Canada’s medical insurance industry faces big challenges adapting to a rapidly shifting snowbird marketplace. Kevin Featherly investigates how the sector is reacting to change
Had the American sage Ben Franklin been a Canadian rather than a colonial wit, he might have added a third immutable to his list of inevitabilities – death, taxes and the annual migration of ageing Canadian ‘snowbird’ tourists to warmer climes with the first chill breath of winter. Fewer factors in Canadian life are more immutable than the phenomenon of snowbirds travelling to the US – and increasingly, other destinations – in their quest to avoid Canada’s cruel arctic chomp. The phenomenon has breathed life into a large and thriving travel insurance industry.
According to the Canadian Conference Board’s most recent figures, snowbirds spent an estimated CA$222 million on written premiums for ‘individual trip-out-of-country’ health insurance plans in 2013. Those premiums, paid to the brokers, banks and insurance companies that sell the plans, were collected on 440,000 policies charging an average premium of $505. That compares to the $151 million that Canadians paid in premiums in 2008, the last year for which the Canadian Conference Board reported the figures.
So snowbirds flying the coop is a tradition as old as the Stanley Cup, and one that continues apace. But that hardly means all things remain equal. In fact, the number of Canadian snowbird trips abroad is increasing rapidly just as the percentage of senior citizens, as a proportion of the Canadian population, is rapidly expanding.
Some key data points from the Canadian Conference Board show that snowbirds (Canadian tourists aged 55 and up) made 433,000 trips lasting 31 nights or more during the calendar year 2000. In 2013, that number had ballooned to 1.33 million such trips. Only in 2009, with the advent of the Great Recession, did the number of trips dip slightly from 871,000 in 2008 to 856,000 in 2009. But that was an aberration. Snowbirds’ resiliency has been almost entirely unaffected by the bursting of the dot-com bubble in 2000, the terrorist attacks of 2001, even the SARS epidemic of 2002-2003, which hit Canada hard. By 2010, the Conference Board indicates, the number of month-long-plus trips was rising again, topping one million for the first time in 2011.
Other travel trends identified by the Conference Board show that more than half (56 per cent) of all snowbird trips lasted between 31 and 59 nights, down from 58 per cent in 2000. Snowbird trips involving 91 nights or more away from Canada have grown at a compound average annual rate of 10.1 per cent since 2000. Looking at where these travellers are going, in 2000, 70.3 per cent of Canadian snowbird trips were to destinations in the US. But the States’ status as a Canadian snowbird destination is gradually fading. In 2013, US visits accounted for only 67.4 per cent of those trips. The number reached as low as 59.3 percent of total trips in 2007.
There is little reason to expect reversals anytime soon. If snowbird trips continue to grow at nine per cent annually, Canadians will be taking 2.4 million of them by 2020, according to Conference Board projections. That would be an astounding 83 per cent more trips than were made in 2013.
Lots of new trends can be gleaned from peeling back those numbers. David Rivelis is senior vice-president of both CanAm Insurance, a Windsor, Ontario-based licensed insurance distributor and intermediary, as well as Active Care Management (ACM) a third-party Canadian group insurance administrator. He says that under all the data rests a narrative to which Canada’s travel insurance industry must pay close heed.
Canadians over age 55, unlike seniors in the US, Western Europe and most everywhere else, weathered the Great Recession with their wealth largely intact, he points out. So that age group has money, and it has numbers.
Statistics Canada, a Canadian federal government agency, reports that 2014 was the first time that Canadians aged 55 to 65 outnumbered Canadians younger than age 15. That is important because many Canadians begin taking early retirements at age 55.
“That is certainly going to cause the insurance industry to have to respond,” Rivelis says. “The reason I say that is that people are living longer, we are living with more chronic illnesses, and so we’re going to have to make sure that the proper coverages are available.”
Abasse Asgaraly is senior business development executive at Toronto-based Zurich World Travel Protection, which provides comprehensive travel medical insurance, travel security and travel assistance to customers around the world, including Canadian snowbirds. He notes that today’s seniors tend to be healthier and more adventurous than their predecessors. In just the past three years or so, Asgaraly says, there has been a dramatic shift in the way that the latest crop of Canadian snowbirds travels. They tend not to have purchased condos at fixed locations like Sun City in Arizona, Carlsbad in California, or Naples in Florida, he says. The new breed of snowbird is not content to just lie on the beach for six months and then go home, he says. Instead, they’re heading to new destinations such as Costa Rica and Panama, and becoming increasingly adventurous whilst on their travels.
