The mother of all migrations

The mother of all migrations

Milan Korcok details where the snowbirds are flying this year, and what provisions are on offer to them from the Canadian travel insurance market

First published in ITIJ 106, November 2009

Milan Korcok details where the snowbirds are flying this year, and what provisions are on offer to them from the Canadian travel insurance market

It is the mother of migrations, amounting to almost one million Canadian seniors: and with the first few flutters of snow in the fall, the flight south begins in earnest. Despite pandemics, recessions, currency fluctuations, threats of violence, fears of getting sick in a foreign country, and increasingly burdensome cross-border travel restrictions, the Canadian snowbird remains consumed by one immutable goal: get the hell out of that bruising winter.

It is a goal which to Canada’s travel insurance industry provides reason for existence – amounting to CA$151 million in written premiums annually for individual out-of-country private health insurance sold through banks, brokers or direct from insurance company providers. That, according to the Conference Board of Canada, was for 2008 and will be considerably higher by 2010, especially as Canada’s huge reservoir of baby boomers supplements the rolls of confirmed elder seniors. Some industry sources have placed the total premium value of out-of-country travel insurance from all sources and age groups –including annual multi-trip plans, group, retirement, employee benefit and credit card plans – at close to $1 billion. 

According to Statistics Canada, the federal government’s official number cruncher, Canadian snowbirds aged 56 and older travelling for at least 31 consecutive days, will make 944,000 individual trips out of the country in 2010, up from 433,000 a decade earlier – a phenomenal rise muted only slightly by a slowdown between 2001 and 2003, in the wake of the World Trade Center attacks and the SARS epidemic that hit Canada particularly hard. And even during those years, snowbird travel never decreased from year to year, it just increased at a slower rate.

Within that spiralling macro trend, there are bound to be dips. Some say we may be in one now. Roger Perrault, director of corporate marketing for etfs Inc., a Quebec-based provider of travel insurance, suggests that the upcoming snowbird season may be weaker than 2008-2009 due to concerns about H1N1 and the impact of the recession, especially in Canada’s largest province, Ontario, which has been hard hit by unemployment. He adds also that the fluctuating dollar has made it difficult to price travel insurance policies and that some insurers, among them etfs, have increased rates for this year. “Consumer confidence has been shaken,” he says.

Some industry sources have placed the total premium value of out-of-country travel insurance … at $1 billion

Not all travel insurers agree. Gina Riola, assistant vice president of business development and marketing for TIC Travel Insurance Coordinators, tells ITIJ that the current strength of the Canadian dollar vis-a-vis the US dollar, and Canada’s improving economic outlook, will likely outweigh any concerns about H1N1.

In any industry as diverse as this and with its customers subject to so many conflicting pressures, predicting trend lines is a dicey business. But even if there are impediments or dips, will they be more than temporary? Will they be enough to seriously threaten what so many elderly Canadians believe is their sovereign right to get out of the country at the first sign of winter? Not likely, say most in the travel insurance industry.

The flight continues

The flight pattern has been virtually unchanged for decades: shortly after Canadian Thanksgiving (the second Monday in October) the trek begins and it accelerates as each week goes by, until by Christmas, Canada has lost almost three per cent of its population. And much of it won’t be back until Easter.

It is a picture of incredible resilience. Travel experts have long commented that no matter what the challenge or trial, Canadian snowbirds will give up virtually anything before they rescind their winter vacations in Florida, Texas, Arizona, California, Nevada and even Mexico.

Dave Burry, president of TIS (Travel Insurance Specialists, an Ontario-based provider of travel insurance specialising in snowbirds) says of his customers: “For long-stay seniors, my guess is that they will travel under almost any circumstances. They have been through one and now two depressions, wars, etc. The stock market probably was not that big a hit to them. As far as H1N1, etc, they can get sick anywhere. It's the winter weather that they are trying to avoid.”

Besides travelling to the US, they will also travel to Cuba, the Dominican Republic and increasingly to Jamaica, but these are short trips, one week, two at the most. The trips to the US mainland are serious trips, three to four – even six months. And to many, even that’s not enough. The Canadian Snowbird Association, a powerful advocacy group for seniors, lobbied years ago for their ‘right’ to stay in the sunbelt even longer than six months (the Ontario government ended up giving them that dispensation – allowing seven months.) In most of the rest of the country, they are ‘allowed’ to stay out of their province for up to 182 days, the limitation being imposed by their provincial health insurance agencies, who argue that anyone not resident in their home province for at least half the year can be disqualified from government health insurance. Canadian seniors have gained tremendous political clout. Politicians would not dare schedule any provincial or federal election (of which they have many) during snowbird season.

So when travel insurers look at the numbers, they see not only that snowbirds represent a large share of their customer base, but because their trips are much longer and because premiums are age-based for health risk reasons, they represent the mother lode of the travel insurance business.

