Is it time to say yes to pet health insurance?

A few weeks ago, a friend asked me what we do at the hospital if a pet doesn’t have health insurance. They were surprised to discover that very few pets have it. Ironic, isn’t it, that it seemed logical to a nonpet owner that animals would have health insurance and yet it’s not an obvious choice for actual pet owners? Only 2%-3% of pets in the US are covered by insurance,¹ whereas 25% and 50% are covered in the UK and Sweden, respectively.²

To better understand the numbers, I spoke with industry veteran Darin Nelson, an executive vice president at Thrive Pet Healthcare and a former executive at pet insurance provider Trupanion. He joined Trupanion in 2012 because he had been troubled by how many pets were being euthanized or receiving subpar care owing to financial reasons and felt that insurance could minimize the problem. However, he was surprised and saddened by how little the industry grew during his tenure at Trupanion.

I also talked with David Goodnight, DVM, MBA, executive vice president of business development at LifeLearn. Previously an executive at Veterinary Pet Insurance, he had also entered the business optimistic that pet parents in the US were ready to embrace the coverage. Like Nelson, he was frustrated and somewhat baffled by the lack of enthusiasm of pet owners and the veterinary community in general.

There are 3 main reasons why demand for pet insurance is low.

1. Historically, veterinarians were concerned that health insurance for pets would entail red tape, excess paperwork, and the slow reimbursements that lead to frustration and burnout. Most vets today realize that scenario is unlikely to occur because pet insurance differs from human insurance in that it covers mainly accidents and illness rather than all health care. Many hospitals are now promoting it—and finding that most clients are not interested.

1. Many pet parents ask about pet insurance after their companion animals have a health problem, at which point they’re not eligible for coverage for that particular problem. These owners then decide that insurance is worthless because it didn’t help them when they needed it. The thing for them to do, of course, is to insure pets when they are young and healthy so that they will be covered in case of illness.
2. The media and consumer review platforms, for their part, often suggest that pet insurance is not worth the money and that pet owners are better off paying as they go. Generally speaking, these are the same commentators who complain that veterinary fees are too high. They seem not to understand that insurance is not about discounts or saving money, but about budgeting for illnesses and unplanned events that, as most pet owners know, are all too common.

Bucking this trend, interestingly, is demand for pet wellness and preventive care packages. These plans are relatively common at veterinary practices and tend to have good enrollment. For some reason, and this seemed to mystify both Nelson and Goodnight, clients are more concerned about budgeting for the annual care they know their pets will need than for an expensive medical problem that might arise in the future. What pet owners don’t realize is that in a typical year 1 in 3 pets will need emergency treatment.³

According to Emily Dong, founder and chief executive officer of SnoutID—a company that provides wellness plans—the key to getting more pets insured is for clinics to offer preventive plans that allow clients to add health insurance later so that they ultimately have a comprehensive package.

What does the future of pet insurance look like, and how will it compare to my friend’s assumption that most pets have it? The future may not be exactly rosy, but 5 factors point toward appreciable growth in the near term.

1. Most pet owners today are millennials, who—statistically speaking—take better care of their animals than older pet parents.
2. Millennials have grown up with monthly subscription services and are a good fit for wellness and insurance plans that are paid on a monthly basis.
3. The pet insurance industry has been growing at approximately 20% a year for the past several years.¹
4. There is no shortage of pet insurance companies: more than 20 such insurers operate in the US.⁴
5. DVM fees are rapidly increasing as a result of high demand for veterinary services, staff shortages, and overall inflation.

Have we reached the tipping point? Will clients finally see the value of budgeting for illness and emergencies as well as preventive care? A relative emailed me a few days ago about their employee benefits package. The plan includes an option for pet insurance and wellness care at a discounted rate, with fees deducted from paychecks. Perhaps this progressive company is setting a trend, and this will be the wave of the future. Will we catch up to Europe? That may be too much to ask, but aiming for 10% of pets being insured would be a good goal, and we need to start somewhere.

Jeff Rothstein, DVM, MBA, is the founder of Mission Veterinary Partners (MVP), headquartered in Southfield, Michigan, which operates more than 320 veterinary hospitals across the United States. He is a frequent speaker at veterinary conferences and veterinary schools and can be contacted at jeff.rothstein@mvetpartners.com. Any opinions represented here are those of Rothstein alone and may not be shared by MVP.

References

1. 57 pet insurance statistics you need to know for 2022. Shortlister. Accessed August 10, 2022. www.myshortlister.com/insights/pet-insurance-statistics
2. U.S. lags behind in purchasing pet insurance plans. Woodruff. January 30, 2018. Accessed August 10, 2022. www.wearewoodruff.com/blog/pets/ united-states-lags-behind-pet-insurance
3. Reinicke C. Are you prepared for a pet emergency? Most Americans are not. CNBC. June 14, 2018. Accessed August 5, 2022. www.cnbc.com/2018/06/14/ are-you-prepared-for-a-pet-emergency-most-americans-are-not.html
4. NAPHIA. State of the industry report. May 2022. Accessed August 5, 2022. https://naphia.org/industry-data/