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Insurance

J. Ross Quigley

CEO

Medipac International Inc.

Peter, Paul and Mary’s wonderful song about “flowers”

was the first thing that came to mind. Snowbirds are the

most resilient of people; they have had to be, to deal with

the ups and downs of cross-border living for many years.

But this year appears to be different!

No longer could snowbirds cut out a few fancy meals,

reduce their side trips and still maintain their snowbird

lifestyle. The Canadian dollar’s value had collapsed to

levels it had not seen for the past 10 years. For most snow-

birds, the Canadian dollar’s gradual rise since January

2002, from a low of $0.63, hadmatched or even beaten the

inflation rate in the United States. The snowbird lifestyle

became easier every year. There was a brief dollar retreat

back to $0.80 that affected the 2008/09 travel season but

generally, during the surrounding years, they had gotten

used to a $0.95 dollar value. The wise ones, who were

able to time their purchases, even got dollar for dollar,

and better.

The second retreat to $0.80 began at the beginning of the

2014/15 travel season and took many snowbirds by sur-

prise. We believe that it was a direct result of the collapsing

oil prices, which seem to follow trading patterns similar to

the Canadian dollar. Their finances were severely stressed

from what they had budgeted, while they were away!

Of interest is the fact that the 2014/15 travel season was

perhaps the worst claims season, ever. Multimillion-dollar

losses by insurers were very common. Did the financial

stress caused by the dollar’s retreat contribute to the

dramatic increase in claims? Probably. Snowbirds are

on fixed incomes and the pressures on their lifestyle were,

and are, enormous. The interest and dividend revenue of

fixed-income investments are at multi-year lows and a 1%

GIC rate won’t support any senior, let alone snowbirds

who have also been whipsawed by the Canadian dollar’s

decline.

Did I mention the costs of travel insurance? For the

2014/15 travel year, rates increased marginally across

the board. These increases were manageable for most

snowbirds unless they had tomove to a higher age banded

rate. (Every year, 20% do shift age bands.) But the insurers

got caught just like the snowbirds. Their prices were set at

approximately a $0.90 dollar but, when the claims came

rolling in, they had to pay those claims based on an $0.80

dollar. So, as an insurer with a $100 million travel book,

you just lost $10-15 million dollars and perhaps more.

Price increases for this upcoming travel season were

justifiably dramatic, with insurers chasing the dollar down

by jamming premium rates up. In some cases, several

rate increases were levied in a short period of months.

The poor snowbirds – dramatic increases in insurance

costs, rental and lifestyle expenses up by close to 30%

and a fixed Canadian-dollar income to try and offset

the new “normal.”

The statistics are telling. Medipac’s consistent growth of

8-12% in the number of policies written has stalled. This

is by policy count, of course, as insurance revenue has

still increased due to the premium increases necessary

to counteract the U.S.-dollar strength. The Conference

Board of Canada statistics show that, between January and

August 2015, there were one million fewer overnight trips

to the United States; many of these were snowbird trips.

During the same period, overnight automobile trips to

the U.S. dropped by 8.5%. These are staggering numbers.

Medipac has gone from an average annual increase in

snowbird policies of more than 10% to a decrease of 4%

this year, for the upcoming travel season. That’s a 14%

shift – staggering, indeed! Our phone staff debriefings

show an abundance of calls looking to reduce their annual

trip length andmany looking to increase their deductibles

from last year, all to save money, of course. For every

snowbird who has increased his or her trip length, there

are three who are being forced to go for shorter periods

of time.

Texas has had the largest percentage reduction in trips and

trip lengths, followed by Florida. Not surprisingly, Arizona

travel has increased and California travel is up by even

more. These are generally the upscale markets and they

do not appear to have been affected by the dollar’s decline,

higher insurance costs or our insignificant interest rates.

But, as I have come to know over the years, snowbirds

are resilient. They will adapt to the new “normal” and

they will continue their lifestyle for years to come. Well,

there are a few exceptions. These few are the snowbirds

who purchased a home at the bottom of the U.S. hous-

ing market and are now sitting on 30-50% gains, before

applying the dollar exchange rate. After conversion, they

have come close to doubling their money and some are

deciding to sell their property. My guess is that they will

once again become snowbirds, but as renters, and they

will use their newfound money to support an even better

lifestyle. Party on!

Where Have All the “Snowbirds” Gone??

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www. snowbirds .org