Insurance Information Institute
Pet Insurance: Fido's Risk Management Options
October 2014, CIPR Newsletter
Media queries should be directed to the NAIC Communications Division at 816-783-8909 or email@example.com
Last Updated 5/23/19
Pet insurance is similar to health insurance for humans. It includes exclusions, various levels of coverage, deductibles, and payment limits. Some carriers have different levels of coverage for the customer to choose from, while other carriers have one-size-fits all type plans. Most pet insurance companies exclude pre-existing conditions and hereditary or congenital conditions, and most general pet health policies do not cover wellness or preventative items, such as annual exams, vaccinations, and spaying or neutering. Some insurance companies will not accept pets after a certain age and many companies have waiting periods before benefits begin.
Insurance policies are usually broken out by the type of pet being insured and some companies allow the owner to choose their veterinarian. The actual monthly cost of the policy will depend on many variables, including the species of animal, breed, gender, age, location, and the coverages and deductible chosen. Most policies pay on a reimbursement basis and are not transferrable to other pets, but with written approval and consent, some policies can be transferred to new owners.
Reimbursement methods can be slightly different among companies. Some companies use a benefit schedule, which reimburses policyholders based on the illness or injury and the coverage level chosen. Other companies reimburse percentages based on the amount actually spent by the policyholder. Pet insurance is not for everyone, and consumers who are considering it should do their research. There are many online education centers dedicated to pet insurance which include policy and company reviews, term definition and explanations, and questions consumers should ask of themselves and the companies they are considering.
According to the 2017-18 APPA's National Pet Owners Survey, 84.6 million, or 68% of, families in the U.S. reported owning a pet, and will spend an estimated $18.26 billion on vet care alone in 2018, up from $17.07 billion in actual costs in 2017. This is not a new trend; consumer spending on pet medical care has been consistently rising every year since 2001, the year APPA officially started collecting data. The rise in veterinary care spending comes at a time when sales of pet insurance policies are rising, as well. Highlights from the North American Pet Health Insurance Association (NAPHIA) 2018 State of the Industry Report show the total number of pets insured in 2017 reached 2.1 million, up by almost 17% from 2016. As lifespans of companion animals increase, costs of veterinary care may increase for the consumer; this could be beneficial for the pet insurance industry in the future as more consumers look to pet insurance to help manage preventive care, acute and chronic illness, and emergency medical care costs for their animals. Moreover, the data from NAPHIA shows consumers prefer these types of "comprehensive" insurance plans for their pets: In the U.S., 98% were covered by Accident & Illness plans or Embedded Wellness plans while the remaining 2% were Accident Only plans.
Other Pet Risk Management Tools
Wellness Programs: In addition to pet insurance, some veterinary offices offer their own wellness plans. These offer wellness coverage for items traditionally not covered by pet insurance, like vaccinations and examinations.
Discount Plans: There are some national discount programs that exist as well. Programs like these offer veterinary services discounts for a monthly fee, calculated on the number and kind of animals owned. Typically, veterinarians who are part of a network must be used to receive the discount.
Pet Pharmacies: Many pharmacies, like Target and Wal-Mart, are beginning to carry pet prescriptions.
Homeowners Insurance: Homeowners and renters policies can sometimes assist with covering damages incurred by a pet while on their own property. Additionally, arrangements, such as boarding, may be covered for pets in a homeowner's additional living expenses (ALE), while the home is being repaired for a covered loss. However, homeowners need to be prepared and research to make sure their animal is not excluded by their insurance carrier as a dangerous breed. Usually, homeowners and renters policies protect an owner from liability caused by their animal, but if the carrier has identified the breed as dangerous, or a dog has a history of aggressiveness, that pet(s) may be excluded. For owners in such a situation, some additional or specific liability coverage could be purchased to cover the risk.
Status: In Oct. 2017 the Producer Licensing (D) Task Force made a referral to the Property and Casualty Insurance (C) Committee asking the Committee to consider developing a white paper on pet insurance, to include a review of coverage options, product approval, marketing, rating and claims practices. The Property and Casualty Insurance (C) Committee adopted a charge related to the referral during the 2017 Fall National Meeting. During the 2018 Spring National Meeting the Committee formed a drafting group to develop a white paper for regulators regarding pet insurance. The drafting group, consisting of both regulators and interested parties, presented a draft white paper to the C Committee at the 2018 Fall National Meeting. Comments were collected on the draft white paper. The comments will be discussed during the Spring National Meeting and the Committee will determine if revisions are necessary before voting on a final version to be sent to the Executive (EX) Committee and Plenary for consideration.