According to Conference Board of Canada (CBoC) estimates of the size and impact of snowbirds on the travel insurance business, $151 million in individual trip out-of-country health insurance for the year 2008 was collected on the sale of 380,000 policies – at an average premium of $398. But a further breakdown shows that of the total of $151 million, $123 million was paid for by seniors 65 and older, and $28 million by snowbirds in the 54 to 64 year age group. And of this amount, $63 million was paid by over those over 65 staying longer than three months.   

the fluctuating dollar has made it difficult to price travel insurance policies and some insurers … have increased rates for this year

The bottom line, according to CBoC, is that the average premium paid by 55 to 64 year olds in 2008 was $344, compared to $1,108 for those over 65. Again, this refers only to individual single trip policies, not to annual multi-trip plans that are becoming increasingly popular among all age cohorts, and group and retirement plans that also cover some out-of-country travel.

Not lost on insurers, however, is the demographic inconsistency in the sales of their-out-of country travel products. Though snowbirds love insurance, others are not all so keen. According to a national poll released in mid-summer 2008, only 49 per cent of Canadians travelling to the United States for leisure say they ‘always’ or ‘usually’ buy travel insurance. And almost 43 per cent say they ‘never’ or ‘rarely’ buy it.  

These are tough birds

Will McAleer, director of business development in Eastern Canada for Travel Underwriters, one of Canada’s oldest out-of-country health insurance providers, says that Canadian snowbirds travelling South are “a committed bunch.” They have their favorite southern ‘hot spots’ and “they will defy any political, social or economic logic for not travelling. They have their condo, trailer park or motor home and they will visit for a few months come hell or high water.”

And with the continuing rise in the value of the Canadian ‘loonie’, (a colloquialism for the domestic dollar), snowbirds will find even more reason to take flight this year, adds McAleer.

With the loonie approaching parity with the US dollar, snowbirds gain distinct advantage when it comes to buying groceries, gas, booze, or paying rent in the US. It has not escaped their notice that a bottle of Canadian Club, distilled in their home country, sells for about half the price in the US as it does in their own liquor stores. Just a few years ago, the Canadian dollar would buy only 67 US cents. Now it buys about 97 US cents at the time of writing (up 26 per cent since last March) and predictions are it may hit parity by Christmas.

This approach to parity is also a clear advantage to Canadian insurers who pay the US hospital bills of their clients in US dollars. In the past, collecting a premium worth only 70 or 80 US cents to the dollar and paying claims in 100 cent dollars has proven frustrating.

As for health concerns, Canadian snowbirds seem to have brushed off fears of H1N1 swine flu in their apparent belief that this affects a much younger demographic, says Alex Bittner, CanAm Insurance Group’s sales manager for Eastern Canada. He also notes that the upsurge of violence in Mexico has been disconcerting to many. Seven Canadians have been killed in Mexican resort areas since 2006 – some of them allegedly involved in the drug trade. “To those in Western Canada, (who are the most frequent Mexican travellers) there is a real perceived danger, and there is no question that there is significantly reduced traffic headed for Mexico from Canada,” says Bittner.

TIC’s Riola has a somewhat different view and projects that although Canadians have been shaken by the Mexican violence, they will ultimately persist with their tourism plans to that country. Approximately 1.1 million Canadians travel to Mexico annually (more than any other country except the US). The great majority of these are one or two week all-inclusive travellers, but those who are snowbirds will likely follow the same patterns, says Riola.

Another trend in the rest of Canada, says CanAm’s Bittner, is the introduction of semi-annual price increases replacing the usual (and bigger) once-a-year hike in October. This has boosted the marketing of ‘early bird’ premiums, which encourage early shopping at current or last year’s price levels for those prepared to commit early. Overall, he says, there have been some modest premium increases, which have been stimulated mostly by fears of high medical cost inflation in US hospitals.

Canadian snowbirds seem to have brushed off fears of H1N1 swine flu in their apparent belief that this affects a much younger demographic

Overall, McAleer and Bittner both agree that: “The travel insurance business appears to be brisk with no concern about the economy and other external factors affecting the Canadian snowbirds. Consumer confidence, it seems, has never appeared better.”

TIC’s Riola concurs that in the near and medium term, “The Canadian snowbird segment will be one of the most dynamically developing components of the travel industry market.”

Clearly, the profile of the Canadian snowbird is changing. The traditional snowbird flight path has usually been straight south – to Florida, Texas, Arizona and California. But as younger age groups morph into the ranks of snowbirds, their tastes change. The trend that insurers have seen over the past several years is a shortening of average trips, an expansion of their range and a greater frequency of travel. Mexico, Costa Rica, Spain, Portugal – anywhere the sun shines, snowbirds show a willingness to follow. According to Statistics Canada, snowbirds’ trips to the US have grown by 71 per cent between 1998 and 2008. But they have grown by 134 per cent to non-US destinations – reflecting more agility and spontaneity and less compulsion to follow the lead bird.

Canadians have had various national symbols extolling the tough, rugged nature of their environment – beavers, grizzlies, even sled dogs. But the snowbird may be their toughest critter of all.