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12
Insurance
J. Ross Quigley
CEO
Medipac International Inc.
At Medipac,
we are voracious readers
of financial news and forecasts. We
follow commodity and oil prices,
imports and exports, medical costs
and treatments, several international
news sources, and we review Canadian
government statistics until they come
out of our ears. The travel medical
insurance business is a very complex
interaction of all of these factors.
In setting insurance rates and
designing our Medipac insurance
products, probably the most important
two tasks are to predict the Canadian-
dollar exchange rates and to predict
how inflation will affect hospital and
doctor prices around the world. The
United States is our primary focus, of
course, because that is overwhelmingly
the travel destination of choice for
Canadians.
Over the past several years, overall
medical inflation rates in the U. S. have
averaged approximately 4-5% – a
fairly predictable figure. There was
one year at plus 20% and another year
during which prices actually went
down, but that was some time ago.
Then along came Obamacare! We are
stunned that no one in the United
States has any idea what this means
for health care. We have been told that
all of the poor people will now have
proper health care, but the reality on
the ground today is that many, many
people are actually losing their health
care. Hopefully, this is a temporary
problem…but I am not so sure that it
is.
The hospitals and doctors are
terrified of the massive government
bureaucracy that is descending on
their lives, and their reactions are fairly
predictable (there’s that word again).
They are dramatically increasing
their prices in anticipation of the
government forcing them to treat
these new patients at the “government”
cost. I believe that they think the
government will force them to reduce
costs and they want the highest rates
possible before starting those rate
negotiations. Price increases of 20-30%
were not uncommon last year and
Medipac had to pay them.
So…when we are pricing this year’s
travel insurance program, what
inflation rate can we plan on for
medical costs in the United States?
“We now anticipate the loonie to
trend materially lower over the
next year, dropping to as low as
USD$0.90 in early 2014.”
That is a direct – and recent – quote
from one of Canada’s major banks. That
is the time at which we will be paying
many of our snowbird claims! Another
major bank stated that they expect the
loonie to be $0.85 early next year. This
would be very bad for our claims, not
to mention the dent in our lifestyle. But
we have managed these things before.
Other banks are saying $0.95 and,
perhaps, up to parity. These predictors
all offer great long explanations as to
why their predictions will be correct,
but why, when we are talking about
pennies, do they occasionally change
their minds by dimes.
We are in an era of dramatic volatility
due to the many uncertainties which
we face and Medipac has made a
decision to “stay the course” on pricing
and premium rates…at least for our
Early Bird program. As the year unfolds,
we will get more information and
perhaps be forced to adjust rates –
upward would be my guess. We have
built in a very modest rate increase to
try and offset the U.S. medical inflation
and we will absorb the currency risk for
our Early Bird clients. There is no real
prediction for our main season rates
but, based on all of the statistics, there
may be some larger increases with
which to contend.
I have decided that I am going south
this winter. My guess is that you have
decided to escape winter and go south,
or east or west, too. Now we just have
to decide whether to buy the Early Bird
insurance. If there was ever a year to
buy Medipac’s Early Bird…this is it!
If there was ever a year to buy
......
Medipac’s Early Bird…this is it!
You decide!
Insurance Tip
Paying to "Buy Down" a
$99 deductible to zero is
often more costly than the
savings that are realized
when you submit a claim.