinary people to buy.

There are about 1.5 million PHI policies in place
in the UK, according to the Association of British
Insurers.

'It makes you feel a lot better knowing that there
is a cushion,' William says.

'I can see that if you don't have this type of cover,
you are possibly looking at a fair amount of
misery.'

The ?400 a month he would get would not cover
all his bills, but it would help maintain his
standard of living.

As insurer Friends Provident puts it in its
literature: 'Statutory sick pay and other state
benefits provided by the Government may help.
However, they are principally designed to protect
against poverty, and do not provide sufficient
income to maintain most people's standard of
living.'

Although he is happy to pay for the cover, he did
not get around to it until Torquil Clark raised the
issue with him. He was then very positive about it
- particularly since 'my mortgage has been rising
over the years'.

Not only did he buy the permanent health cover,
but he also bought a policy to pay his mortgage in
the event of accident or sickness.

He accepts that all this cover costs him a fair
amount, but has no doubt that it is worth while.

'You get what you pay for,' says William. 'These
policies do cover quite a few things.'