In an interview with the Financial Times, Legal & General chief executive Nigel Wilson has called for several financial products to become compulsory, namely income protection and long term care insurance, in addition to the already launched auto enrolment pension system.
The case made is that the state cannot be expected to continue to provide for us in the event that we fall ill or require long term nursing care. Wilson suggests that insurance for these needs should be compulsory, however perhaps this is a bit too much of a one-size-fits-all approach.
While I agree that most individuals do require further planning and protection in these areas, is compulsion really the solution? It would seem that if we are going to force people to take out these insurance products, then an increase in taxation and state provision would be the simplest, if not the most desirable solution.
Many people certainly need to do more to protect themselves in the event of a spell of time off work, or the need for long term nursing care, however, there are many ways that this protection can be achieved.
One way for example, is to hold a sufficiently large emergency fund in cash and other investments. The fortunate people who already have this type of provision in place would justifiably feel a little aggrieved if they were forced to purchase insurance to cover a need that they have already taken care of.
Income protection and certainly long term care insurance are complex products with myriad different options. Surely it would be better for individuals to have a say in the type (and cost) of the cover that they require, rather than trying to fit all individuals into one mass solution.