Inflation continues to fuel travel insurance concerns

According to Sylvain Charbonneau, president and CEO of Blue Cross Canassurance, geopolitical and economic conditions have taken precedence over the COVID-19 pandemic in disrupting the travel industry during the spring and summer of 2022. However, Charbonneau says that the situation is changing rapidly.

He says that inflation was seen as more of a barrier to travel in the early summer, when the Bank of Canada announced that the inflation rate had reached 8.1% in June 2022, compared to 7.7% in May 2022. The pace slowed this summer, with the inflation rate reaching 7.6% in July 2022. Canada's central bank was about to reveal the August 2022 inflation rate at the time of writing. The Bank of Canada measures inflation by the change in the total consumer price index.

Sylvain Charbonneau says that inflation could have an impact on people's ability to travel. "A recent survey shows that those who are not planning to travel in the next year view the cost of travel and the increase in the cost of living as the most important barrier, coming before the health measures related to COVID-19," he adds. 

Increase in premiums  

François Morin, CEO of SecuriGlobe – a travel insurance broker acquired from La Capitale by Blue Cross Canassurance in July 2021 – commented on the effects of inflation on the cost of travel insurance. He says that the cost of travel insurance has increased since the pandemic began. He says he has observed that the average increase in the price of travel insurance from his providers has been in the 5% to 10% range.

On the other hand, he says he is not concerned about the effect of inflation on Snowbirds' travel intentions. "Snowbirds are resilient to the increase in the Consumer Price Index (CPI). They will make sacrifices to go," Morin says.

Medical cost inflation  

Sylvain Charbonneau says that the cost of travel insurance has been affected by rising medical costs. "We had not adjusted our premiums during the pandemic; we recently did so. The increase was approximately 5% to 7% last April. Many insurers have adjusted their premiums or may do so. There has been a bit of catching up, as medical costs have continued to rise overall, especially in the U.S.," says Charbonneau.

He does not attribute the increase in travel insurance premiums to COVID-19 cases. He says they have not had a significant impact on Blue Cross Canassurance’s experience. "We haven't seen a great deal of COVID-19 cases among our clients," says Charbonneau. When we do, they haven’t resulted in lengthy hospital stays," he adds. "The adjustment in premiums is more related to the economic context that has affected the medical costs we cover in our contracts."

Not too close to the Ukraine  

As for the geopolitical context, Sylvain Charbonneau mentions that the war in Ukraine is contributing to a decrease in travel intentions to Europe, mainly to Eastern Europe. "We are also seeing a greater tendency for clients to go to the United States. Interest in travelling to Asia and Europe has decreased. As they restart travelling, clients are going abroad, but a little less far, and not too close to Ukraine," says Charbonneau.

Patrick Charbonneau, director of travel insurance at Optimum Reinsurance, notes that "the current forecast is good" for snowbirds' travel intentions, but that "Canadians who want to travel are still thinking about it.” Among the issues that are causing hesitancy, Charbonneau cites:

• The rising cost of flights and travel packages;
• The rising cost of gas;
• The cost of car rental "which is now exorbitant," he says;
• Inflation in general;

• Problems at Canadian airports (flight delays and cancellations);
• The risk of another wave of COVID-19 in fall 2022.

"These impacts will favour an increase in automobile travel at the expense of air travel, even if the price of gas is high," he says.

Patrick Charbonneau also says he believes that travel to the United States will make a strong comeback, at the expense of "the new trend of some Snowbirds spending their winters in Europe (Spain, Portugal)," he says.

"Another trend will be to travel more north-south than east-west," adds Patrick Charbonneau. The pandemic has favoured travel close to the insured's place of residence, he says. This is to make it easier to return home if problems arise, such as catching COVID-19 or seeing flights come to a complete halt, he says.