Canadian travel insurance losses crush the market

With the US/Canadian 5,500-mile land border closed to non-essential travel through October and possibly beyond, escaping the oncoming winter is no sure thing for Canada’s ‘snowbirds’ whose trek south usually begins with the country’s Thanksgiving Day celebrations – this year 12 October.

The border closure applies only to land, and not to air travel. But the Canadian government also maintains a Level 3 ‘avoid non-essential travel’ advisory for all other (non-US) destinations and warns that travel to such designated locations may invalidate travel insurance coverage. That’s tough medicine for Canadians, at least 76 per cent of whom buy travel insurance.   

This also amounts to a rocky road back for travel insurers, who lost the summer vacation season and were doubly damaged by their obligation to rebate millions of dollars to customers distressed by Covid-related cancellations.

A 60-per-cent drop in travel insurance sales

According to the Conference Board of Canada, which is currently compiling its 2020 travel insurance outlook, preliminary estimates suggest 2020 will show a 60-per-cent drop in travel insurance policy sales for 2020, amounting to an estimated CA$504-million loss in premiums over the year. As one leading provider of annual and single-trip plans remarked to ITIJ when told of that loss: “That’s more than half the market. Incredible.” Indeed: in 2019, 9.6 million single and multi-trip policies were sold to Canadian travellers, amounting to an estimated $983 million dollars.

Federal government data show that in August 2020, auto arrivals to Canada by US residents were 96.4-per-cent lower at the 111 land ports equipped with electronic sensors compared with August 2019. And the number of Canadian residents returning from the US by auto was down 95.2 per cent. Considering that of the approximately 34 million out-of-country overnight trips made by Canadians annually, more than 60 per cent are to the United States, the size of the hit on travel insurance if this lockdown continues is historic.

Canadians not confident about resuming travel

According to a tourism status report published in September by the Travel Industry Association of Canada (TIAC), only 18 per cent of Canadian consumers feel safe flying right now, 33 per cent feel safe staying in a hotel, and only 14 per cent are actively searching for travel deals. Compared to studies in other countries, this does not show Canadians are optimistic or confident about resuming their travel patterns.

The key takeaway from this profile, says TIAC, is that though the introduction of health and safety protocols combined with decreasing virus transmission levels has helped to boost traveller confidence, ‘these numbers remain low and, when compared to other countries, Canadian traveller confidence is among the lowest of all countries studied (Deloitte), seriously impeding the potential to recover tourism even from the domestic market’.

For the travel insurance industry, the future is clearly challenging. According to Jennifer Hendry, Senior Research Associate of the Conference Board of Canada, travel insurance sales activity for 2021 is anticipated to be up to two-thirds of 2019 sales with the pace of recovery for trip activity and insurance sales interconnected. But she also suggests the availability of Covid-specific coverage is bound to strengthen traveller confidence and booking intention, and she commends the initiative of providers offering coverage independently of the government travel warning advisories. “Perhaps others will follow suit,” she said.

Changing policies to include Covid has brought more customers

To date, several of the major Canadian travel insurers have expanded coverage options to include Covid-19, among them Medipac International (the designated provider for the 100,000-member Canadian Snowbird Association), Allianz, Manulife, Tugo, and Canada’s Blue Cross plans.

Medipac and Blue Cross have also moved one big step beyond by assuring their customers they would cover them even in countries or regions the federal government urges them to ‘avoid’.

Asked if the de-coupling of coverage from government warning levels has had a salutary effect on sales and an easing in the customer’s mind that they will have coverage wherever they travel, Medipac President J. Ross Quigley told ITIJ that, so far, his company’s sales to snowbirds (and other short-term US-bound travellers) are up to 50 per cent of last year’s levels and pushing towards 65 per cent – ‘still down 35 per cent of last year’s sales, but charging hard’.