1) Populations are aging globally as life expectancies increase, resulting in more people living longer portions of their lives with disability and illness. 2) This aging trends poses massive challenges for public services like healthcare and is straining budgets due to the high costs of caring for older populations. 3) Insurance products that help fund long-term care costs are needed but developing viable products is difficult given the risks involved in insuring an aging population.

1. Living longer. Living poorer.
The challenge of caring
for a greying population
infocus
Issue No. 67, April 2015

2. Here’s the good news: we are all living longer, not just from
birth but our life expectancy at retirement has increased. By
2062 females are projected to be living 60% longer than in
1982 and male life expectancy at 65 will have almost doubledi.
A lot of this is owed to increased survival from circulatory
disease (and heart attacks in particular) and a related decrease
in smoking prevalence. Coupled with generally falling or flat
birth rates, in the West at least, as a result we are witnessing
a profound demographic shift as the number of over 60s will
double in the first half of the 21st century and the number of
the oldest old (>85) will treble.
And here’s the bad news, while we are living longer, a third of
our older age is spent dealing with profound ill-health. So for
example, while the average 65 year old in 2010 could expect
to live until their mid-80s, their last twelve years would be
spent with disabilityii.
These changes have massive implications in almost all areas
of public planning, from health and social care provision to
volume of tax receipts as people exit the workplace. A glance
of the newspaper headlines show that these are fast becoming
urgent political problems being wrestled with across the globe,
Graph 1: Growth in over 60s and Alzheimer disease: UK
 Proportion of over 60s with Alzheimer’s
from issues to funding the NHS in the UK, to the success of
Obamacare in the USA and Abenomics in Japaniii.
As mentioned above, medical science’s success in tackling the
mortality associated with the triple scourge of ischaemic heart
2 | Hannover Re UK Life Branch
2005
0m
5m
10m
15m
20m
25m 10%
8%
6%
4%
2%
0%
2013 2015 2020 2025 2051

3. Parkinsonian diseases. As graph 1 and 2 demonstrate, the
number of over 65’s is directly correlated with a surge in
these diseases. However, increases in single diseases is not
the whole problem as one of the features of ageing is that
ill-health and disability is seldom caused by one or even two
chronic illnesses but a constellation of co-morbidity. Care costs
for the elderly, whether funded by the state or individually, will
consequently and exponentially increase as we live longer but in
poorer health.
Should we be worried?
Given the elderly already consume three times more acute care
services and ten time more long-term care than the non-elderly
per capita, it is a simple fact of economics that governments
cannot afford to fund the spiralling costs associated with this
demographic change and the resulting need for elderly careiv.
In the US for example, Medicare is predicted to run out by
2030v, and in the UK, while the Government has allocated the
seemingly huge figure of £3.8bn for the ‘Better Care Fund’,
and 57% of local government spending is on social care for the
elderly, it’s clear such continued expenditure is unsustainablevi.
Amongst the public, the idea that we must make our own
Graph 2: Global projected number of people over 50
with Parkinson’s Disease 2005-2030
 China  W. Europe  USA  India
 Russia  Brazil  Japan
disease, cancer and tobacco addiction has meant a rise in the
prevalence of more insidious ill-health issues, particularly
those associated with neuro-degeneration; dementias and
Hannover Re UK Life Branch | 3
2005
0m
1m
2m
3m
4m
5m
2010 2015 2020 2025 2030

4. Graph 3: Would consumers buy an insurance product that provided
funds for care in old age (their own care or that of a relative)?
 Yes  No  Not sure
It is essential therefore, that the Life and Health Insurance
industry provides affordable and accessible products to
meet this increasing requirement for both disability and care
provision in the over 60s. And we must go further than that,
convincing the public that these products are not only available,
but are an absolute need. Of course designing and pricing these
products is tricky given the burden of risks involved.
provision for care needs is beginning to take root, with worries
about old age care costs topping a list of financial worries for
45-65 year olds in a recent surveyvii. However, society appears
to be lethargic about actually doing something about these fears
as 90% of over 65 year olds have no long term care provisionviii.
However there are signs this may be changing. Research from
The Syndicate 2015 shows there is a growing propensity,
especially in the younger generations, to consider purchasing
an insurance product to help fund care in old age. Nearly one
quarter of the survey respondents claimed they would consider
purchasing an insurance product to fund their care in old age,
mainly ‘not to be a burden’ on others and society. These findings
were particularly interesting when compared to the percentage
that instead showed interest in purchasing an insurance product
to fund relatives’ care, which was just 12% (see graph 3).
Clearly there is a growing perception amongst consumers that
funding care in old age should be an individual responsibilityix.
Lack of finance and poor financial planning leads ultimately to
lack of choice, and choice is clearly important for end of life care
as only around 3% would like to be cared for in a residential
care home; the majority would prefer to be at homex.
4 | Hannover Re UK Life Branch
Caring for
relatives
Their care
in old age
23% 35% 42%
12% 49% 40%

