Public Policy Bulletin (7th Issue - December 2023)

3 lack of familiarity with the LTCI market. More than three-quarters of the respondents anticipated some LTC needs in old age. Almost two-thirds of the middle-aged adults in the study expected family care to be available should LTC needs arise, and only 9.1% anticipated living alone in old age. Anticipated dependence in old age powerfully predicted interest in both plans; the presence of cognitive difficulties hampered some of the respondents from making proper judgments regarding financial planning, which is unsurprising and reduced interest in the hypothetical purchase. Women were found, with higher statistical significance, to be less likely to purchase either plan, and therefore we posited that reluctance to purchase on the part of women owes primarily to the high annual premium at HK$25,440, compared with the premium of HK$14,884 for men. Women are understandably more conservative when considering such a hypothetical purchase. Variables Percentage (%) Interest in Plan 1 61.59 Interest in Plan 2 46.72 Female 60.7 Age 50-59 53 Married 86.6 Having at least 1 child 80.2 Tertiary education 21.2 Bequest motive 60.3 Preference for formal care 72.2 Concern on insurers 32.7 Low income (<10K/month) 28.2 High income (>30K/month) 16.8 Ability to afford premium 56.7 Anticipated dependence 76.8 Chronic condition 36.4 Insurance ownership 73.1 Table 2. Statistical summary of survey results Hesitancy to make long-term premium commitments The discrepancies generated between the statistical patterns for Plan 1 and Plan 2 can be explained by reference to salient differences in the key features of the two hypothetical products. Plan 1 provides a shorter payment period with a higher monthly premium, while Plan 2 trades off a much longer payment period in exchange for a significantly lower monthly premium. The factors denoted by “concerns about insurers” and “financial literacy” apparently reduce respondents’ interest in Plan 2, while these factors are negligible for Plan 1. This finding could be attributed to Plan 2’s smoothing of the total premium across a very long period of 35 years, which naturally aroused concern about uncertainties related to financial risks and insolvency that insurance companies might face over the course of such long-term contractual relationships. Strong desire for self-reliance among middle-aged adults The survey result indicates that many respondents have a strong wish for self-reliance. Half of the respondents believed that supporting LTC is primarily a familial obligation, reflecting habitual adherence to out-ofpocket payments of LTC expenses. Most respondents indicated personal savings as their principal source of LTC financing, and nearly half reported that they would pay for LTC using social welfare benefits. Around 60% expressed a bequest motive to leave considerable money to their children. For both Plan 1 and Plan 2, respondents holding other private insurance policies were more likely to indicate willingness to purchase LTCI, arguably because they preferred risk aversion. The statistical significance of negative responses to “familial obligation”, a preference for formal care, and private insurance ownership appears to reflect a desire for selfsufficiency in paying for LTC expenses. In our sample, middle-aged adults (those born between 1961 and 1980) show a remarkably strong preference for formal LTC in residential or community settings, and this preference seems to have reinforced their interest in purchasing private LTCI. The prospect of support from family members appears to have been unimportant to respondents, as it seems not to have dampened interest in LTCI purchases. These results mirror the notable changes in family structure and intergenerational dynamics that have occurred recently within families in Hong Kong. The current cohort of middle-aged Hong Kong adults is more economically independent than earlier generations and appears to have formed much lower expectations that their children or families will be the chief sources of LTC support. In fact, should chronic disability occur, they do not expect their children to support them in monetary or even in-kind terms. The effects of higher education, higher income, and the bequest motive Higher education was associated with a significantly weaker intention to purchase Plan 1. Studies suggest that higher education increases both risk aversion and the willingness to delay gratification for future benefits, a phenomenon denoted as “temporal discounting”. Respondents with more advanced educational attainment tend to prefer paying premiums over a longer period when making such decisions. On the other hand, higher-income respondents and those who reported having the capacity to pay for LTC with savings demonstrated less interest in the hypothetical insurance products. Higher income was also strongly associated with negative acceptance of Plan 1; this non-purchase intention may be explained in part by these respondents' confidence in their capacity Public Policy BULLETIN Private Long-Term Care Insurance in a Super-Aging Society: A Purchase Motivation Study in Hong Kong