The Evolution of the Snowbird Market

Fall 2005 CSANews Issue 56  |  Posted date : May 23, 2007.Back to list

And I thought that the travel health insurance market had finally matured! Wrong! After 25 years in this high risk business (and I love it), I naturally assumed that most insurance companies now had enough claims experience to properly set rates and were able to properly "select their risks". I also felt that they must have some idea of the size and travel patterns of the snowbird market. Also, wrong!
Two things that I particularly remember over the past two years is a major bank "deciding" that there were 1.5 million snowbirds who would buy travel insurance. They then proceeded to design a new, multi-million dollar snowbird insurance program and launched it with a massive advertising budget. On the other hand, an in-depth study was done by one of the "think tanks" on the patterns of snowbird travel. They came to the conclusion that approximately 23,000 true Canadian snowbirds would have to buy private travel medical insurance. Most others would have coverage included under their government and employer/employee benefit programs.

This vast difference of opinion seems to be typical of our snowbird travel insurance marketplace. They were obviously both wrong.

The other huge misconception is the affect of the baby boomer market on travel and insurance buying characteristics. For five years, I have heard insurers talk about how they are going to capture this market – this year. We all know that the baby boomers are a huge segment of our society in Canada, and that they have significant buying power. We also read in the newspapers, every day, about the necessity of baby boomers to retire late, or to not retire at all, so they can continue to maintain their consumer driven lifestyle. So, how many of them will become snowbirds and more importantly, when?

Baby boomers are defined as being born between 1947 and 1966 and on average they are 48 years old today. So, how many do you think are buying travel insurance? You are right – almost none. Even the oldest of the baby boomers have yet to turn 60 and they are working very hard to support their lifestyle, not travelling to winter destinations for six months of the year. Certainly there are some who have retired at age 55, in particular military and police force personnel who have served their full terms, and can retire on pensions. However, I have found that most of these people find a second career and continue to work well into their 60's. We have several working for Medipac and they are some of our best workers. Receiving both a pension and an employment income can remove much of the stress from everyday living.

But some of these older baby boomers are forced to retire for health reasons. We call them medical retirees and they DO need travel health insurance. These are the people that the many insurance companies are, really, chasing for their business; they just do not realize it. Of course, many of the policies are so restrictive that they cannot buy their products or get proper coverage, in any event. I wish them all good luck! The real force of baby boomer purchases of travel insurance will not occur for 10 to 15 years.

One other interesting factor is the continuing entrance (and exit) of U.S. insurers in the Canadian travel insurance market. Over the years, several non-Canadian insurers have thought they had the golden answer to making money in the Canadian travel insurance business. They came loaded with, primarily, U.S. statistics and loss experience and had endless data on U.S. medical care and hospital and physician "deals" that they were going to pass on to we Canadians. Invariably they lost money and subsequently withdrew from the market. Canada has very different market parameters than those found in the United States and other countries, and travel health insurance is vastly different than the primary medical care routinely insured in the U.S. Did they not know this? No, they appear to still not know this.

There is an old "Insurance Underwriter's Creed" that goes something like this..."You should reduce your insurance rates to get more business until you lose enough money to force you to increase rates, which will, of course, lose you business. You then begin to make a small profit, on your much reduced business, with the increased rates, and you then start to reduce rates to get more business...repeat the above."

There are lots of reasons why the Canadian travel medical insurance business is not yet mature and, perhaps, never will be. It is a complicated niche market with very few experts who really know what they are doing and it is really not large enough to have the full attention of the larger insurance companies. Travel medical insurance is Medipac's only business and we consider ourselves to be very knowledgeable in all areas of snowbird travel. We also think that we have learned enough to enter that stage of life called "Maturity". We won't stop learning, of course, and we depend on you, our customers, to keep teaching us the proper ways to do business.