2009 Annual Meeting ● Assemblée annuelle 2009 Halifax, Nova Scotia ● Halifax (Nouvelle- Écosse )

1. 2009 Annual Meeting ●Assembléeannuelle 2009 Halifax, Nova Scotia ● Halifax (Nouvelle-Écosse) Canadian Institute of Actuaries L’Institut canadien des actuaires

2. 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 Agenda

3. Market Size: Group: $ 0.3 billion Individual : $ 0.7 billion Total : $1 billion Market Size & Tendencies

4. TIC/Co-Operators Echelon RBC ManuLife Reliable Life Travel Underwriters (IAP) Blue Cross Mondial (Allianz Global) ETFS (RoyalSun Alliance) AIG Travelguard Group Medical Services Desjardins TourMed (Survivance) Individual travel: insurers and competition in Canada

5. 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 Travel insurance: Trends and opportunities

6. Emergency medical expenses and assistance Single trip Annual plan Visitors to Canada AD&D 24 hours public transportation Flight accident only Trip cancellation Trip interruption Financial Failure or default of travel supplier Available products andrelated benefits

7. 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 Emergency medical: example coverage

8. "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. Example of definition of “Medical emergency” for individual insurance

9. 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 channels

10. 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 Distribution costs and commission levels

11. Typical premium breakdown: individual travel insurance

12. 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 Travel Insurance chain of suppliers

13. Canadian “Snowbirds” population growing

14. 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 Recent Trends in medical underwriting

15. 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 Sample individual travel insurance premiums (medical portion only)

16. 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

17. 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 What influences pricing (cont’d)

18. 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 Profitability and control cycle

19. Insurers have a tough time analyzing their experience since every year there is something different : 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 Pricing challenges

21. Travel insurance claims frequency table illustration

22. Rise in catastrophic claimsSource: SOA Contigencies

23. 10-years travel insurance price trend (in $CDN) Source: The Toronto Star annual survey

24. 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 pre-existing conditions Government Involvement

25. 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 OOC Insurance(imbedded in overall EHC)

26. Group InsuranceOptimum Re Survey on Group OOCM Coverage (limit) * Did not mention

27. Optimum Re Group OOCM survey Maximum Trip Duration

28. 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 Group Expatriates and inpatriates

29. 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 types

30. 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) Reinsurance: Why ?