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Life Health > Annuities > Fixed Annuities

State Regulators Approve Pet Health Insurance Model

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What You Need to Know

  • Regulators classify pet health insurance as property and casualty insurance.
  • The new model could shape state requirements for pet insurance policy terms and policy term disclosures.
  • The model could lead to a big expansion in the use of commercial pet health insurance by helping pet owners understand what policies really will and won't cover.

A new regulatory framework could help your clients do a better job of planning for their pets’ health care expenses.

The National Association of Insurance Commissioners last week approved the Pet Insurance Model Act.

What It Means

The model could lead to a big expansion in the use of commercial pet health insurance by helping pet owners understand what policies really will and won’t cover.

Pet cost planning is an important component of overall financial and retirement planning that’s easy to overlook.

Today, vitamins and routine care cost an average of about $368 per year for the typical U.S. dog and $301 per year for the typical cat, according to American Pet Products Association survey data compiled by the Insurance Information Institute.

Surgery can cost $458 per procedure for a dog and $201 for a cat, and insulin for a pet with diabetes can cost $1,200 or more per year.

Some owners spend far more. About one-third of dogs get cancer, for example. Chemotherapy for a dog with cancer can cost several thousand dollars per year, and radiation for a dog with cancer can cost $7,000, according to the Cornell University College of Veterinary Medicine.  Some owners spend more than $10,000 on treating their dogs’ cancer.

The Pet Insurance Market

The North American Pet Health Insurance Association estimates that only about 4.4 million of the 175 million North American are covered by pet insurance.

That’s up from 3.4 million in 2020, but still represents just 2.5% of U.S. pets.

Owners are spending an average of about $640 per year on premiums per covered pet.

The NAIC Model

States have jurisdiction over pet health insurance regulation.

The NAIC is a nonprofit, Kansas City, Missouri-based group for state insurance regulators. Its new pet insurance model will have no direct effect on states’ rules, but states can use the model when developing their own pet insurance laws and regulations.

Regulators generally classify pet insurance as a form of property and casualty insurance, and the panel that developed the model is part of the NAIC’s Property and Casualty Insurance Committee  The model itself does not define pet insurance as either a health line or P&C line.

In the past, the NAIC offered a general, “limited lines” approach to setting pet insurance rules. The approach was based on the model rules the NAIC has developed for simple products that people such as travel agents or tennis club owners might sell as an extra.

In 2016, regulators decided that pet insurance was popular enough and complicated enough to need its own model.

The NAIC has based the new model on models for human supplemental health insurance, and it has designed the model mainly for coverage for family-owned dogs and cats.

The sample language in the new model shows what kinds of rules a state could set for policy elements such as policy renewals, descriptions of conditions covered, descriptions of benefits provided, and descriptions of coverage limitations.

Another proposed provision shows how a state could regulate an issuer’s ability to deny benefits for treatments required to treat what might be a pet’s preexisting condition.

(Image: amedeomaja/Shutterstock)