In-force premiums for pet insurance increased by 30% in 2021

With pet insurance most similar to human health insurance, most claims are for routine vet visits, emergency surgeries, or accidents. (Credit: Credit: Igor Normann/Shutterstock.com)

The numbers are there, and like a dog’s tail, they don’t lie: pet insurance is fast becoming a booming industry. On May 17, the North American Pet Health Insurance Association (NAPHIA) released its long-awaited 2022 State of the Industry Report.

The pet insurance industry in North America surpassed $2.83 billion at the end of 2021, meaning the industry has more than doubled since 2018, as PropertyCasualty360.com l had previously planned.

Tracking the industry closely, this means that 2021 saw an increase of almost $700 million in total premiums in force (up more than 30.5% from 2020), and that there now has 4.41 million pets insured in the United States and Canada. that’s a lot of protected animals.

However, since according to the Humane Society of the United States, there are over 128 million households in the United States alone that own pets. and some of them own multiple pets (and that’s not counting Canada), meaning that only a small fraction of the total number of pets in North America are currently insured. The fledgling pet insurance industry is just beginning.

Here are some key figures to know from the NAPHIA report:

  • Nearly 20 companies participate, providing their pet insurance data.
  • The gross written premium (GWP) in force is constantly increasing:

2017: $1.030 billion

2018: $1.254 billion (21.7% increase over 2017)

2019: $1.558 billion (24.3% increase over 2018)

2020: $1.986 billion (27.5% increase over 2019)

2021: $2.591 billion (30.4% increase over 2020, almost 1/3)

  • More people insure their dogs than their cats: in 2021, 88.4% of the total US volume of dogs insured by GWP, although this is a slight decrease from 2020, when 89.1% of the total GWP concerned dogs.
  • The total number of insured pets in the United States is increasing year over year:

2017: 1.8 million pets

2018: 2.15 million pets (18% increase over 2017)

2019: 2.51 million pets (16.7% increase over 2018)

2020: 3.1 million pets (23.2% increase over 2019)

2021: 3.98 million pets (28.3% increase over 2020)

Where are these animals? It’s perhaps no surprise that the most populous states also have the most puppies:

-California has 19.3% of all insured pets, which means that approximately 21.6% of the total GWP for pet insurance comes from California. -New York is a fairly distant second, with 8.4% of all pets insured, or about 9.3% of total GWP. – Florida lags behind with 6.1% of the nation’s insured pets, or about 6.2% of total GWP. – Texas and New Jersey each have about 5.5% of the nation’s insured pets (although the GWP is a bit lower in Texas at 4.8% compared to New Jersey’s 5.4%). – The list is completed by Massachusetts (4.7%; 4.8% GWP); Pennsylvania (4.6%; 4.4% GWP); Washington (4.1%; 4.0% GWP); Illinois (3.2%; 3.3% GWP); and Virginia (3.1%; 3.2% GWP).

Dissecting a Pet Insurance Claim

What do pet insurance claims look like? With pet insurance most similar to human health insurance, most claims are for routine vet visits, emergency surgeries, or accidents. According to NAPHIA, below is a compilation of the top ten dog and cat surgeries in the United States in 2021.

Table. Courtesy picture

The numbers are staggering, with the “top dog” incurring just over $50,000 in dollars after being hit by a car. According to Consumer Reports, the average annual premiums paid for a dog in 2020 were just under $600, and about half ($340) for a cat. Based on the numbers below, some pet surgeries can cost tens of thousands of dollars.

As a longtime pet owner who has shelled out thousands of dollars for unsuspected pet emergencies over the years, pet insurance policies can save lives. When a pet owner may not have the funds to spend saving their furry friends, insurance can make all the difference in saving a pet that otherwise wouldn’t receive the care. medical supplies he needs to survive.

From a legal and regulatory perspective, what does the significant growth in the pet insurance industry mean?

The National Association of Insurance Commissioners (NAIC) clearly takes pet insurance seriously. As early as April 2019, the NAIC released its pet insurance white paper, “A Regulator’s Guide to Pet Insurance.” Specifically, at the Spring 2022 National Meeting (April 4), the Property and Casualty Insurance Committee voted to reinstate the Pet Insurance Task Force so that changes to the Model Law can be completed. The working group will make any necessary revisions to the model law before it is resubmitted to the responsible committee for consideration.

Currently, regulations vary widely, and according to the NAIC, California is currently the only state with a law specifically governing pet insurance. California law requires policies to have clear language about coverage limits, lifetime limits, waiting periods and deductibles. It will be interesting to see how well, if at all, the model law mirrors what California already has in place. A pet insurance bill was introduced in New York, but never passed into law.

Could an increase in the number of insured pets also mean an increase in claims litigation against pet insurers? As is the case with other lines of insurance, an increase in claims and an increase in litigation could go hand in hand. The more claims, the greater the chance that more claims will be denied, leading to dissatisfied consumers and more lawsuits against insurers. And just like other lines of insurance, insurers are not immune to bad faith claims when seemingly minor claims are denied.

One such question that seems to be hotly debated in the pet insurance industry is what constitutes a “pre-existing condition” because pre-existing conditions are often excluded from subsequent pet insurance coverage. In a recent Los Angles Times article, a California pet owner was denied his dog’s insurance claim when the dog developed cancer.

Although the insurer considered cancer to be a pre-existing condition, the owner (who worked for a cancer center herself) believed the insurer was wrong: although the dog had already suffered (and overcome) cancer, a brand new cancer, in a new area of ​​her body, was different. While it does not appear that this matter has escalated into litigation, it is almost certain that similar litigation will increase over time. As the scale and size of pet insurance increases, additional legal considerations will likely increase on a comparable scale.

Sandra K. Jones is an insurance partner at Faegre Drinker Biddle & Reath in the Philadelphia office and co-lead of the long-term care insurance team and co-lead of the structured settlement annuity team.

The opinions expressed here are those of the author.

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