Robin Ingle, chairman and CEO of the Ingle International Group, runs a company that markets travel insurance and travel assistance to seniors, students, and even war correspondents. He says that the snowbirds’ demographic and behavioral changes dovetail with changes in the low-margin travel booking industry, which has lost a lot of business to self-booking websites. They have responded by packaging and marketing cruises, adventure travel and ‘extreme’ adventure travel, even to seniors. “Snowbirds are going to countries other than the US or Mexico,” Ingle says. “They are doing aid projects. We’ve got 60 and 70-year-olds going out on adventure holidays.”
“The new generation of what we call the Boomers are very inclined to discover the world when they retire,” Asgaraly agrees. “We have examples where they are climbing Mount Everest.”
The implications for insurers are obvious, and not a little harrowing. Once they could count on sedentary snowbirds of the Second World War generation to buy condos in the Sun Belt and host quiet dinner parties when they weren’t lounging on the patio. They were fairly easy underwriting clients. But vigorous Baby Boomers who want to climb up to Machu Picchu at least once before they die? They present are a rather more complicated case.
Individualised risk assessments
The travel insurance industry cannot simply refuse to write policies for this new, energised cohort of motorcycling, bungee jumping, mountain climbing senior citizens, a group that came of age in the Me Generation of the 1960s and want to live life to the fullest. To do so could mean eliminating too large a portion of potential policyholders. But insurers also cannot ignore the fact that to live longer is to accrete a raft of medical maladies – heart arrhythmia, worn out joints, hypertension – any and all of which impact insurance risk ratings. What to do?
Alex Bittner, president at the Travel Health Insurance Association of Canada (THIA), says that insurers can deny claims, particularly if snowbirds either mislead underwriters about pre-existing conditions or fail to disclose their extreme adventure plans ahead of time. But the travel insurance industry is hardly eager to do that, he says. Not that you would know it from media coverage. Canada’s medical travel insurance industry has been beaten up by both news organisations and regulators in recent years, with stinging reports about snowbirds purchasing travel insurance plans only to have their claims denied, leaving them on the hook for hundreds of thousands of dollars for foreign medical care expenses.
When that happens, Bittner says, it is usually because people don’t tell the whole truth to underwriters about their medical conditions on insurance form questionnaires. There is now data to back up what has long been an industry presumption about that, he says.
A September 2014 THIA survey of 1,007 Canadians performed online showed that 18 per cent of respondents inadvertently provided inaccurate information on travel health insurance forms. Another 14 per cent provided false information deliberately, with half of those admitting they did it in order to pay lower premiums. That’s nearly a third of respondents who gave bad information when filling out forms.
Nonetheless, Canadian travel insurers almost always pay claims. Bittner points to a November 2014 survey of insurance providers conducted by auditing firm KPMG. It indicates that fully 95.33 per cent of individually purchased travel insurance claims got paid. “That stat does not cover things like credit card insurance and group insurance,” Bittner says. “Actually, I would submit that if we included those stats, it would be even better for us in terms of claims paid.”
The industry has a fiduciary responsibility to decline claims made by travellers who provide false or misleading answers on insurance policy questionnaires, or who go ahead and travel without first having established that their pre-existing medical conditions have stabilised for the requisite 90 days, Bittner says. But it also has to respond to a new marketplace filled with a new adventurous breed of ageing traveler – one whose itinerary alone might have triggered fatal heart attacks in their parents.
“Insurers can’t just come into the marketplace as they did 20 years ago, put out a plan and say take it or leave it,” says Milan Korcok, a freelance medical writer and an original co-sponsor of the Canadian Snowbird Association. “These 65 and 70-year-olds are the meat of the industry. They are the ones who can afford to travel.”
“We need to change our policies to accommodate them,” Bittner agrees. One way to do that, he says, is by borrowing a page from the UK playbook. There, companies like the Healix Group have developed predictive modelling methods and tools that automatically create individualised risk assessment ratings for travel insurance applicants with pre-existing conditions. It is a model that Canadian insurers are beginning to adopt, he says.
“Again, what is the objective there? It’s to cover pre-existing conditions at the right price for the individual,” Bittner says. “So it is all about managing the risk.” He acknowledges, however, that ‘the right price’ often means an increase in premiums.
