Health Care and Insurance

Insurers go to the dogs, cats: Pet policies rise as owners show growing willingness to spend on their animals

May 29, 2006

Max the golden retriever has lymphoma.

But fortunately for him, the disease is not a death sentence. That's because a pet insurance policy covered most of the $4,000 in chemotherapy and drug treatments needed to keep the canine alive.

While the pet insurance industry remains relatively small, it is gaining popularity. From 1994 to 2003, the number of people purchasing health care coverage for their four-legged friends rose 76 percent, according to Veterinary Pet Insurance in Brea, Calif.

Dr. Jim Weisman, a small-animal veterinarian in Evansville who treated Max, sees the growth. He estimated 25 percent of his clientele has the insurance, a dramatic increase from when he started his practice 10 years ago.

"Pet insurance adds the ability for the pet owner to allow medical care to progress on their concerns versus the economic concerns," said Weisman, who is president of the Indiana Veterinary Medical Association. "And it allows us to manage the case. I get to practice medicine."

In other words, coverage could spare Fido from the alternative: euthanasia.

Owners of ailing pets indeed have more options, as vets have added many diagnostic and treatment capabilities borrowed from human medicine. But those options can quickly run bills up into the thousands of dollars, making insurance premiums of a few hundred dollars a year a good investment for some pet owners.

People's willingness to pamper their pets is contributing as well. From doggie day care centers to mobile washing services, the business of catering to pets is booming. The American Pet Products Manufacturers Association estimates consumers will spend more than $38 billion this year on pet food, supplies and care, nearly double what they forked out a decade earlier.

But Bob Vetere, president of the Connecticut-based APPMA, suggested two groups with more disposable income are mostly responsible for driving pet spending today. They are baby boomers turned empty-nesters looking to fill a void in the home and young professionals delaying marriage and children.

A niece of his, for instance, recently spent $5,000 on a hip replacement for her mastiff.

"When I was young, I'm not so sure my dog would have received one of those," Vetere said. "What you're seeing is the humanization of pets. People are almost looking at their pets as extended family."

Dr. Kristyn Richardson, a veterinarian at the Veterinary Emergency and Medical Center in Beech Grove, concurred. She treated a dog that suffered a broken front leg, as a result of being hit by a car, which cost roughly $2,000 to mend. The owner had insurance.

Yet, while the numbers are rising, it is estimated that only about 3 percent of pet owners in the United States have insurance, compared with 25 percent in Great Britain.

For each one of Richardson's clients who are covered, there are dozens more who tell her they wished they had purchased the insurance, she said.

Most policies carry deductibles ranging from $50 to $200 and premiums from about $10 to $70 a month. They cover the normal to the exotic-from cats and dogs to chinchillas and iguanas.

Plans include such treatments as vaccinations, surgeries and hospitalization-and some have cancer policy riders. Many reimburse the owner, and owners do not have to choose a vet from a list of preferred providers.

There are limitations, however. Pet health insurance can restrict the drugs and techniques that can be used in treating an animal, just as HMOs restrict care for people. And like humans, pets can be denied coverage for pre-existing conditions. The only difference is that Buddy the Boxer cannot fill out a form indicating prior illnesses.

Pet insurers instead reject claims for treatments or surgeries relating to repeated intestinal obstructions, for instance. Swallowing a bone or sock on more than one occasion falls under the category.

Consumer finance advocates urge consumers to look over policies carefully because they often don't offer as much coverage as buyers think they do.

"It can be very similar to human insurance," Richardson said. "You have to watch the fine print."

But unlike traditional health policies, pet coverage works more like property and casualty insurance. Owners pay the veterinarian, and the claim form is submitted to the insurance company for reimbursement.

And pet-insurance premiums are based on specific risks such as age, health and genetic makeup, whereas employer-based health insurance provides coverage to all members of the group.

Most even let consumers appeal an insurer's decision by resubmitting the claim, along with a copy of the veterinary records. VPI forwards its appeals-about 125 a month-to a board of independent vets.

VPI, the nation's oldest and largest health insurance plan for pets, began offering coverage about 25 years ago. The concept began more than 30 years ago in Europe, where nearly 50 percent of pet owners in Sweden and 20 percent in England have the insurance.

VPI controls about 80 percent of the $160 million pet insurance market. Last year, it insured nearly 420,000 pets, up from 157,000 in 2000.

Brian Iannessa, spokesman for VPI, said the company began to notice larger jumps in enrollment during the late 1990s, when the company introduced preventive care additions to its basic policies. They cover the vaccinations and routine checkups and cost about $100 extra a year.

"People seem to be OK with paying that," Iannessa said. "People's pets are being considered more of a part of the family than ever before."

To be sure, a 2004 survey from the Animal Hospital Association of America found 94 percent of pet owners polled believed their pets had human personality traits.

Pet insurance is even offered as a voluntary benefit by a growing number of employers, who negotiate a group rate with the underwriter and require employees to pay the premium. Most policies, however, are offered at the veterinarian's office.

And some plans, such as those carrying an Avian supplemental for birds, protect pet owners from potential catastrophic events.

"The key to [pet insurance] is the advances of veterinary medicine," Weisman said. "With these advances, we can do very comparable things that we see in the human world."
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