1. 1 Outlook for Canadian Travel Insurance September 20, 2005 David Redekop, Principal Research Associate, The Conference Board of Canada dredekop@conferenceboard.ca

2. 2 Presentation Outline 1.Travellers of the future 2.Changes in where Canadians are traveling 3.Travel forecasts & issues

3. 3 Summer Outbound Leisure Travel (’000 of outbound summer [April through Sept.] leisure trips each year)

4. 4 Visitors to Canada: Rebound but not as strong, still below 1996 level ( ‘000 of 1+ night overseas foreigner person-trips to Canada) Source: Historical Statistics Canada; forecast CBoC. SARS

5. 5 Canadian outbound travel on a strong rebound after 3 years of difficulty ( ‘000 of outbound leisure trips by Canadians) Source: Historical Statistics Canada; forecast CBoC.

6. 6 Yet outbound leisure trips still not at 1991 level ( ‘000 of outbound leisure trips by Canadians) Source: 1991 Statistics Canada; forecast CBoC.

7. 7 Economic, demographic and travel industry changes will continue support growth in outbound leisure travel However, which Canadians are traveling, where they are going and what they are doing has changed significantly

8. 8 Travelers will be:  older,  travel farther,  stay longer

9. 9 Future travel insurance customers (Canadian population growth‘000 in 2001 and 2011) Source: Statistics Canada

10. 10 Future travel insurance customers (Overseas trips in 2004 and 2011 by age group) Source: Statistics Canada

11. 11 Future travel insurance customers (% change in overseas trips between 2004 and 2011 by age group) Source: Statistics Canada

12. 12 Less US, more Asia & Caribbean Average annual rate of growth in Canadian visits between 1990 and 2003.

13. 13 US losing share of Canadian outbound leisure trips (% share of Canadian pleasure trips by year) Source: Statistics Canada.

14. 14 Asia rebounded sharply 1 year following SARS (% change in # of Canadian visitors, 2004 vs 2003 and 2003 vs 2002) Source: Respective tourist boards/authorities

15. 15 Capacity to China up 58% (Number of planned direct seats, by carrier, from Canada to China) Planned direct seat capacity from Canada to China is up by 58% for summer 2005. All three carriers have boosted capacity with China East increasing seat capacity the most – some 243%. China Eastern Airlines began service from Vancouver to China in June 2004. Source: OAG.

16. 16 Emerging Travel Destinations Eastern Europe – borders opened up, $ flowing into building tourism infrastructure, Asia – appetite for travel to “exotic” destinations has been growing for last 10 years. Central America – Caribbean going up-market while Central American countries eager to build tourism industry. Underperformers with lots of potential – Africa & Middle East

17. 17 Insurance risk nights more than double for travel to non-US destinations (Average # of nights spent while traveling for leisure purposes, 2003) Source: Statistics Canada.

18. 18 Insurance risk nights between US & non- US will be about equal in 2005 US Risk Nights Non-US Risk Nights

19. 19 WHTI will impact travel to US Western Hemisphere Travel Initiative requiring passports to travel to the US will hit discretionary auto travel the most. More level playing field – US no longer has “ passport not needed advantage” Renewed confidence in outbound travel favours less traditional destinations such as Asia, Central America, Eastern Europe

20. 20 Total Loss in Trips & $ (between 2005 and 2008 due to WHTI) Source: CBoC TRIP model

21. 21 Winter Vacation Intentions (% indicating Yes/Probably would take a winter vacation trip) Canadian intentions to take a winter vacation fell somewhat in our June survey to 45% compared with 48% a year ago. A drop in the intentions to take a winter vacation in Canada was the main reason for the drop in the overall level of vacation intentions. Yes & Probably

22. 22 Steady increase in winter outbound trips planned (# of Canadians intending to take an outbound winter vacation trip, June survey each year)

23. 23 More uncertainty about outbound destination (% that did not know which destination in Canada, US or Other Int’l they would visit)

24. 24 Air travel at normal level (% intending travel to US by car and air on winter trip, June each year)

25. 25 Most outbound travelers have high- speed Internet connection

26. 26 Travel insurance

27. 27 Premiums have grown: Average premiums for individual trip policies each year ? Source: CBoC travel insurance industry survey each year Industry survey not done in 2002 & 2003 +19%

28. 28 Travel insurance policy sales (‘000 of individual trip travel health insurance sales to Canadians)

29. 29 Travel insurance ½+ $ billion market ($ millions in premiums) Source: The Conference Board of Canada Travel Health Insurance Monitor. * Trip Cancellation figure does not include for domestic trips

30. 30 Ontario home to nearly 4 in 10 travel insurance buyers (% of individual & annual premiums sold by province/region) Source: CBoC travel insurance industry survey, 2004

31. 31 Growth in snowbird trips (‘000 of Canadian Snowbirds 55+, trips of 30+ nights) 7.2% Source: Historical Statistics Canada; forecast CBoC. 5%

32. 32 Are we seeing the beginning of the end of provinces providing coverage of out-of- country medical services??

33. 33 Romanow report: out-of-country coverage not an entitlement Recommendation 5 of the "Romanow report" regarding the portability of medical services under the Canada Health Act states that out-of-country coverage for insured health services "be considered a benefit if provinces choose to provide it but not entitlement under the Canada Health Act ” and that “the portability provisions of the Act be limited to supporting mobility within Canada.” " Building on Values: The Future of Health Care in Canada" Commission on the Future of Health Care in Canada, November 2002.

34. 34 $ Millions in payments by Provinces for out-of-country medical services Source: Historical Canada Health Act Annual Reports with Quebec estimated. Forecast CBoC

35. 35 Ontario: Payments for out-of-country insured physician services ($ millions) Source: Canada Health Act Annual Reports

36. 36 THIA responsibility? Perhaps THIA should consider making representation to the appropriate officials in response to the Romanow report that the Canadian travel insurance industry, having a long and respectable record in servicing the out-of-country medical insurance requirements of Canadians, is ready & willing to assume a greater role in protecting Canadian outbound travelers and at the same time, reduce the growing financial burden facing all provincial governments to adequately fund health services.

37. 37 Wrapping up Survived the worse 3 years in the history of the travel industry since WWII. Changes in who is traveling and where will mean risk nights to non-US destinations will exceed risk nights to the US in 2005 and beyond. Governments looking for ways to better manage funding the growth in health care costs as the Canadian population ages.

38. 38 Thank you!