Long-term nursing care for the elderly is expensive and somebody has to foot the bill. At present the State provides approximately 11,500 extended care beds and there are 12,637 private or voluntary places. A health board grant is available to older people with little or no means but it is stringently means-tested and only covers a fraction of the full cost of care.

Average private nursing home costs are between £300 (€381) and £450 per week but can be much higher, and the financial burden falls on the elderly person and their family if they cannot get a State bed.

No long-term care insurance is currently available in the Irish market, although it is well established in the US and Germany, and is also available in Britain. Changes introduced in the Finance Act 2001 mark the beginning of a process that should lead to the introduction of this type of policy.

A recent investigation by the Society of Actuaries found that Irish people are living longer and this trend is set to continue. Over the past 30 years, improvements in Irish life expectancy have added four years for men and five years for women. A positive feature of the research was that these extra years were found to be healthy years. Increased life expectancy was not accompanied by increased periods of disablement.

That is good news and it's worth bearing in mind when talking about long-term care. Nevertheless, with the increasing number of elderly people in the population, there will inevitably be a greater demand for long-term care beds.

Other research involving the Society of Actuaries, the Irish Insurance Federation and the Irish Association of Pension Funds suggested that substantial care costs would arise for perhaps 20 per cent of those aged over 65. The 1998 report on Financing Long Term Care in Ireland estimated that the total cost of providing care for the disabled elderly would rise by more than 200 per cent to approximately £2.7 billion over the next 25 years.

Against this backdrop, the Irish Insurance Federation suggested in recent pre-Budget submissions that there should be tax incentives to encourage the development of long-term care private insurance products. This would suit individuals interested in making private provision against the cost of longterm care.

In his Budget 2000 speech, the Minister for Finance, Mr McCreevy, said that he favoured providing tax relief at the standard rate for premiums on insurance products geared at providing future care needs. Under legislation subsequently introduced in the Finance Act 2001, long-term care policies will pay out if an individual is incapacitated to the extent that he/she is unable to carry out at least two "activities of daily living" without substantial assistance from another individual.

So who will be the target market for the new product and when is it likely to be introduced? Ms Jennifer Hoban of the Irish Insurance Federation believes that long-term care is more likely to be a niche product than one of general appeal.

"Typically, when it comes to insurance, most people will have life cover as their main priority, with pensions also appearing high on the list.

"Long-term care cover will probably be further down the list and it will not necessarily be cheap, although it should be possible to fund it either as a once-off payment or by spreading the cost over a number of years with regular premiums."

Like other insurance products, long-term care insurance will only be available to people who are in reasonable health at the time the policy is taken out, so it will be a form of advance planning.

Ms Hoban points out that the tax relief will also be available where the policy is paid for by an individual who wants to provide cover for a relative.

The challenge is for insurers to develop attractive products. However, there is no sign of anything emerging in the near future.

Mr Des Kelly of Irish Life says the criteria laid down for claim payments will have to be examined carefully.

He estimates that the long term care insurance market will become established within five years. In the meantime, Mr Kelly questions whether tax relief at the standard rate is incentive enough for the product.

"We will be keeping a watching brief but we're not wildly enthusiastic at this point in time," he says.

Mr Ian Veitch of Hibernian says the area is an interesting one. He adds that there are a number of possible stumbling blocks to the development of long-term care insurance.

Under the existing legislation it is not possible to merge a protection element and an investment element together with this product. Mr Veitch sees this as a serious negative.

The consensus seems to be that nothing will happen in this area in the short term because there is so much detail to be clarified. However, Ms Hoban is confident that the market will develop.