Preferences for private long-term care insurance products in a super-ageing society: A discrete choice experiment in Hong Kong

Abstract

There is a stark contrast between rising long-term care (LTC) demands and limited financing capacity in many ageing societies. Despite the theoretical potential of private insurance in LTC financing reforms, the reality is that the market remains remarkably underdeveloped. This study adopts a novel two-phase approach to quantitatively examine the market demand for private long-term care insurance (LTCI) in Hong Kong, one of the world's super-ageing societies. In order to examine people's preferences regarding private LTCI in Hong Kong, which has been exploring alternative LTC financing mechanisms to relieve the overburdened public system, we conducted a discrete choice experiment (DCE) in 2019 to elicit the preferences of a representative sample of 410 middle-aged adults. At first, we used data from the US National Longterm Care Survey to perform an actuarial projection for Hong Kong. In the first phase, we computed the indicative premiums based on various attributes of hypothetical private LTCI products. Undertaken in the second phase and using two econometric techniques, the DCE suggested that the most preferred hypothetical LTCI product in Hong Kong was associated with the following features: 1) a monthly benefit level of HK$20,000 or HK$25,000, 2) 3% inflation protection, and 3) 15 years of contribution. These attributes led to a monthly premium of HK$1237 (US$160)/HK$1546 (US$200) for men and HK$2150 (US$278)/HK$2687 (US$348) for women. Furthermore, we also found that the preference for LTCI products varied across people with different socioeconomic and health characteristics. These insights could inform initial market segmentation, LTCI product design, and targeted marketing in the future. This paper concludes with cautious optimism regarding the market demand for private LTCI in Hong Kong, and recommends concrete policy instruments to nurture the LTCI market, including information campaign, premium subsidies, and tax benefits.

Keywords: Discrete choice experiment; Financing; Hong Kong; Long-term care; Private insurance; Willingness-to-pay.