Providers are making strides to persuade owners that coverage is worthwhile.
The pet health insurance industry has seen its share of obstacles—from veterinary apprehension to policy confusion—since its 1980 debut. But industry insiders predict a bright future through not only the forging of business partnerships and the launch of new products and services but also a reduction in competition.
Kristin Lynch, executive director of the 4-year-old North American Pet Health Insurance Association (NAPHIA), works on behalf of two clienteles: insurance buyers and sellers.
“We are an independent source for pet consumers and can explain what services should be provided with a policy,” Lynch says.
“As the perception of pets increasingly becomes ‘one of the family,’ insurance will be more in demand,” she says. “There are very different ideas of pets’ role in life in urban and rural areas. As this bridge narrows … owners will want to be able to care for all of their pets’ medical needs.”
For pet insurers, NAPHIA grants membership to qualified companies and strives to set professional and ethical standards. Another goal is to provide accurate benchmark statistics.
One survey now under way asks about the average turnaround time for insurance claims, the size of insurers’ call centers, how many and what types of policies are in place, and the average policy payout.
Laura Bennett, CEO and co-founder of Embrace Pet Insurance and NAPHIA’s chairwoman, doubts the accuracy of statistics previously compiled by groups such as Packaged Facts, a market research company, and the American Pet Products Association.
“I’ve found their statistics to be a bit high,” Bennett says. “The people surveyed are often part of a group who care the most about their pets and therefore will answer questions more favorably to the industry than the actual pet-owning population.
“True statistics will help insurers, veterinarians and pet parents understand more about each other.”
As the trade association does its research, insurance companies are pursuing partnerships outside of the veterinary industry to try to win over pet owners. The thought is that established, well-known branding will not only improve sales but also convey a feeling of trust to pet owners.
For example, Veterinary Pet Insurance (VPI) of Brea, Calif., partnered with Nationwide, a provider of vehicle, property and life insurance, in 2008. Nationwide customers receive a 5 percent discount on a VPI policy.
Pets First Healthcare of Jeffersonville, Ind., has been proactive as well, partnering with Kroger Co., a Cincinnati-based grocery retailer, Lynch says. As for Bennett’s Embrace Pet Insurance, “We have plans in the works for a partnership, but are waiting until the deal is complete to discuss it,” she says.
VPI also has strategic partnerships with several major companies in the pet industry, CEO Dennis Drent says.
“VPI’s strategic partnerships have proven a valuable part of our marketing efforts by allowing us to get our name in front of more pet owners than we could on our own,” he says.
Jack Stephens, DVM, president and founder of Pets Best Insurance in Boise, Idaho, expects major changes in the industry.
“I think there will be an increase in the number of new products and services offered along with increased customer service,” Dr. Stephens says. “Although some compare the 1 percent of U.S. pet insurance policy holders with the 25 percent of U.K. policy holders, we have 10 times the number of pets in America that they do.
“Although those numbers are skewed, I anticipate narrowing the difference and increasing the U.S. number in the next five years.”
Lynch looks for new coverage offerings as well, including discounts for particular traits found in pets.
“People who exercise and don’t smoke or drink alcohol get better rates in human health coverage,” Lynch notes. “Some [pet] insurers are starting to build in a dental care option and annual blood work, and we will see more options in the future.”
Lisa Hockensmith, communications manager with Petsmarketing Insurance, a subsidiary of the Hartville Group Inc. of Canton, Ohio, expects policies to evolve toward an accepted norm—stable coverage that appeals to a larger number of pet owners.
“Just as some newer companies have been unable to provide consistent pricing, many customers still do not have expectations of pet insurance plans or how they work, which along with affordability needs to be remedied,” Hockensmith says.
New insurers in the pet market have forced all companies to stay competitive and offer better products, Bennett says.
“New companies must make policies appealing so they can compete with established providers,” she says. “Established providers are constantly working to improve their products.”
Some companies are opting for customizable policies in which a client can add to a basic plan to suit their needs. Others are offering a basic plan but with deductible options.
Stephens says Pets Best customers are opting for less expensive policies.
“The economy has played a role in slowing growth of new policies, but we don’t expect that to last,” he says.
More than 50 pet health insurance companies have entered and left the market over the past 30 years, Drent says.
“We expect this volatility among competitors to continue,” he says. “Some of the companies around today will not be here five years from now, at least not in their current form. Considering the size of many of the companies currently in the market, there may be some consolidation of companies in the near future.”
In the Practice
A VPI survey found that younger veterinarians are more willing than older colleagues to talk about pet insurance with clients and promote a specific provider.
“With newer grads making recommendations regularly, this is inevitably going to have a positive impact on the pet insurance industry’s future,” Drent says.