5. Frailty
One way to measure this burden is to assess the prevalence
of frailty. There is no precise universally accepted definition
of frailty, but it is generally seen as an increased risk of poor
health because of progressive decline in the function and
capacity of multiple body systems. More simply it is a failure
to ‘bounce back’ and be resilient to life events. As we age,
we become more likely to die or be permanently ill. Frailty
therefore is strongly correlated with age (see table 1).
Table 1: Presence of Frailty in Canada. Rookwood 2011xi
Age 15-39 40-69 >70
Relatively fit 61.5% 47.5% 22.6%
Less fit 25.9% 28.5% 30.2%
Least fit 10.2% 16.0% 25.0%
Frail 2.4% 8.0% 22.2%
There have been a number of attempts to classify what frailty
precisely means; Fried and colleagues for example see it as a
specific syndrome or phenotype, characterised by the presence
of three of the following highly specific attributes; weight loss,
exhaustion, weakness (usually measured as grip strength),
slowness and low activity measuresxii. Alternatively Rookwood
and colleagues in Canada see frailty as a state that presents
itself because of the accumulation of a set of deficits in a frailty
index (FI); those with few deficits are ‘fit’ whilst those with
many are ‘frail’. Typically a FI consists of around 30-70 deficits
(see Appendix 1 for an example) ranging from the presence
of certain diseases (Alzheimer’s, Parkinson’s, Diabetes etc.),
disabilities (sight, hearing loss etc.) and functional abilities
(dressing, washing, shopping etc.)xiii Numerous studies ranging
from China, the USA, Canada and Europe have shown that a
FI score of >0.15 (6 out of 40 deficits present for example) is
a better predictor of death than chronological agexiv. Use of a
frailty index could be an excellent method of differentiating
between individual risks in the older population.
However, one of the flaws with a fully-fledged FI model is the
complexity and number of variables involved in terms of assessing
whether an individual is frail or not. Instead a modified, simpler
and more understandable method would be to use assessments
of Activities of Daily Living (ADL); this has a further advantage
in that these are widely understood by the life insurance industry
and are adequately adaptable in any disability product design.
Hannover Re UK Life Branch | 5

6. any top-up care provision over and above that deemed essential.
Table 2: ADLs v IADLs
Activities of Daily Living (ADL)
Instrumental Activities
of Daily Living (IADLS)
Essential activities that are a
requirement of life, these include:
• Bathing
• Dressing
• Communication
• Feeding
• Toileting
• Movement between rooms
and/or in and out of bed
Devised by Lawton in 1969, these
are actions or tasks that measure
ability to perform in the general
community setting, these include:
• Housework
• Taking medications
as prescribed
• Managing money
• Shopping for groceries
or clothing
• Use of telephone or other form
of communication
• Using technology (as applicable)
• Transportation within
the community
There is therefore clearly a need for the provision of financial
products to enable people to pay for the care they need and expect
without exhausting their lifetime savings or selling their homes.
At Hannover Re UK Life Branch we have successfully worked with
a number of clients on devising and creating products to meet
For example, having ADL disability adds roughly 10 years to
age or halves life expectancy in older lives. In underwriting
terms having at least 1 ADL disability is equivalent to 50-100%
extra mortalityxv, xvi. There are several different scales of ADL
(see table 2), but the two most common are basic ADL (widely
used in Critical Illness insurance) and instrumental type (IADL).
One way to differentiate between them is to think that they
measure different stages of care need, IADLs assess whether
a person requires assistance, whereas ADLs assess whether
a person needs constant care. Both of these measures could
be used as different triggers for different payment events.
Of course ADL/IADL are very physical measures, they don’t
capture any cognitive impairment (as in Dementia) until fairly
advanced. A product aimed at long-term care should therefore
also include provision for claim pay out for cognitive decline.
With the UK Care Act (May 2014) recently gaining royal assent,
some of the issues around the sustainability of funding care
and its impact on both public and individual finance are being
addressed. However some fundamental problems remain; while
this legislation safeguards that an individual should in their
lifetime pay no more than a specific cap (currently £72,000), it
excludes accommodation costs (the ‘bed and board’ fees) and
6 | Hannover Re UK Life Branch

