An industry born from the first policy taken out in 1982 for the TV celebrity collie Lassie is now a multibillion-dollar market, growing so fast that Rhode Island lawmakers are playing catch-up to prevent unscrupulous practices in a shadowy market.
The pet insurance market is projected to quadruple by 2033, according to the North American Pet Health Insurance Association, which says total premium insurance policy volume in 2023 surpassed $4 billion, a more than 150% jump from 2018.
Rep. Joseph J. Solomon Jr., D-Warwick, said the skyrocketing costs of care and pet ownership require a more robust regulatory framework that can filter out bad actors, resulting in a safer and more secure market, spurring greater competition that, in theory, would tamp down prices.
Solomon is the primary sponsor of a bill working its way through the General Assembly that provides a list of definitions and mandates a host of information that an insurer will have to disclose, such as whether the policy excludes coverage for preexisting conditions, hereditary disorders or congenital anomalies.
Policyholders would have the right to return the policy within 30 days of its receipt and to have the premium refunded if they are not satisfied for any reason.
Based on the Pet Insurance Model Act adopted by the National Association of Insurance Commissioners, which has become law in 12 other states, the legislation also clarifies prohibited sales practices.
Solomon was recently faced with a vet bill that was over $1,000. While his family could afford it, rising expenses across the board from housing to energy have forced others to make difficult choices on their animals “that really become members of your family,” he said.
Without clear guidelines, the pet insurance market has been a wild west of typically smaller operators engaging in business practices that are already prohibited in other types of insurance.
And the issue has been on the state’s radar for some time.
In 2021, responding to the increase in filings from would-be pet insurance providers, the insurance division of the R.I. Department of Business Regulation set out to gain insight into the sales and marketing practices that were already happening, undertaking what is dubbed “The Pet Insurance Project.”
Regulators combed through existing filings, obtained pet insurance quotes and sent “a series of interrogatories about their activities in the market.”
The unit then began monitoring emails from these entities, including United States Insurance Co. and Spot Pet Insurance Services, some of which hit inboxes several times a day, often promising that “Today is the last day for the offer” on consecutive days, according to the report.
One company offered 50% off for the first month for a wellness plan. Another offered a $25 Visa gift card if the consumer bought and kept the insurance for at least 30 days.
But Dennis Tabella, director of the nonprofit Defenders of Animals Inc., said there are several other areas regarding pet insurance that for years have needed oversight. Extensive delays in claims processing, poor or completely absent customer service, misclassifying a new health condition with a preexisting one, or discrimination against certain dog breeds have become the norm.
The list goes on.
“Sometimes owners sign up for insurance and the rate is decent at first,” he said. “And then the renewal increases for no reason. They become stuck and must scramble to find another insurance policy.”
But poorly written or indecipherable policy language can make the average potential policyholder’s head spin, Tabella said.
“The average person is not going to be able to digest all of it,” he said. “There absolutely needs to be oversight.”
Roughly 15% of veterinarians said they had a bad experience with pet insurers in the past, according to the NAPHIA 2024 State of the Industry Report, with 39% of veterinarians saying that pet insurance is not worth the money and 42% agreeing that pet insurance “has too many exclusions.”
Advocates such as Tabella argue that a well-regulated pet insurance market will build support from veterinary clinics and animal hospitals, which have historically been loath to recommend it.
Otherwise, pet owners will be faced with the same dilemma as someone who opts out of health insurance and finds themselves in intensive care. Tabella knows many pet owners who in times of crisis had no choice but to bring their animals to emergency clinics, which typically charge more for services.
“I’ve seen some who had to give up their pet because they just couldn’t afford it,” he said.
In testimony to the Senate Committee on Finance, Joanne Rongo, president and board chair of the nonprofit Volunteer Services for Animals, said pooling financial resources in an insurance market will “provide a modicum of relief for our assistance program funds,” which have been stretched thin in recent years.
The irony of representatives from the government, nonprofit and insurance sectors all agreeing was not lost on Smith Hill insurance lobbyist Jeff Taylor, who in March told the House Corporations Committee this was one of the few times the industry is looking for more regulations.