Korcok thinks premium prices will soon rise regardless. That, he says, is because the Canadian dollar has slipped in value against the US dollar to below 80 cents, after achieving near parity six years ago. That puts many insurers in the unenviable position of collecting premiums in Canadian loonies, but paying out medical claims in foreign currency, most often American dollars. “That has a perfect impact on an industry in which price sensitivity means everything,” he says. “It is going to be a tough year for insurers. And the only way they can make up for that is to jack up their prices for next season.”
Clarity of cases
As it happens, most snowbirds do purchase travel medical insurance in some form, according to the Canadian Conference Board. Fully 82 per cent of Canadians over age 55 were covered either by a single-trip plan, an annual or multi-trip plan, premium credit card plans or employer group plans, or some combination of those. Only 68 per cent of Canadians aged 18 to 54 were similarly covered.
The problem, says Korcok, is that people don’t always understand what they are buying. He is among those pushing insurers to undertake plain language initiatives that simplify and clarify insurance applications and make it obvious, prior to purchase, which conditions are covered.
Ingle agrees with that, but thinks consumers need to take more responsibility, too. “You need to take charge as a consumer,” Ingle says. “You need the consumer to understand and ask questions and you need the consumer to get questions answered in writing.”
Bittner would like to see government reforms to make it easier for medical travel insurers to underwrite policies for individuals in the same way that auto insurers do. When a car insurance company accepts an application, it does not rely on the applicant to provide accurate information. That insurer can tap into databases that reveal the applicant’s full driving history.
Because of confidentiality laws, however, medical travel insurers have no such luxury. Bittner would like to see more data become available, an eventuality that would require changes to federal law. He thinks that might one day become possible, as today’s younger citizens – a social-media-loving cohort that is not nearly as obsessive about privacy as its elders – ages into maturity.
In the meantime, THIA is doing what it can, revamping its website to be more consumer friendly and making itself more available to the media. In the past five years or so, educating Canadian snowbirds about their rights and responsibilities as consumers has become a specific and primary focus for the organisation. Consumers have a lot to learn, Bittner says. They must come to understand, for instance, that the passage of the Affordable Care Act is not a mirror image of the socialised medicine that Canadians enjoy. Therefore it is not likely, at least in its present form, to bring the costs of care down when snowbirds are off wintering in Phoenix.
They also need to learn a lesson that has, for many, been hard to internalise – that the government-funded provincial healthcare plans that they are accustomed to are irrelevant when they travel abroad, Bittner says. There may be some slight fluctuations in their levels of coverage, but in general such plans will only pay approximately nine per cent of out-of-country healthcare costs. Gone are the days when Canada’s provincial health insurance would routinely shell out for Mexican or American hospital stays. That has not been true for two decades, thanks to ever-increasing healthcare costs in the US, and the development of the private medical insurance market.
“Yet we are still finding that there are Canadians who think that travel insurance covers them for everything,” Bittner says. “Hence our thrust at education. Because we need to stress that travel insurance is not our government insurance plan replacement. It is insurance, it is a contract, and it has limitations and exclusions.”
Ironically, some of the same negative press that has made travel insurers look so bad in recent years has had a beneficial side-effect, according to Zurich’s Asgaraly. It is educating consumers. “Now,” he says, “a lot of Canadians are starting to shop around.”
The Canadian travel insurance industry is now big business. But it must adapt to a changing landscape that sees snowbirds living longer with a variety of chronic conditions, but who nonetheless have the financial wherewithal to travel. These are often the seniors who are going off on more adventurous – and hence more risky – forms of travel, while heading off to destinations other than the familiar snowbird perches in the US and Mexico. These trends cannot be ignored because such snowbirds are a key business sector.
Predictive modelling technologies show promise for tailoring plans to individuals to fit their risk profile yet still supply them with affordable coverage. Legislative changes would also make insurers lives easier; but consumer education is still key.
Snowbirds need to know what they are buying and what is included and excluded in their coverage. And barring any technological or legislative breakthroughs that make it possible for medical travel insurers to underwrite plans the way that auto insurers do – by investigating consumer profiles before plans are issued – consumers need to learn how vital it is that they supply correct information on their forms. At the end of the day, it is better to pay a few extra dollars to cover a pre-existing condition than it is to find out after you’ve received a US$500,000 medical bill that you’re not covered at all. It’s not like today’s snowbirds aren’t interested in travel insurance cover or can’t afford to make a decent investment in it. Which is just as well.