7. Hannover Re UK Life Branch | 7
Appendix 1
Variables in a typical Frailty Index.
FRAILTY
Physical
Cardiovascular/
Pulmonary
Neuro-degenerative Sensory Psychological Other Morbidity
• Falls
• Activity level
• Walking ability
• Dressing
• Bathing
• Going out
• Low/High BMI
• Arthritis
• MI/Angina
• Stroke
• Hypertension
• Tachycardia
• Chronic Obstructive
Airways Disease
• Bronchitis
• Shortness of breath
• Asthma
• Alzheimer’s
• Dementia
• Parkinson’s
• Other cognitive
decline
• Hearing difficulty
• Deafness
• Eyesight problems
• Cataracts
• Glaucoma
• Depression
• Low mood
• Social isolation
• Cancer
• Diabetes
• Thyroid disease
• Ulcers
these needs. This work has been derived from our experience in
the health, life and longevity sectors. We would be delighted to
discuss this or any other product innovation with you.
Paul Edwards
Manager Medical Risk
Sources:
i ONS http://www.ons.gov.uk/ons/dcp171778_345078.pdf
ii Later Life in the UK, October 2014, Age UK
iii The Economist, ’Age Invaders’ 24 April 2014
iv Jackson, R., Howe, N., and Peter, T., ‘The Global Aging Preparedness
Index’ 2nd Ed 2013. Centre for Strategic & International Studies
v Reuters, July 28 2014, http://www.reuters.com/article/2014/07/28/
usa-fiscal-health-idUSL2N0Q310320140728
vi Age UK, Care in Crisis 2014, http://www.ageuk.org.uk/
Documents/EN-GB/Campaigns/CIC/Care_in_Crisis_report_2014.
pdf?epslanguage=en-GB?dtrk%3dtrue
Continued overleaf

8. www.hannoverlifere.co.uk
vii Health Insurance and Protection Daily, ‘Old age care costs ‘top
financial fear for 45-64 year olds’ 14 September 2014
viii Health Insurance and Protection Daily, ‘Over 90% of over 65s have
made no plans for care and are confused about their options’ 8
October 2014
ix The Syndicate Research 2015, online omnibus research conducted
in September 2014, 2,000 respondents, GB nationally representative
weighted sample
x The Care Choice Gap, Consultus Care and Nursing Report, 16
September 2014 http://www.consultuscare.com/_app_/resources/
documents/www.consultuscare.com/care-choice-gap/care-choice-
gap-report.pdf
xi Rockwood, K, et al., “Changes in relative fitness and frailty across
the adult lifespan: evidence from the Canadian National Population
Health Survey”, Canadian Medical Association Journal, 2011
xii Moorhouse, P. and Rookwood, K. ‘Frailty and its quantitative clinical
evaluation’ J R Coll Physicians Edinb 2012; 42; 333-40
xiii Fried LP, Tangen CM, Walston J et al. Frailty in older adults:
evidence for a phenotype. J Gerontol A Biol Sci Med Sci
2001;56:M146–56. http://dx.doi.org/10.1093/gerona/56.3.M146
xiv Romero-Ortuno, R, et al., “The Frailty index in Europeans: an
association with age and mortality”, Age and ageing, 2012, Vol. 41
(5),684-689
xv Keeler E .,‘The Impact of Functional Status on Life Expectancy
in Older Persons’ J Gerontology A Biol Sci Med Sci. July 2010;
65(7):727–733
xvi Steineman, M.G., et al ‘All-Cause 1-, 5-, and 10-Year Mortality in
Elderly People According to Activities of Daily Living Stage’ J A
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