California’s pet insurance regulations, which experts peg as the strictest in the country, owe their existence to a dearly departed golden retriever named Bodie.
It was Bodie’s death more than a decade ago from blood cancer, and his owner’s subsequent tussle with a pet insurance company for reimbursement of medical expenses, that led to the legislation requiring California’s pet insurance rules today. But outside of the Golden State, pet insurance is governed by a loose, state-by-state set of regulations that vary widely, experts say. Mostly, they come under general insurance regulation and often are governed under the property-casualty umbrella rather than the health insurance category.
That can leave consumers navigating an insurance labyrinth on their own when collecting on claims or in other disputes with the companies.
“It can vary dramatically, state by state,” said Kristen Lynch, executive director of the North American Pet Health Insurance Association (NAPHI), a consortium of the largest pet insurance companies in the United States and Canada. “California is the only state that has a law that guides pet insurance. Other states have tried it, but none of those has passed yet.”
Three states — Massachusetts, Michigan and New York — are considering legislation on pet insurance. Broadly speaking, the legislation in the three states would tighten definitions of pre-existing conditions and require more disclosure of policy limitations by pet insurance companies.
The rise in pet insurance in the United States has been dramatic. Revenue from pet insurance grew from nearly $840 million in 2016 to over $1 billion in 2017, an increase of 23 percent, the association said.
The number of companies selling the insurance also has jumped in the past two years from just a handful to more than a dozen. And companies trying to attract millennials with pets have begun offering the insurance as a popular job perk, including Microsoft, Xerox, Yahoo and Hewlett-Packard, The New York Times reported.
While more than 180 million dogs and cats are kept as pets in the United States, according to the American Pet Products Association, only 1.8 million pets were insured in 2017, NAPHI said.
The pet insurance market is concentrated in urban areas, with the largest market in California, state officials said.
After Bodie died, in 2006, his owner Gary Lucks argued that his policy was supposed to cover 80 percent of his $5,000 cost for Bodie’s cancer treatment. The company initially paid about 30 percent, he said.
Eventually, Lucks, an Oakland, Calf., environmental lawyer and consultant, won the 80 percent he was looking for. “They miscalculated,” he chuckled, referring to his insurer. “They assumed I would go away.”
Not only did he not go away, he wrote a policy paper on his experiences and proposed changing the law. Then, he called his friend Dave Jones, then a Democratic lawmaker, who introduced the “Bodie Bill” in 2010.
It passed the Legislature but then-Gov. Arnold Schwarzenegger, a Republican, vetoed it, saying the state didn’t need insurance rules specific to pets. Jones became California’s insurance commissioner in 2011, and he passed on the issue to another lawmaker to carry. It took until 2014 for the regulations to finally make it through the California Legislature and be signed by Gov. Jerry Brown, a Democrat and a dog lover who lists his current pets, Colusa, a corgi mix, and Cali, a poodle mix, as “first dog” and “deputy first dog.” The rules took effect in 2015 and Jones now enforces the statute he essentially wrote.
Jones said California is the largest market for pet insurance, with about 20 percent of the nationwide policies.
The California regulations call for insurance companies to spell out, among other requirements, what is covered and what is not; how the policy handles specific pre-existing conditions for specific breeds; whether there is a waiting period before coverage starts; whether there is a lifetime limit on reimbursement; whether the policy covers “well pet” visits to the veterinarian; and what the policy will pay if there is a specific benefit schedule.
Because of those stringent rules, Jones said his office gets relatively few complaints of the kind that spurred Lucks to press for tighter regulations in the first place. Of the 42,000 complaints a year to California’s insurance consumer hotline, about 120 on average in each of the past three years were about pets.
“Most of those 120 complaints deal with consumers complaining that the claim is being denied,” he said. And, in bad news for policyholders, he said most of the complaints are not resolved in favor of the consumer. Many purchase policies that they wrongly think covers their pets’ pre-existing conditions.
“We think the legislation has helped in requiring more disclosures,” he said, “but consumers actually have to read the policies before they buy them to take advantage of the disclosures.”
Since the California law was implemented, pet insurers across the country have improved their policy disclosures, written the restrictions in plainer language, and detailed disclosures on their websites, said Lynch of the insurance industry group.
She suggested that if people have questions about reimbursement, they should contact the company before buying a policy and not wait until there’s a claim. “Read it before you buy it,” she said, “and when you first get it, then that emotional surprise is not going to happen.”
Average U.S. pet insurance premiums in 2017 were $516 a year per pet for accident and illness plans, which made up 98 percent of the policies, according to the insurance industry group.
Premiums for accident-only plans were about $181 a year. The average payout for a claim was $278.
Doug Kenney, a Memphis veterinarian and pet insurance expert who writes an advice blog for those considering coverage for a pet, said pet insurance is a good investment for many people, since veterinary care is getting more expensive, particularly such treatments as surgeries and diagnostic tests.
“Pet insurance is affordable” if the pet is young and healthy, he said. “You can choose your own deductible and copay and you can play with those variables and get a premium lower, so you can afford it.”
Rebecca Ruch-Gallie, a veterinarian and an associate professor in clinical sciences at Colorado State University, recommends consumers get pet insurance — as long as they read the fine print.
“You need to decide for yourself about specific coverages,” she said, noting that policies range from catastrophic coverage to coverage for every vet visit. “For example, people who have a higher cushion in their savings account, could you pay $500 out of pocket easily? How about $1,000? If you don’t have that cushion, you are going to want a smaller deductible.”
For her clients on a limited budget, Ruch-Gallie is more inclined to recommend the insurance.
“That’s going to be a conversation that I am going to have with them, so they don’t have to make a ‘financial euthanasia’ decision,” she said. “It’s hard enough to say goodbye, but having to say goodbye for that reason makes it even harder.”
