Property and Casualty Insurance (C) Committee
Thursday, August 15, 2024
12:30 PM CDT
McCormick Place Convention Center—S102—Level 1
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Pet Insurance
Background
Last Updated 12/13/2024
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. Some insurance companies will not accept pets after a certain age and many companies have waiting periods before benefits begin. Pet insurance companies typically divide their products into 3 main categories: accident-only, accident and illness, and wellness coverages. Each level offers specific services that are covered and excluded and will vary by price.
Insurance policies are usually broken down by the type of pet being insured. 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 transferable 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 spent by the policyholder. Although pet insurance is not for everyone, 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.
Background: According to the 2023-2024 American Pet Products Association's (APPA) National Pet Owners Survey, 60% of households, or about 86.9 million families in the U.S. reported owning a pet. Pet industry expenditures in 2023 totaled 147 billion dollars, up 7.5% from 2022. This is not a new trend. The APPA officially started collecting data in 2001 and consumer spending on pet care has consistently risen every year since. 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) 2023 State of the Industry Report shows the total number of pets insured in 2023 reached 5.6 million a 16.7% percent increase from 2022. Dogs continue to make up the majority of insured pets (78.6% vs 21.4% for cats). The data from NAPHIA shows consumers prefer comprehensive insurance plans for their pets.
The combination of a growing pet population and consumers willing to invest more in the health of their pet could create opportunities for insurtechs to enter this expanding market. In 2022, Insurtech company Lemonade added pet insurance to their existing product lines.
Actions
In April 2019, the NAIC's Pet Insurance (C) Working Group reviewed the NAIC White Paper, A Regulator's Guide to Pet Insurance, to consider whether a model law or guideline was needed to create appropriate regulatory standards for the pet insurance industry. A request for Model Law development related to pet insurance was adopted during the NAIC 2019 Spring National Meeting to address issues such as definitions, disclosures, violations, producer licensing, preexisting conditions, reimbursement benefits, and regulations for pet insurance. At the NAIC's Summer 2022 National Meeting in Portland, Oregon, members voted to adopt the Pet Insurance Model Act. Key elements of the model law address pet wellness programs, preexisting conditions, consumer protections, and training for insurance producers. State adoption information for the model can be found here.
The Pet Insurance (C) Working Group disbanded in 2023.
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