Travel Insurance Alert: The Flight of the Early Bird
Because it's that time of the year again, the Medipac office is bustling with activity! Most of you already know that we offer our Early Bird Travel Insurance every July to mid-August at a 5 percent extra discount. Hopefully, this year will be a good year for travel medical insurance sales if your responses were any indicator.
Some rough times we had during the last season, what with surging hospital and doctor bills triggered, to some extent, by the Obamacare issue. Did you know that the average bill for a single day of admission in the hospital climbed 12 percent, from $12,985 during the 2010-11 travel season to $14,577 in 2011-12? As one would expect, the strong medical inflation last year caught our very modest rate increases off-guard.
On the brighter side, our relationships with local and U.S.-based clinics, doctor groups and hospitals grew stronger in addition to aggressive pricing points. Our ambulance teams also generated great results – save for one complex extraction from South Africa which cost $130,000 (air ambulances from U.S. to Canada normally cost between $10,000 to 20,000). However, the medical team did an awesome job and were precise and careful in their execution.
The U.S.-Canada exchange rate presents the biggest uncertainty in pricing for 2015. When the dollar dropped to the $0.96 range early this year, some insurance firms priced along the par mark for 2014 were caught. In September last year, other insurance companies hedged their U.S. dollar exposure – a method which worked to their advantage despite the fact that this only added more extra cost and upward pressure on premium rates. Many are wondering how travel insurance – and the whole insurance industry for that matter - will turn out this year. But no one really knows yet, so we can only wait and see.
Pundits including banks, brokerage houses, investment houses and the like are clamoring for an $0.85 dollar in 2016. In other words, getting a doctor's bill of $100 U.S. requires a payment of $117.65 Canadian. Had the dollar been at par, Canadian citizens would have had to pay only $100 Canadian. Based on the dollar, if you look at it closely, a 17 percent premium rate would suffice. Recall our earlier discussion on medical inflation. Though a few are still saying par, which by the way are rather rare these days, many predictions allude to a $0.90 or $0.95 dollar.
For us to get a clearer view of this seemingly vague picture, I guess we should now introduce the “shock” factors. The Romney/Obama tandem wins the November U.S. presidential election and, in effect, the U.S. dollar surges upward while the Canadian dollar exchange rate remains... a blank. What's your best guess? To guess – this is as much as we can do at the moment. Other issues to consider: the European crisis continues and people are expecting billions of euros to head over to the U.S. for safety. While the U.S. dollar moves upward, the Canadian dollar gets stuck where it is. This has not yet happened, though, and with the world in turmoil, it may not happen anytime soon. It has since been the norm to seek refuge from the U.S. dollar but they have yet to realize that it is not really as safe as they think it is. Who knows, a massive devaluation might happen next year. Since Canada's monetary policy has continued to impress for years now, a Canadian dollar worth $1.10 to $1.20 is highly possible. This has not happened ‒ yet ‒ only because of all the turmoil in the world. People have sought safety in the U.S. dollar and artificially kept the dollar higher than it should be. What will happen when they realize that the U.S. dollar is not really that safe? A massive devaluation is possible. Could it happen next year? Absolutely! A Canadian dollar worth $1.10 to $1.20 is very possible, as we have had excellent monetary policy in Canada for several years.
2015 is a very unpredictable year and it may be difficult to foresee what direction the travel insurance business will take. But here at Medipac Travel Insurance, we keep things optimistic. We do what we can to infuse positivity in all our endeavours. Hence, we took a modest rate increase last year. Allow me to explain why. Last year's main season rates averages about 4 percent, but non-senior travellers may have paid more. I cannot wait for that ideal travel season marked by healthy and happy travellers, a progressive dollar and unimportant claims to settle upon us. Let's all look forward to it.