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Pet Insurance Industry Laps Up New Law

The industry fully supported the California Assembly Bill 2056, and don’t see difficulty adapting it.

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Originally published in the November 2014 issue of Veterinary Practice News

While pet health insurers may have work to do to ensure compliance with a new California law, most in the industry welcomed the changes and don’t foresee much difficulty adapting.

The attitude isn’t surprising considering that the majority of the industry supported Assembly Bill 2056, which was signed into law Sept. 30 and goes into effect July 1, 2015.

The California law requires pet insurers to disclose more information about their policies, standardize definitions and provide consumers with a 30-day “free look” period.

Kristen Lynch, executive director of the North American Pet Health Insurance Association, predicted business as usual for most pet insurance providers.

“NAPHIA has always promoted transparency,” Lynch said, “and most of our members have had policies posted on their websites for viewing for many years.”

The Pet Industry Joint Advisory Council applauded Gov. Jerry Brown’s signing of the bill.

“California has taken a bold, innovative approach towards increasing the transparency to safeguard consumer choice,” PIJAC President and CEO Ed Sayres said. “This new law is the first step to increase both pet and consumer protections when purchasing pet insurance.”

Lynch and others insurers said they hope the law encourages policyholders to read the documents and call if they have questions.

Seattle-based pet insurer Trupanion supported the bill, and CEO Darryl Rawlings said the law won’t change the company’s operations much because “the key elements of AB2056 are already baked into our core policy.”

“We think the new law will only help the industry because it establishes clear rules for all insurers and offers a very transparent look into policies for consumers to select medical coverage plans that work best for them and their pets,” Rawlings said.

He said he’s also hopeful that having the law and additional safeguards will give veterinarians more confidence to recommend medical insurance to their clients.

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Adam Fell, a spokesman at Brea, Calif.-based Veterinary Pet Insurance Co., said VPI is taking steps to comply with the law. They include providing a disclosure link on the VPI website and adding disclosure documents to the packet mailed to new policyholders.

VPI favors the 30-day “free look” because the opportunity exposes more people to pet insurance, Fell said.

NAPHIA’s Lynch said she believes most insurers have the same attitude about the “free look.”

“Most companies offer free cancelation within the first 30 days of coverage,” she said. “And most also have waiting periods as high as 30 days on illness coverage. The bill doesn’t change this.”

Jack Stephens, DVM, founder and president of Pets Best Insurance Services of Boise, Idaho, agreed the “free look” may get pet owners to try insurance, but he has concerns.

“Coverage or claim payments for trial plans has to be paid in some manner, as the underwriter has to have premium[s] at some point to cover losses associated with the plans,” Dr. Stephens said. “My preference would be that pet owners understand pet insurance is protection and peace of mind in knowing you are prepared financially for a pet accident, illness or cancer and appreciate the value pet insurance provides, resulting in pet owners seeking and purchasing a plan that is best for them and their pet.”

Another issue among the cacophony of praise was that the legislation would promote greater transparency in the pet insurance industry.

“The message … is a bit misleading because it implies that there have been a disproportionate number of complaints about pet insurance, and that is simply not the case,” Lynch said.

NAPHIA members submitted all their customer complaints data to a third-party actuary firm. The complaint rate in California was 0.02 percent per insured pet, or 1 in every 4,251.

More than 200,000 insured pets reside in California, according to the state’s Department of Insurance. The department reported receiving nearly 100 complaints annually about pet insurance coverage, the majority of which after investigation supported the consumer.

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One of the most common issues that consumers face is coverage of pre-existing conditions, the state noted. Pet owners often purchase policies not knowing that pre-existing conditions are not covered, the department stated, or the policy’s language is unclear as to what constitutes a pre-existing condition, leading to coverage denials.

The law will make insurers adopt universal language around pre-existing conditions, Lynch said. But she and other insurers say that’s not much of a hurdle.

“We will add a Web page and reference for consumers on how we pay, which is unaltered since we pay [a] flat percent of veterinary cost,” said Stephens, of Pets Best.

Pet insurance continues to grow rapidly, with several carriers on pace for healthy growth in this year. The NAPHIA State of the Industry Benchmarking Report showed a 14.6 percent increase in policies in force from 2012 to 2013.

“We’re seeing strong, stable, year-over-year growth, and we expect this positive growth to continue,” Lynch said.

Trupanion, for example, reported that revenue jumped by 42 percent in the second quarter of 2014 from the same period a year earlier. The number of enrolled pets rose 32 percent.

Pets Best expects 12 to 14 percent growth in premiums written next year, VPI’s Fell said the company is forecasting solid growth as well.

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