Trust issues remain in Canada

ITIJ 197, May 2017
Canada’s travel insurance market is agile and robust, but issues of trust remain. Milan Korcok reports on the latest figures from the Conference Board of Canada. 
For a nation of 35 million people, a tally of 23.8 million out-of-country leisure trips in one year (2016) is impressive by anyone’s count – especially given that the value of Canada’s currency has dropped some 25 per cent over the past decade vis a vis its favourite vacation destination, the US. As one travel analyst recently noted of Canadians’ propensity to travel: “As long as they can put money on the table, they will travel every year. They will treat travel as a right.”
Be they adventurous and affluent boomers, hardy and proliferating snowbirds, or curious and questing backpackers, they comprise one of the western world’s most robust travel markets – and the fact that 77 per cent of them had some form of supplemental medical coverage on their last outbound trip suggests Canada’s private travel insurance sector can handle adversity and foresee continued growth well into the future.
Your task … will be to win their trust, to convince them that they need coverage for every single trip they take
Speaking to the 19th annual Travel Health Insurance Association of Canada (THIA) conference in Las Vegas on 1 May, Jennifer Hendry, senior research associate of the Canadian Tourism Research Institute (CTRI; an integral part of the Conference Board of Canada (CBoC)), emphasised that though the share of the nation’s population older than 55 is increasing very dramatically, it is healthier, wealthier, more mobile and adventurous than its predecessors; and if that specific sector of the population continues to take the same proportional number of trips in 2023 as it did in 2010, outbound volumes of travel will grow by 41 per cent. 
Of this cohort of potential travellers, Hendry said: “They don’t want more stuff. They want to go someplace and do something they haven’t done before. This is good news for travel providers.” Good news indeed, as the value of Canada’s travel health insurance market is projected by the CBoC to hit CA$865 million in 2018, triple its value in 2002. In 2014, at the historical peak of outbound leisure travel, the value of travel insurance hovered tantalisingly close to the one-billion-dollar mark (CA$926 million) before sliding somewhat due to recessionary and other economic pressures. But it is now rebounding and the big One B is again in sight.
A diversifying demographic
As reported by Hendry, between 2015 and 2019, the proportion of Canadians aged 55 to 64 is projected to increase by eight per cent, while those aged 65 and older will increase by 15 per cent – “A shift that will grow more snowbirds and encourage more intergenerational (family) travel. Good news for any travel company.” 
The main reason the overall Canadian outbound travel market didn’t buckle more than it did during the recent economic slowdown, especially during the plunge in its currency value (the Canadian dollar now stands at CA$1 = US$0.73) is precisely because of the strength of that snowbird market, which has grown at an average annual rate of 9.9 per cent since 2009 and remains a bulwark of the country’s overall travel profile. Travel insurers can take solace in the fact that the growing Canadian population is expected to result in 2.3 million snowbirds by 2021.
the value of Canada’s travel health insurance market is projected by the CBoC to hit CA$865,000,000 in 2018, triple its value in 2002
Moreover, it appears that Canadians are not only growing their travel numbers, but expanding and diversifying their travel choices. CBoC data shows that over the past decade, Canadian outbound travellers have shown a shift favouring travel to Europe and Asia (non-US destinations), part of the lure of exploration and new experiences. In 2008, 31 per cent travelled overseas; in 2015, that number grew to 35 per cent. But as seniors age, they tend to travel closer to home and stay within their comfort zone, and this tendency is expected to return a larger share of the outbound market to its traditional US base: Florida, Texas, Arizona and California, not to forget the Caribbean or Mexico: not bad options.
Not to be overlooked in Canada’s travel-ready future is the diversity of its immigrating peoples. As noted by Hendry, not only has Canada’s foreign-born population tripled in the last 20 years, but according to projections by Statistics Canada (the official government statistics analysts), Canada’s ‘visible minority’ in 2006 accounted for 5.3 million (out of a total population of 32 million). By 2031, that ‘visible minority’ is projected to increase by 143 per cent to 13 million (figures are rounded) out of a total projected population of 42 million. In 2016, 48.6 per cent of foreign-born Canadians were from Asia or Oceania, 28.1 per cent from Europe, and the remainder from the Americas and Africa.
