Laura Bennett, the CoFounder and CEO of Embrace pet insurance company recently posted a link to an article written by a pet owner who received her pet insurance renewal letter and discovered the premium was increasing by 52%! This article is perhaps the most well thought-out response to the issue of increasing pet insurance premiums I've ever seen.
This is an issue that needs to be addressed by both the veterinary community and the pet insurance industry. The fact is, several companies have raised premiums at rates similar to those cited in this article. If not addressed, pet insurance may be perceived by pet owners as unaffordable at some point in the future. Therefore, the pet insurance industry faces a big challenge when it comes to designing policies that offer real "value" at an affordable price.
There is much to discuss from this article, but here is the one thing that really jumped out at me that all pet insurance companies need to take notice of - the writer of the article put it this way - "just be honest with us." By this, she didn't mean that pet insurance companies are intentionally being dishonest with policyholders, but that they need to do a better job of explaining why they need to increase premiums.
I believe that such huge jumps in premiums are largely due to readjustments due to analysis of actuarial data collected over time. Therefore, technically such a premium increase could be due to a dog's location, breed and age and perhaps other factors, but the pet owner doesn't understand that without further explanation. The writer outlined a more tactful approach companies can take when sending out renewal letters that contain a notice of a premium increase.
As I see it, pet insurance companies should:
- Anticipate phone calls and emails from upset policyholders who just received notice of a significant premium increase and train representatives how to respond - being prepared to give a detailed reason rather than simply saying it is due to "veterinary inflation" or the standard line, "premiums are based on your location, age, and breed of your pet."
- Better yet, in the renewal letter, include an honest and detailed reason for the increase along with alternatives to lower the premium if necessary. Be proactive.
Companies who take this approach are likely to receive fewer phone calls from upset policyholders seeking answers and maintain satisfied and even happy policyholders.
For a number of years, I had to pay for my own health insurance for my family out-of-pocket. Each renewal (every 6 months), they did exactly as I suggested above. Imagine my elation when I went 2 years without a premium increase when I was hearing from my friends how much their premiums were going up with their insurance.
When the premiums did go up, they simply told me how much they were receiving in premiums and how much they paid out in benefits and that in order to maintain the policy they had to increase the premium.
They included several alternative plans to consider to lower the premium, so I simply took out my calculator and figured my out-of-pocket cost with each plan if I had to spend up to the maximum out-of-pocket cost. Sometimes it made sense to change plans and other times I would come out ahead staying with what I had and paying the higher premium. The policy selection worksheet included in the Pet Insurance Toolkit would assist pet owners in deciding what makes most sense for them too.
When premiums increase, pet owners may be tempted to switch companies or just drop the insurance. If their pet has any significant medical problems, switching companies may not be an option. And, what's to say that the company they switch to won't also dramatically increase premiums in the future?
In almost all cases, you will have options available that will allow you to stay with the company that insures your pet if you've been happy up until the premium increase. Contact the company and discuss what you can do to keep your policy and still be able to afford it. Don't be afraid to ask hard questions until you are satisfied with the answers.
A question I have is, "What strategies can pet insurance companies put in place to greatly reduce the need to increase premiums dramatically at one time or is it simply unavoidable from time to time?"
Very soon, I'll publish a guest blog post by Dr. Jack Stephens - the veterinarian who founded the first successful pet insurance company in the United States. He will honestly and frankly reveal the real reasons such dramatic increases in premiums occur and what options the pet insurance industry will likely consider in the future to address the issue.
Laura Bennett has also expressed some interest in doing a podcast episode devoted to this issue. She was the first actuary in the pet insurance industry and in a previous podcast, she discussed the role of actuaries in setting rates (premiums) and a little bit about what they did when they started Embrace.
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Other blog post that deal with this issue: