Pet health insurance gains ground in North America

Already popular in Europe, policies protect against injuries and illness
Published on February 15, 2007
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Health insurance for companion animals can be almost as confusing as human health insurance, but it also can come in handy—particularly for an animal owner whose companion develops a major medical condition.

In the United States, only a small percentage of pet owners carry health insurance for their animals. Pet insurance is the topic of many articles in the popular press, though, and insurers are selling more policies as pet owners become aware of the option.

The AVMA supports the concept of companion animal health insurance. In part, the AVMA guidelines on pet health insurance state: "The Association recognizes that a viable companion animal health insurance program will be important to the future of the veterinary profession's ability to continue to provide high quality and up-to-date veterinary service."

The National Commission on Veterinary Economic Issues just recently launched a new benchmarking tool regarding pet health insurance: "Do your clients know how to cushion a fall?" The tool asks veterinarians about the ways that they recommend insurance to clients, whether they have concerns about insurance, and how the financial constraints of their clients affect treatment.

At the same time, companies continue vying to offer the most viable pet health insurance program in a perplexing but promising market.

By the numbers

Only 3 percent of U.S. pet owners had insurance for their animals in 2004, according to a survey by the American Animal Hospital Association. Pet owners living in Canada insured 2 percent of cats and 9 percent of dogs in 2001, according to a survey by Ipsos Reid market research.

Pet health insurance is taking hold in North America, though.

The two largest companies together have more than half a million policies. Veterinary Pet Insurance of Brea, Calif., had about 392,000 policies in the United States in 2005—up from about 195,000 policies in 2001. Pethealth Inc. of Oakville, Ontario, had about 153,000 policies in the United States and Canada in 2005—up from about 22,000 policies in 2001.

Pet health insurance already has taken hold in parts of Europe. Pet owners living in the United Kingdom insured about 12 percent of cats and 18 percent of dogs in 2005, according to a report by Datamonitor.

How it works

Dr. Carol McConnell, VPI director of veterinary education, said pet insurance is still a difficult business. Veterinarians are very independent in nature, she said, and most pet owners continue to pay for veterinary care from discretionary income. Insurance also is subject to many regulations, which vary from state to state.

Some insurers have survived in the market, though, and some veterinarians embraced the idea of insurance years ago. Dr. McConnell said veterinarians founded VPI with the goal of ending "economic euthanasia."

"They could see that the quality of the medicine they could practice was limited by people's finances," Dr. McConnell said.

While many animal owners also have embraced insurance for their companions, Dr. McConnell said not everyone realizes that pet health insurance is usually more like property insurance than human health insurance.

With property insurance, the policyholder makes a claim only if the property suffers damage. Pet health insurance similarly covers accidents, injuries, and illness unless the policyholder pays for a rider to cover routine care.

The billing process also differs between most pet health insurance and human health insurance. Pet owners usually submit claims to insurers after paying veterinarians. Physicians, however, have to handle much of the paperwork of billing insurers.

Pet insurance is becoming more like human health insurance in at least one way. Dr. McConnell said some large companies offer pet insurance as an employee benefit.

"People love their critters," she said. "People have embraced these animals as family members. These family members have their affiliated medical expenses."

Professional opinions

Both the AVMA and the Canadian VMA support pet health insurance in general. The Canadian VMA once exclusively endorsed PetCare insurance, through Pethealth, though the association has since chosen not to endorse a particular plan.

The AVMA Council on Veterinary Service oversees the AVMA's guidelines on pet health insurance, which the Executive Board established in 1994 and revised in 2003. Dr. Laurel Kaddatz represents private practice, exclusively small animal, on the council. He said the AVMA guidelines are a reference point for veterinarians who want to evaluate insurance programs.

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Dr. Kaddatz also has accumulated personal experience with pet health insurance as the owner of Pound Ridge Veterinary Center in Pound Ridge, N.Y.

"The 5 to 10 percent of my clients that have it seem to be happy," Dr. Kaddatz said. "They seem to be pretty satisfied."

He said he doesn't have to handle too much paperwork. His staff fills out insurance forms for clients, and he adds his signature. They once released a medical chart to a company to answer questions about a claim, and he has written medical summaries.

Dr. Kaddatz said his clients are fairly well-to-do, but almost everyone worries about money, and they might agree to treatment more easily if they have insurance.

"I feel that if a client has some help financially, it will help them feel more comfortable in pursuing treatment for their pet," he said.

Dr. Kaddatz said veterinarians are more actively making clients aware that insurance is an option. His clinic includes information about insurance in each folder for new patients.

Insurance companies

The companies that provide pet health insurance in the United States operate through a number of names, products, and affiliations.

This year, VPI enters its 25th year of selling policies. The company offers a standard plan and a superior plan, as well as riders for routine care and for additional cancer coverage. Iams pet foods owns a portion of VPI, and VPI also has an affiliation with the Veterinary Centers of America.

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Pethealth began selling insurance policies in Canada in 1999. It came to the United States in 2001 and now has distribution partnerships with Petco animal supplies and MetLife insurance. The Pethealth insurance plans include PetCare and ShelterCare. The company also offers several other products, such as the 24PetWatch microchip identification network.

The Hartville Group Inc. has provided health insurance plans for dogs and cats for about a decade. The group offers the Petshealth Care Plan and Healthy Bark & Purr.

Hartville and the American Society for the Prevention of Cruelty to Animals announced in fall 2006 that they are expanding a previous partnership and offering ASPCA Pet Health Insurance. Some plans will cover spaying and neutering—but all exclude tail docking, ear cropping, and declawing.

The new company Fetch Inc. brought the Petplan insurance brand, popular in England and Canada, to the United States last year. Pet Plan Ltd. in the United Kingdom entered the market in 1976, and it now insures more British pets than any other provider. The Petplan brand arrived in Canada in 1989.

The companies that offer pet health insurance continue to change as they test business models and as the market grows. For example, the founder of VPI started another company after retiring. Pets Best offers policies that pay about 80 percent of veterinary costs—with the coverage, deductible, and limits varying by plan.

Client finances

The potential benefits of pet health insurance to both practices and clients is the focus of the new NCVEI benchmarking tool.

According to early results, almost all veterinarians have encountered clients with serious financial constraints. About 97 percent of respondents said they have been forced to recommend a less effective medical solution because the client could not afford the most effective solution. About 90 percent have euthanized a pet because the owner could not afford treatment.

About 59 percent of respondents said they think that advising new pet owners about the potential costs of routine pet care as well as unexpected expenses is a responsibility of the practice. Just over half offer low-interest, extended-credit care plans to clients to assist in the payment of unexpected, large veterinary fees.

Howard Rubin, NCVEI chief executive officer, urged veterinarians to visit to add their information to the benchmarking tool.