A Canadian Parlor Room–Type Approach to the Long-Term-Care Insurance Puzzle

We examine different hypotheses of the cause of the low market penetration of long-term-care (LTC) insurance in Canada. Our analysis is based on results from a survey of 2,000 Canadians aged between 50 and 70 years that was conducted in autumn 2016. A remarkable proportion of individuals in this age bracket report never having been approached to purchase such protection. Respondents who report having LTC insurance do not differ in risk perception or health from uninsured respondents, but they are more likely to report having an employer-sponsored pension plan and, conditional on low income, to have bequest motives. We conclude that supply-side factors, including crowding out by government programs, are the most likely reasons why the proportion of Canadians who purchase private LTC insurance is so low.