Transcript Canadian Institute of Actuaries L’Institut canadien des

Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
2009 Annual Meeting ● Assemblée annuelle 2009
Halifax, Nova Scotia ● Halifax (Nouvelle-Écosse)
Agenda
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Market Size & Tendencies
Number of insurers & competition level
Product Trends
Price trends
Distribution channels / Acquisition costs
Government involvement
Profit margins
Group Insurance
Assistance & Managed Care
Reinsurance
Market Size & Tendencies
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Market Size:
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Group:
$ 0.3 billion
Individual : $ 0.7 billion
Total :
$1 billion
Individual travel: insurers and
competition in Canada
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TIC/CoOperators
Echelon
RBC
ManuLife
Reliable Life
Travel
Underwriters
(IAP)
Blue Cross
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Mondial (Allianz Global)
ETFS (RoyalSun
Alliance)
AIG Travelguard
Group Medical Services
Desjardins
TourMed (Survivance)
Travel insurance: Trends and
opportunities
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First Baby Boomers in their sixties
Have more $$ to spend
Lowering retirement age or phase-in
retirement
More immigrants visit their relatives abroad
Boomers become “Zoomers”
Less lying down on the beach--->more
adventure and exotic destinations
Overall increase in travelling
Available products and
related benefits
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Emergency medical expenses and assistance
• Single trip
• Annual plan
• Visitors to Canada
AD&D
• 24 hours
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public transportation
• Flight accident only
Trip cancellation
Trip interruption
Financial Failure or default of travel supplier
Emergency medical:
example coverage
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Medical Benefits up to $2,000,000 U.S. including:
• Hospital and Emergency Room Expenses
– with intensive care and coronary care
• Doctor’s and Physician’s Care
• Emergency Evacuation with Full Medical Teams
• Ambulance and Paramedic Fees
• Prescription Drug Coverage
• Chiropractors and other Practitioner’s Care
• Emergency Dental Coverage
• Return of Your Vehicle (including your trailer or motor
home)
• Travel Expenses to Bring a Relative to Your Bedside
• Return of Your Spouse and/or Dependent Children to
Canada
• Return to Destination Benefit
Example of definition of “Medical
emergency” for individual insurance
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"Medical Emergency" means a Sickness or
Injury which:
(a) results in symptoms which occur
suddenly and unexpectedly; and
(b) requires immediate Physician’s care to
prevent death or serious impairment of Your
health and/or to relieve acute pain and
suffering; and
(c) occurs outside Your Canadian province
or territory of principal residence.
Distribution channels
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Group or Individual
Direct or brokerage
Retirees association (FADOQ, Canadian
Snowbird Association, CARP, etc)
Travel agencies and tour operators
P&C customers (direct or through
brokerage)
Credit cardholders
Bank customers
Internet sales
Direct marketing (inbound or outbound)
Distribution costs and
commission levels
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Travel agencies: 20% to 50%
Snowbirds: 15% to 30%
Brokerage 15% to 40%
Associations 20% to 50%
Banks typicall play the role of brokers
Direct-marketing infrastructure costs
vs brokerage commissions: a wash
Typical premium breakdown:
individual travel insurance
Short term Snowbirds
Claims
41.0%
Distribution
32.0%
Administration
7.0%
Premium tax
2.0%
Claims handling and assistance
10.0%
Risk and profit (excl. investment)
8.0%
Total
100.0%
56.0%
22.0%
7.0%
2.0%
7.0%
6.0%
100.0%
Travel Insurance chain of
suppliers
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Plan sponsor or retiree association
Distributor or broker
Insurer
Assistance 24/7 for Alarm firm
Assistance-case managemement firm
Claims payment firm
PPO or repricing firm
Subrogation and other forms of recovery
firm
Reinsurer
Canadian “Snowbirds”
population growing
Snowbird Trips
('000 of trips for 31+ nights by Canadians 55+)
673
694
715
732
751
610
525
489
500
2001
2002
433
2000
2003
Source: Statistics Canada, CBoC Forecast
2004
2005
2006
2007
2008
2009
Recent Trends in medical
underwriting
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More medical questions asked
More risk classification
Individual rating sometimes offered
Looking for excluding combination of
specific diseases (e.g. 3 out of 4 of
