Ingle International/Imagine Financial is committed to providing you with the essential information you need when it comes to selling travel insurance. Information is the most powerful tool in the success of your business, and you can rely on us to get you the information you need so you can focus on developing lasting relationships with your clients.
Let’s discuss the particulars that are commonly driven by insurers to influence plan and/or pricing changes in the marketplace.
Currently, Canada is in a state of economic change as a result of the fallen Canadian dollar. The low dollar is having an impact on many aspects of the Canadian business market, including travel insurance. The Canadian market conditions, along with secondary factors related to travel insurance, are causing prices to escalate. This includes factors such as claims activity (loss ratios), overhead costs, the increasing costs of health care, changing demographics, and geographic factors.
These factors individually, as well as combined, have a direct effect on the pricing model surrounding travel insurance premiums. While understanding these factors may seem daunting, we will explain and guide you through these changes so you are equipped and informed with the knowledge to answer questions when your clients ask, “Why the change in price?”
Canadian market conditions
The depreciation of the Canadian dollar is at a six-year low and taking a major hit on the Canadian economy, due in large part to the fallen price of crude oil. Currently, the Canadian dollar is sitting at $0.79—a 25% decrease from this time last year, with expectancies for it to drop even further!
So how does the falling Canadian dollar affect Canadian travel insurance prices? Many Canadian travellers visit the USA for vacation but pay for their insurance in Canadian dollars. Insurers then have to pay claims for medical bills in US currency, which results in higher claims cost for the insurers. Compared to last year, insurance companies are paying on average 10–15% more in claim amounts.
Soaring “medical inflation” rates have also resulted in higher medical costs in not only the USA but also in other parts of the world commonly travelled by Canadians, like Mexico and the Caribbean, where health care is billed for in US currency.
The rate of inflation has risen by 5–6%, and it is expected to continue rising. Inflation factors, along with the weakened Canadian dollar, have caused US goods and services to increase in price by approximately 17%. This increase has affected even common travel medical claims like a sprained ankle or sore throat. Visits to minor clinics can reach up to $2,000 USD, and major hospitalizations can run in excess of $250,000 USD.
The decrease of the Canadian dollar has led to a negative climate for claims-loss ratio in the insurance industry. Many people are surprised to find out that travel insurance has one of the highest rates of paid claims—up to 95%, according to the 2014 KPMG Private Survey. With large claims payouts, small margins, and costly expenses such as overhead and administration, very little is left to net profits.
In a medical emergency, many aspects are involved in getting the injured traveller to safety or to their home city. The cost of air evacuation for someone who has suffered a medical emergency depends on elements such as the location of service, type of aircraft, medical services needed, and the fuel required. With inflation causing the cost of US goods and services to increase, this has a direct impact on services related to air evacuation, including medical professionals and the cost of fuel.
Geographic location and demographics
The cost of travel insurance depends on a several risk factors such as age, health status, and the desired travel destination. In the past few years, there has been a change in the average age of travellers and the way people are travelling. More seniors with pre-existing conditions are travelling and they’re travelling farther and longer than ever before. Also, rising global risk due to civil unrest, terrorism, climate change, natural disasters, political instability, and outbreaks of communicable diseases are all playing a role in the increased risk to insurers.
You are now informed with the tools to answer and assist your clients with questions about the change in their travel insurance premiums. We will continue to inform our partners about changes to the travel insurance products you are offering, and help you and your clients navigate the world of travel insurance.
If you have any further questions or concerns, a member of our Partner Services Team will always be available to assist you. Visit www.ingleagents.com.