Earthquake and tsunami in Japan, violence in Egypt and Libya, volcanic eruption in Iceland…Natural and political turmoil is stoking sales of trip cancellation and interruption coverage, most experts interviewed by The Insurance and Investment Journal confirm.
"It’s been a turbulent season," says Patrick Lavoie, vice president, marketing at Securiglobe. "Trip cancellation and interruption insurance has been booming. This drove our sales in this market segment."
Experts interviewed claim that people who do not usually buy insurance are starting to worry about potential danger. There is no typical clientele profile: this insurance appeals to men and women of all ages.
Pierre Saint-Onge, vice-president of Tour+Med, thinks media coverage of catastrophes plays a role. "When the government warns the population about a hazard, these products become more legitimate," he says.
Emmanuel Reinaud, vice-president, sales and account management at etfs, does not think that recent natural catastrophes have had a major impact on insurance product sales and claims. "The earthquake in Japan was large scale, but each year there are natural catastrophes," he points out.
Trip cancellation and interruption insurance is drawing more clients each year, he adds. Sales are rising steadily, for a simple reason: these two forms of coverage are very useful in case of illness, burglary or death of an immediate family member.
For all their sales boosting potential, natural catastrophes and political instability are a double-edged sword: they generally result in more claims. Could this mean rate hikes for trip cancellation and interruption insurance? "It’s possible but not confirmed," Mr. Lavoie says.
Companies are also wary of high risk destinations. For example, Tour+Med does not cover travelers heading to Egypt or Libya. "We’re rejecting all applications until the political climate settles down," Mr. Saint-Onge says.
How do insurers decide whether to cover a risk in a given country? Many rely on government advisories. "You have to get informed to find out if the government recommends travelling to the destination selected," says Joanne Parent, regional business development director, Quebec and Atlantic at TIC.
While insurers may refuse to issue trip cancellation for high risk destinations, advisories are not the only indicators considered. Repatriation and hospitalization costs are also factored in.
"Repatriating someone from Japan or Europe costs twice as much as bringing them home from Florida. In contrast, hospitalization costs are lower in Europe than in the United States," Mr. Saint-Onge continues.
Medical tourism is also driving sales of some travel insurance products. A growing number of Canadians, not all of whom are insured, are shopping for care overseas. According to a study by the Fraser Institute, close to 45,000 people received treatment outside Canada in 2010, which is up from just over 41,000 in 2009.
Facing long wait times in the Canadian health care system, many patients seek care abroad. "It is not uncommon to wait nine or ten months for orthopedic surgery, Mr. Reinaud explains. "Some clients opt for care at private hospitals or in the United States."
This is precisely the rationale for products like Viator Priority Care, which etfs has offered for ten years. This health inwwsurance product gives insured quicker access to health care in the private system in North America