heart, lung,diabetes, hypertension)
Reduced age limit for underwriting
Lack of affordable coverage for
borderline risks
Sample individual travel insurance
premiums (medical portion only)
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Age 40: $2.50/d X 14 d = $35
Age 60 (good health): $3/d X60 d = $180
Age 67 (good health): $3.50/d X 90 d = $315
Age 67 (average health):$8.00/d X 90d= $720
Age 72 (average health):$12/dX120 d= $1440
Age 80 (average health):$20/d X 180 d = $3600
Age 89 (borderline health): $65/d X180 d = $11,700
Substandard health premium may reach $20,000 with
$10,000+ deductible
What influences pricing
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Age
Destination (USA= $$$$)
Past experience
Trend/ inflation
Plan design
Underwriting criteria (risk class)
Pre-existing condition period
Acceptance or not of stabilized
conditions
What influences pricing
(cont’d)
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Canadian currency exchange rate vs others
Cost of air evacuation (function of gaz price)
Aggressiveness in case management
Liberalness in claims payment
Provincial plan reimbursement
PPO discount level
Capacity to recover from other plans and third
parties
Required risk and profit margins
Expenses, commissions and tax charges
Competition
Profitability and control cycle
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Must follow currency exchange
evolution. Hedging.
Between two seasons: adjust rates
and undewriting criteria
Reserve assessment crucial
Revisit contractual clauses
Reinforce claims management in light
of trends
Pricing challenges
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Insurers have a tough time analyzing
their experience since every year there
is something different :
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Product changed
New risk classes
Change in competitive mosaique
PPO’s, recoveries patterns, etc.
For snowbirds, experience available
usually developed through May for
fall/winter season. Represents only
60%-70% of ultimate paid claims
Travel insurance claims
frequency table illustration
0,000001
0,00001
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4,35
Rise in catastrophic claims
Source: SOA Contigencies
10-years travel insurance price
trend (in $CDN) Source: The
Toronto Star annual survey
Government Involvement
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There should be no further
significant disengagements
Industry under close scrutiny with
respect to clarity of contracts,
sales process and understanding
of customers, especially on preexisting conditions
Group OOC Insurance
(imbedded in overall EHC)
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No underwriting, but some managed care clauses
30% of insurers impose pre-existing condition or
“stability clause” clauses
Monthly premium around $CDN 2.00 single
trend to include ancillary benefits (return of vehicle,
repatriation of dependent , trip cancellation, etc.)
Maximum duration vary from 30 days to 182 days
Plan maximum vary from $ 1 million to unlimited
Retirees often lower coverage (only $50,000 for lifetime)
Individual group characteristic must be taken into
account (Frequent business travelers, Teachers on
sabbatical, truckers
Group Insurance
Optimum Re Survey on Group
OOCM Coverage (limit)
Year
2000
2002
2009
$1 million
64%
68%
50%
$2 million
4%
4%
10%
$5 million
16%
20%
10%
Unlimited
8%
8%
15%
Varies per group/DNM *
* Did not mention
15%
Optimum Re Group OOCM survey
Maximum Trip Duration
Year
2000
30 d
4%
45 d
4%
60 d
32%
90 d
24%
180 d
12%
Unl.
24%
Varies per group
2002
8%
0%
40%
24%
20%
8%
2009
5%
0%
25%
20%
5%
10%
35%
Group Expatriates and
inpatriates
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Assignees may be anywhere in the world
May be white collar or extreme blue
May work in war-zone countries
Not restricted to emergencies
Policy resemble comprehensive major med
policies
Contains emergency travel insurance outside of
country of assignation
Insurer may cover political evacuation risk
Price: $300-$1000 per month (single)
Less price sensitive
Perks often included
Reinsurance types
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Excess-per-life (retention per life)
Quota-share
Specific and aggregate stop-loss
Full outsourcing (reinsurer arranges
for everything)
Catastrophe cover (retention per
event)
Reinsurance: Why ?
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Protect profitability
Share risk for which we are not familiar
or no tolerance
Expertise in plan design, underwriting,
claims,etc
Review high claims
Gain market knowledge
Immunize against catastrophic events
(pandemics, Terrorism, Tsunamis,
Hurricane, etc)