Previous reports from the CBoC have shown that travel to Asian countries and Oceania from Canada has been one of the fastest growing market destinations, buoyed by visits to friends and family and greatly expanded airline seat capacity from many parts of Canada. Four out of 10 travellers to Asia self-identify as Chinese or South Asian, and 40 per cent are aged 25 to 34. The new demographics clearly show these trends will only increase over the foreseeable future.
Travel insurers respond
For travel insurers, whether their customers journey to Europe, Asia, or South Carolina, it’s a win, either way. Though trips to the US are generally shorter, there are many more of them. Thirty-five per cent of trips to the US are for four to six nights; 36 per cent are for seven to 14 nights. Trips overseas average 17 nights. And then there are snowbirds, 55 years and older, who spend at least 90 days per year, usually in the US, though increasingly in Mexico and occasionally in the Caribbean. This represents a broad, challenging and diverse market requiring an expanding panoply of products and marked changes in distribution channels.
Hendry told THIA conference attendees that prior to 2009, travel agents were the number one source of travel health insurance sales. But consumer demand has shifted, and direct sales through insurance companies and brokers now account for 40 per cent of private travel insurance purchases, 17 per cent are from travel agents, 18 per cent from membership associations, and 15 per cent from financial institutions. In addition, one-third of surveyed travellers reported purchasing travel health insurance online for their last trip out of the country, more than half of them claiming that they felt comfortable doing so, a comfort level rising to 85 per cent after purchasing online multiple times. It appears familiarity breeds comfort.
Despite that comfort, many travel insurance applicants reported qualms about the purchase process. Furthermore, according to recent surveys, more than half of those who bought travel insurance on their last trip reported difficulty understanding the terms and conditions of their policies when dealing with a broker. They rated trust, clarity, an ability to compare products and prices and assess the reputation of the provider as challenging aspects of buying insurance
As Hendry summarised: “The top reasons for discomfort aren’t surrounding the transaction, it’s related to the need to speak to someone on issues of clarity.”
The top reasons for discomfort aren’t surrounding the transaction, it’s related to the need to speak to someone on issues of clarity
Policy sales outlook
Overall, 4.3 million single trip policies accounted for CA$572 million in premiums, for an average of CA$133 per policy in 2016. That is a drop of 12.1 per cent in the number of policies over the previous year. The average premium, however, was nine per cent higher than the previous year. Hendry noted that average premiums are expected to increase due to the volume of older travellers getting into the market and their increased trip duration.
When a snowbird with the expected health imperfections that go with age signs up for a six-month policy at double digits per day, it doesn’t take many snowbirds to shift the market from red to black. But it must be noted that far fewer snowbirds spend a full six months in sunny countries now compared to even 20 years ago. They, too, are attracted by the lure of shorter, more frequent trips, keeping their options open, seeking out that elusive experience or taking one last shot at fulfilling their bucket list wishes.
In 2017, individual-trip policy sales are forecast to grow by 1.2 per cent, while annual multi-trip policy sales are forecast to increase three per cent. In 2016, multi-trip/annual policies accounted for CA$225 million on 3.5 million policies, for an average of CA$63. (The beauty of the multi-trip policy, of course, is that it is priced only on the number of covered risk days selected, say 10, 15, 30 days or more, and that number can be used over and over throughout the year for no additional cost).
Combining single trip and multi-trip policies, and going back 14 years to 2002, the trajectory of sales and value is remarkably consistent: the number of policy sales growing at an average annual rate of 7.6 per cent through to 2016, and the number of trips rising an average 4.1 annually, to CA$797 million in 2016. A temporary blip in this trajectory shows a deep dip from a peak of CA$926 million in 2014-2015, but a quick recovery to CA$776 million in 2016, and a projected target of CA$865 million in 2018 reconstitutes the upward trend.
One remaining issue put to travel insurers by Hendry was that of the uninsured – mostly younger, perhaps skeptical, people who comprise more than 20 per cent of Canadians who went uninsured on their last trip out of the country. According to Hendry: 30.5 per cent of the uninsured did not think about getting insurance; 21.5 per cent thought it too expensive; 16.7 per cent declined because their trip was only for a night or two; and 8.8 per cent simply forgot or thought the process was too inconvenient.
“Your task” she concluded, “will be to win their trust, to convince them that they need coverage for every single trip they take.