Canadian travel insurance gets a boost

Canadian Travel Insurance Boost
Are older travellers responsible?

Thanks to Canada’s ageing population, the nation’s travel insurers appear headed for a buoyant future. Milan Korcok analyses the latest statistics from the Conference Board of Canada

Speaking at the annual conference of the Travel Health Insurance Association of Canada (THiA) in California in April, Jennifer Hendry, Senior Research Associate with the Conference Board of Canada (CBoC), emphasised that ‘while travel frequency tends to decline after age 74, older Canadians are now healthier, wealthier and more mobile than their predecessors’ – and more determined to continue travelling. In addition, in 2021 when the oldest boomers (born between 1946 and 1964) start to turn 75, there will be 10 million millennials coming on behind them, and ‘this cohort of Canadians will comprise 27 per cent of the projected population’. 

Given that almost 90 per cent of snowbirds, who spend up to several months out of the country each year, usually wintering in the US South or other locations in Mexico or the Caribbean, buy travel insurance – often the higher-priced medically underwritten plans designed for those in less than perfect health – travel insurers have bountiful targets for their promotions.

Seeking pastures new

In the past couple of decades, Canadians maturing in age, wealth and diversity of interests have expanded their travels far beyond the US, though the lure of cheaper shopping and better weather south of the border keeps them firmly anchored. In 2010, Canadians made 15.8 million overnight trips to the US and 7.6 million to non-US locations. In 2018, they still made 15.8 million trips to the US, but 9.5 million to other locations – Europe, Asia, central and South America and beyond. That’s a pattern that appears to be continuing.

Since 2008, snowbird trip volumes grew almost four times the rate of overall outbound activity; and since 2000, the volume of snowbird trips to the US has increased 190 per cent

Does it mean they’re getting jaded by the US? Or is it that they’re just getting more adventurous, more interested in different travel experiences, more inclined to greater bragging rights about the last time they visited Cambodia or chopped their way through frigid Antarctic waters? A bit of both, perhaps.

However, since 2016 and the appearance of ‘The Trump Effect’ (Canada’s media has been even more waspish about the actions of America’s president than has his own), the experts about such things have predicted a nosediving of Canadian southbound travel.

Both THiA and the CBoC have found then when Canadians have been asked if the ‘political situation’ in the US might deter them from travel to the US, almost a third concurred that it might. Except that when vacation time is imminent, or the snows start blowing, such hypotheticals don’t necessarily translate into action. Since 2016 (when Donald Trump became president), Canadian leisure trips to the US have increased each year, from 14.8 million to 15.8 million.

What seems constant in the minds of leisure travellers to the US is that currency exchange rates between the Canadian and the US dollar are powerful motivators of travel trends, certainly more-so that ideations about ‘the current political situation’ – a euphemism for The Trump Effect. CBoC data shows that after the peak travel years of 2013 and 2014, when the Canadian and US dollars were close to par value, Canadian travel to the US dipped to its lowest level since the global recession and this was most acutely felt by auto travellers – who are more price sensitive. But starting in 2016, as the ‘loonie’ began to recover some value, travel to the US regenerated, helped by considerable increases in air travel. (The exchange rate is now fluctuating in the 75 US cents to 77 US cents range and predicted to stay there until about 2020). 

Hendry points out that a decade ago, one-third of overnight visitors flew to their US destination. Now, 43 per cent do so and they take more frequent trips. For travel insurers, this is good news as air options tend to support longer-haul destinations, are less likely to be spontaneous, and air travellers are more likely to buy travel insurance for their trip.

Cityscape in Canada

The snowbird influence

Even during these fluctuations in exchange values, the snowbird presence makes itself heavily felt as many have homes in the US, social connections with their American neighbours, and a propensity for sharing lifestyles not dissimilar from their own. CBoC data shows that since 2008, snowbird trip volumes grew almost four times the rate of overall outbound activity; and since 2000, the volume of snowbird trips to the US has increased 190 per cent. 