Some veterinarians have expressed concern that pet insurers will dictate prices for covered services, imitating the human health care model.
“Veterinarians fear that pet insurance companies will tell them what kind of medicine they can practice,” Bennett says. “But this doesn’t work in the human world, so why would we do it in veterinary medicine? The owner pays the bill and the owner submits the claim, so there’s at no point at which the veterinarian would not have charges covered.”
A white paper produced by the National Commission on Veterinary Economic Issues (NCVEI) cited four reasons pet health insurance “has neither the power nor the incentive to foist managed care onto the profession”:
• Pet health insurance is not true medical insurance. Pet health insurance is indemnity insurance and is designed to pay a portion of veterinary bills.
• Pet health insurance reimburses policyholders, not veterinary clinics.
• Insurance companies have no financial leverage in the veterinary community.
• Veterinary medicine has no mandate for uninsured care.
“Veterinary medicine as a practice model does not lend itself to managed care due the fact that there are a small number of specialists, the majority of services are provided on an outpatient basis and 90 percent of veterinary practices are independent businesses providing services to individual clients,” Drent says.
Each insurer handles policy claims differently, but all say they have no interest in replicating HMOs.
No Fuss for Vets
“We don’t require a diagnosis for clients to be eligible for reimbursement,” Hockensmith says. “That means when veterinarians are dealing with a difficult case, they don’t have to worry about naming a specific diagnosis prematurely just so clients can begin filing claims. We don’t require veterinarians’ signatures on our claim form or ask veterinarians to fill out a portion of it. This reinforces our direct relationship to the customer and does not place extra work on practice staff.
“We also won’t second guess medical decisions or veterinarians’ recommendations.”
Insurers say pet owners think most about the cost of pet medical care when they are at a veterinary practice.
Interaction with veterinarians will always be key in turning a noninsured client into an insured one, says Howard Rubin, chief operating officer of Seattle-based TruPanion.
“Vets are sought after by owners for all information about animals,” Rubin notes.
“The deepening of the human-animal bond will drive the demand for more active veterinary care,” he says. “As a result, the fundamental value of pet insurance will become even more apparent.”
“Based on our experience and informal surveys, we believe the majority of U.S. veterinarians provide some information about pet health insurance,” Hockensmith says. “While many veterinarians may not yet feel comfortable recommending one specific provider, they do increasingly recognize the value of pet insurance and provide a greater amount of materials to their clients.”
“I’d say about 60 percent of vets at least have insurance brochures in their offices,” Bennett says. “But they very passively, if at all, make a verbal mention about investing in a program. If a veterinarian points out five different companies, clients won’t know where to start and will likely do nothing, but if a vet suggests one or even two companies, the client is more likely to take action.”
No Strangers to Advice
Some veterinarians say recommending a specific insurance company is no different from the other advice they give clients.
“You can’t be 100 percent sure about all of the recommendations you make as a vet,” says Karen Felsted, DVM, CPA, CVPM, the CEO of the National Commission on Veterinary Economic Issues. “How many times do veterinarians recommend a drug the pet throws up or recommend a boarding facility? You don’t think twice about making other types of referrals because you might hear negative feedback.”
Dr. Felsted says veterinarians should do some research on their own and, if they choose to recommend a pet insurer, suggest only one or two.
“Insurance gives owners peace of mind if something catastrophic happens,” Felsted says.
“I place veterinary care in three buckets. The first bucket is routine care, which should be paid out of pocket. The second is common illnesses that you might draw extra cash from savings to cover. The third is catastrophic diseases and unplanned events like cancer or being hit by car, which is where insurance steps in.”
Insurance providers say they frequently speak with veterinarians for insight into creating policy options and for how to better serve pet owners and practitioners.
“Veterinarians will always be an important part of pet health insurance because they will be able to convey to clients all of the things that can happen medically to their pet,” says Stephens, of Pets Best. “Some owners may also not realize the cost related to veterinary medical care.
“Pet health insurance gives them medical coverage for five times what they would be able to pay out of pocket,” he says.
In the end, insurance offers another payment option for clients, Felsted says.
“I can see that it’s a tough position for vets to be in to talk about pet insurance,” she says. “But we all know about the push-back from clients about veterinary visits and cost. We may not think it’s our job to find ways for clients to pay for our services, and maybe it isn’t. But if it can benefit the patient, the client and the vet, it is worth it.”
NAPHIA’s Bennett notes that 70 percent of U.S. households own one or more pets.
“We think the question pet owners ask soon won’t be ‘What is pet insurance?’ but rather ‘Which pet insurance works best for me?’” she says.