It seems the business plan of pet insurance is the same as it is for long-term care insurance for humans: start them off with low premiums when need is unlikely, and then raise premiums fast so that people drop the insurance all together before it is actually needed. The Washington Post reports that:
Most buyers sign up for insurance when their pets are young and monthly premiums are lowest. But four or five years later, the premiums most companies charge start to rise — purely because the pets get older. Sooner or later, the price may become unaffordable.
How unaffordable? Take a male mixed-breed dog insured by Pets Best in the District. Enrolled as a puppy, his premium would be $35 a month, but by age 8, that more than doubles, to $83. By age 12, it’s $149 per month, or almost $1,800 per year.
Thus, over a nearly 13-year lifetime, that tail-wagging $35-a-month premium grows into a rabid $11,172 in total premiums.
And those age-based premium increases don’t include future veterinary price inflation, which will probably add even more to the monthly bill.
Studying pricing at nine insurance companies — making up the vast majority of the pet-insurance business — Checkbook found age-based price hikes at Nationwide, the largest pet insurer; AKC and PetPartners (both brands are underwritten by the same insurer); ASPCA and Hartville (two other brands sold by one insurer); Embrace; Figo; and Petplan. Two companies studied, Healthy Paws and Trupanion, don’t raise prices with a pet’s advancing age.
At most companies, “premiums are generally low during pet adolescent years and sharply increase as the pet ages,” Trupanion told the Washington State Office of the Insurance Commissioner in a 2016 regulatory rate filing. “Policy owners do not often expect this and are likely to [cancel] the policy when this occurs,” the filing says.
Consequently, market research shows the average policyholder insures not for the life of their pet but for only three years, according to the Trupanion filing.
How lucrative is pet insurance for the companies that sell it? One hint is in this statistic: the average annual pet-insurance premium in 2017 was $516, while the average annual vet bill per pet the same year was $92.
A major complaint from folks who buy pet insurance is that their claims are rejected for conditions or treatments not covered by the policy. No policy you buy will cover preexisting conditions, and some conditions that are covered may be considered preexisting if they develop up to a year after you enroll. The diagnostic exam is often not covered by many insurance plans, and neither are follow-up exams in many instances. Other deductibles may also result in only partial coverage.
Read the whole article for more tips and numbers.
Live in the Washington, DC metro area? If so, you can compare prices now until November 30 at this link.
I have had pet insurance on my dogs for years, mainly through Pet Plan. And yes, after 7 years of age the premiums rose very sharply from $35/mo for a small 3 yo mutt to almost $90 at the end. I will say that they paid everything I expected them to and the reimbursement for the last year more than paid for the last three years of higher premiums.
ReplyDeleteThat said, Pet Plan changed underwriters and the new policy they offered me was more expensive than what I'd had and its terms were unacceptable. I am currently with Figo, because they are the last company to offer 100% reimbursement after the deductible is satisfied. But I hear bad things about huge rate increases on even young dogs with no claims so it is very likely I will not renew with Figo.
What has happened is that all of the casualty companies that jumped into a new business with hip front organizations and good websites are finding that pet insurance is a very difficult business to make money in. A lot of the problem is caused by the soaring and often unnecessarily high vet fees you rail against (although in fairness, you can no longer expect a new vet with $100k in student loans to come to work for you for $30k/year). But I believe most of the herky jerky increases are due to poor actuarial models for all of the different breeds with congenital illnesses and huge variances in vet fees from location to location. With owners of defective purebred dogs the most likely to want and be able to afford insurance, how much do you have to charge to ensure you make money off an English Bulldog or a Golden likely to get cancer? They haven't figured it out and they are likely to leave the business before they do.
So all these new companies coming on line are scrambling to find underwriters who will work with them and the underwriters are giving themselves increasingly large cushions since they really don't know what they are doing.
Here's the thing: I trust my vet at the Humane Society but if a dog needs surgery or anything out of the ordinary he will refer me to a specialist, who I am very likely not to trust. So I have to decide: do I pay this new vet whatever outrageous amount of money he's asking for or do I hope for the best? Since I am unwilling to take several thousand dollars from my savings to pay someone I don't know for care that in all likelihood won't work anyway, having insurance at least removes some of the pressure from the decision to go forward with treatment. It's definitely a damned if you do, damned if you don't situation, at least when it comes to dogs. With cats, they get old and die, sometimes from cancer and usually from kidney failure. But their decline is predictable and manageable without heroic intervention.
All of my dogs have presented with serious problems at the end that might or might not respond to treatment. Insurance has made that somewhat easier to handle, but maybe not for long.