I have been in favor of pet owners considering pet insurance as a way to help them pay for their pet's unexpected healthcare expenses that they cannot afford to pay out-of-pocket.
However, in the past year or so, I have had several readers of this blog contact me about disturbing trends in the industry. It has only served to reinforce my long-held belief that pet owners simply must do their own careful research before purchasing a pet insurance policy. That's why I created the Pet Insurance Toolkit to guide them through this process.
Premiums have soared, particularly for older pets. Are pet insurance companies setting artificially lower premiums for younger pets to appear competitive with other companies and making it up when a pet gets older? Companies need younger, healthier pets in their insurance pool to make up for the unhealthy pets - especially older pets who are more prone to age-related chronic conditions that will require management/treatment the rest of their lives.
The problem is insurance companies haven't been forthcoming, in my opinion, as to why the real-life scenario I am about to give you occurs. I just received an email from a pet owner who has been with a company for 6 years. She has never filed a claim. Her dog just turned 9 years old and her premiums increased from $109/mo. to $231/mo - a 112% increase!
The stock answer you will get from an insurance company when there is a premium increase is, "Premiums are set according to the age and breed of the pet and the zip code where they live." Technically, that is true, but it seems to me if a company is setting proper premiums for each age, there should never be more than a 20% increase in premiums from one year to the next. Therefore, there has to be another explanation.
Listen to this audio clip from a podcast episode with Laura Bennett, the co-founder and former CEO of Embrace Pet Insurance to learn how pet insurance companies set their premiums. It's vital information, not only for those who have pet insurance, but those considering the purchase of pet insurance.
Another disturbing trend that is fairly recent is when a company unilaterally changes the terms of a policy (lowering the annual maximum or increasing the deductible and copay) for a policyholder who has filed large and/or frequent claims. Laura addressed this in the audio clip above. This defeats the purpose of having health insurance, and in my opinion and hers as well, is totally unacceptable.
I have come to the conclusion that the most important steps in researching pet insurance is reading a sample policy and then calling the company to get answers to any questions or concerns you may have. I know it may not seem like a pleasant task to read an insurance policy, but it is a contract, and you shouldn't agree to and sign any contract of any kind without reading and understanding the fine print.
Step 2 in the 5-step process I recommend using the Toolkit is reading a sample policy. Step 3 is filling out a worksheet that answers what I consider the most important questions (from my perspective as a veterinarian) when choosing a company to insure your pet. Any questions or concerns not addressed specifically in the policy, or if the language is unclear (vague), should be answered by calling the company directly and speaking to one of their representatives.
You should pay close attention to the sections of the policy that talk about why a company can either change the terms/conditions (coverage) or just simply cancel the policy. These should be specifically defined in the language of the policy. Otherwise, a company is simply not being transparent.
Some companies will significantly change the terms of their policy from time to time. Fortunately, most of the time, it is an improvement in coverage and the changes affect all policyholders when their policy renews. This is understandable. But to change the terms for individual policyholders because it is unprofitable to insure their pet at the current level of coverage just seems unacceptable to me.
Most companies will state that they can cancel a policy for failure to pay the premium or fraud (you provided misleading information to them). This is understandable. However, a statement that says something like "we may cancel your policy and we will give you 30 days notice" without a specific reason given can mean anything. My interpretation of this would be, "If it is no longer profitable for us to insure your pet, we have the right to cancel the policy."
The Bottom Line
For years the pet insurance industry has made significant improvements to their policies e.g. covering hereditary and chronic conditions, making policies customizable, increasing limits as needed to keep up with technology and inflation.
If a company is making age and breed associated changes to their premiums based on actuarial data as discussed in the audio clip above, there shouldn't be dramatic increases in premiums from one year to the next. By simply allowing pet owners to downgrade their coverage when the premium increases out of their comfort zone (budget), should be sufficient to keep everyone happy. The insurance company can remain profitable and the policyholder can keep their insurance and adjust their coverage to fit their pet's medical history and budget. This way, it is the policyholder making the decision and not the insurance company making the decision for them.
So, I don't agree that the insurance company should be able to make changes to the terms of a policy or increase premiums for individual policyholders based on the size or number of claims. However, if the industry does trend toward this as a way to remain profitable, they should be clear in their policy language the reasons they can make these changes. Perhaps, state Departments of Insurance should mandate this.
Most pet owners are reasonable and can be accepting of a company that is transparent (up front) with them concerning these issues. What they don't like or understand is being surprised and not having a good explanation.
In my opinion, if this trend continues, especially if not accompanied by more transparency, the pet insurance industry as whole will suffer and many of us who have been proponents of its advantages for pet owners will no longer support the industry or recommend their product.