The message about not leaving travel insurance as the last item on the To Do list appears to be getting through

Snowbirds are tough, determined, and despite their tendency to keep on ageing, they are a travel insurance market share no one dare ignore. As Hendry told the conference of travel insurers in California recently: “Over the past five years, snowbird trips of 31 to 59 nights have grown at an average annual rate of seven per cent, while trips of 60 or more nights have grown by nine per cent annually.” And while ‘younger’ snowbirds (aged 55 to 64) travel for shorter durations, the size and growth of the 60-plus nights travel market is resulting in more risk nights for insurers, and increased likelihood of claim submissions as the market ages. 

The movers and shakers

Referring to CBoC data, Hendry noted that travel health policy sales in Canada increased 11 per cent in 2018 over 2017, and the total value of collected premiums jumped five per cent; and while the typical premium for a single-trip policy increased, the average cost of annual multi-trip coverage declined. Consequently, consumer demand for multi-trip policies has surged. More than one-fifth of insured travellers reported a reliance on annual multi-trip plans in 2018, and major insurance providers are reporting year over year sales increases of 20 to 30 per cent. Over the past decade, the number of annual multi-trip policies sold has grown by an average annual rate of 13.5 per cent – more of them sold last year than single-trip policies.

Prior to 2009, travel agents were the primary sellers of travel health insurance. But that venue has clearly shifted to direct sales from insurance companies and brokers – to the point that 40 per cent of outbound travellers recently surveyed bought their coverage from an insurance company or broker, and just 16 per cent from travel agents. In addition, 19 per cent purchased their travel insurance from a membership association, and 18 per cent from financial institutions such as banks or credit unions. And for the most part, travellers are making their purchases earlier – 36 per cent, four to six weeks before travelling, and 29 per cent, one to three weeks. The message about not leaving travel insurance as the last item on the to-do list appears to be getting through.

How’s the bottom line?

At the historic peak of outbound travel – 2014 (when the Canadian loonie and the US ‘greenback’ were close to parity) – travel insurance sales hit an estimated CA$929 million. But then a flagging Canadian economy dragged down the loonie’s value to the low to mid-70 US cents range. Since then, a more resurgent economy has fuelled a strong outbound travel market – to both overseas and US destinations – and with it, policy premium sales have peaked to around $990 million in 2018. The bottom line is that Canadians made more than 25 million trips out of the country in 2018 – not bad for a population of just a little over 36 million.

Consumer demand for multi-trip policies has surged

Looking forward, Hendry projects continued growth, albeit at a slower rate than previous years, little thanks to the return of a sluggish economy and higher travel prices. Canada’s economy grew a meagre 1.8 per cent in 2018, compared to a strong 3.2-per-cent first quarter 2019 growth in the US. To add insult to injury, Canada faces a national election this year – never a good omen for economic stability. 

However, despite those uncertainties, a strong boomer drive to travel and the ever-present resilience of snowbirds means predictions are for a strong leisure travel market to remain, in the short term at least.

The need for knowledge 

What also remains is the continuing challenge of increasing consumer knowledge about travel insurance itself – what it is, how it works, why it is necessary. Surveys undertaken by THiA and the CBoC agree on one critical point: too many Canadians still don’t know nearly enough about travel insurance.

According to one 2018 survey carried out by THiA, close to 16 per cent of boomers, 17 per cent of millennials, and 19 per cent of gen Xers (born between 1965 and 1979) didn’t know what their travel insurance covered, and more than 15 per cent in all age groups believed that if they ever had a heart attack while travelling out of the country, their government health insurance would cover between 75 and 100 per cent of the costs. In fact, it would cover only about five per cent (see ITIJ 220, June 2019, Ontario terminates coverage for outbound travellers).

Furthermore, according to a survey reported by CBoC, 41 per cent of respondents in all age groups who purchased private travel insurance reported that the most challenging aspect of that purchase was understanding the terms and conditions of available options (those wretched exclusions). Other major challenges were affordability (38 per cent) and determining which type of coverage was best for their needs (35 per cent).

Perhaps if the lesser age groups listened more attentively to their seniors (snowbirds), they would get the message – first hand.