Barriers to Buying Pet Insurance

Why don’t more pet owners buy pet insurance? Dusty Bonner thinks the name might be part of the problem.

Problems Remain for a Growing but Still Small Industry

by Tony McReynolds

Why don’t more pet owners buy pet insurance? Dusty Bonner thinks the name might be part of the problem. “The term most people use is ‘pet insurance,’” said Bonner, senior vice president of distribution and field sales at Trupanion. “I call it medical insurance, because at Trupanion, we believe we’re a medical insurance provider.”

Bonner noted that the word “insurance” itself can be problematic. “As someone raised in North America, you have this stigma in your mind when you hear the word ‘insurance,’’’ Bonner said. Insurance can be perceived as mind-numbingly boring, impenetrable, and a subject most people don’t want to think about unless forced to. “

“In European veterinary schools, students are taught that insuring pets is the norm.”

—DUSTY BONNER, TRUPANION

Bonner said veterinarians are no different—they don’t want to think about insurance, either.

More problematic, said Bonner, is that when people think of pet insurance, they often equate it with property insurance. Which makes sense, because despite the growing trend to consider pets as members of the family, they’re legally considered property in the US. As a result, insuring your pets’ healthcare isn’t considered to be in the same category as insuring, say, your children’s healthcare.

Bonner said it’s very different in Europe. Although pet insurance was first introduced around the same time in both the US and Europe—about 40 years ago—the models were very different. European insurance companies based their pet policies on a human healthcare model, and so European pet owners perceived it in those terms and always have.

But in the US, the first pet insurance policies were rolled out in a traditional insurance model, meaning that it looked more like property insurance.

“It was like the same policy you’d buy to insure a boat,” said Bonner. “A boat is a piece of property you own. You can insure a boat and get coverage in case you get into an accident.”

As result, pet insurance is far more common in Europe than it is in the US— in the United Kingdom, around 25% of pet owners buy medical insurance for their pets. In Sweden, around 50% have pet insurance. In the US, according to research by the North American Pet Health Insurance Association (NAPHIA), the figure is closer to 2%.

That’s 2%—a number it’s hovered around for years.

Karen Lynch, executive director of the North American Pet Health Insurance Association (NAPHIA), puts that 2% in perspective. While the number of insured pets might hover around 2%, you have to factor in a couple of things: “The pet population is growing,” she said, and so are the number of insured pets. NAPHIA’s latest figures show that pet health insurance has been increasing at an average annual growth rate of 23.4% over the past five years.

The pet insurance market has grown at an even faster pace since the start of the pandemic, and Lynch attributes this growth to a couple of things. “Pet owners are spending more time with their pets, [which] strengthens the human-animal bond.” Additionally—and perhaps a tad counterintuitively—people are seeing more financial uncertainty in their own future. “Pet insurance is a way to create certainty around their ability to care for their pets.”

So while the percentage of insured pets remains much the same, Lynch says the number of insured pets is increasing steadily. Another thing to consider: “Pets also live shorter lives, so a percentage of those who are covered leave the market each year.” So why don’t more pet owners buy pet insurance?

Lynch said people tend to perceive pet insurance to be about return on investment, rather than understanding it’s meant to be a support that helps you take care of your pet during tough times. “You’ll use it,” Lynch said. “It’s just a matter of when.”

Lynch calls people who do buy pet insurance “medicalized”—pet owners who are already far more likely to take their pets to see a veterinarian, know what the costs of treating their pets is, and realize that as their pets age their pet medical bills go up. “Pet medical bills are inevitable,” Lynch added. “But when pets are young, people don’t want to think about that.”

Lynch said another reason people don’t buy is blind optimism—people assume their pets are going to be fine. “By the time they’re not fine, their pet has a pre-existing condition that makes their coverage more expensive.” Or it could even exclude their pet from coverage.

And one last reason: Lynch said most veterinarians don’t take the necessary few minutes to explain the benefits of coverage and the likelihood of their pet becoming ill or injured throughout their lifetime. “We know from our research that when a vet and their practice spend that little bit of extra time, pet owners follow through and get coverage. And when they do, vet practices reap the benefits of increased spending by insured pet owners.”

Bonner believes that European pet owners’ comfort and acceptance of the concept of medical insurance for pets begins with their veterinarians’ comfort in recommending it, a comfort level that’s encouraged early on in the veterinary career.

“In European veterinary schools, students are taught that insuring pets is the norm,” Bonner said, noting that in Europe, veterinary students learn that a big part of their job is to remove restrictions to care. “Medical insurance for pets accomplishes this. It is how you optimize care.”

“Pet medical bills are inevitable, but when pets are young, people don’t  want to think about that.”

—KAREN LYNCH, NAPHIA

That in turn means that veterinarians in Europe start out in practice feeling comfortable recommending pet insurance to their clients. “It’s not the same in this country,” Bonner noted. And that’s too bad, because NAPHIA research shows that 50% of pet owners would consider getting pet insurance if their veterinarian actively recommended it. The difference in revenue can be dramatic—the NAPHIA study shows that dog owners with pet insurance spend 29% more on veterinary care than those who don’t. Cat owners with pet insurance spend a whopping 81% more.

Bonner said one thing US insurance companies have gotten right is providing different levels of care. “Not everybody can afford 100% coverage,” Bonner said. “You have to have different tiers. That’s why you have multiple carriers providing multiple levels of care.”

Multiple carriers are also important because there are so many different breeds of dogs and cats in this country, each with its own particular— and sometimes predictable—health risks. The cost of treating those myriad potential health problems is also going to vary depending on where you live because rates can vary significantly by region.

“In Kentucky, where I live,” noted Bonner, “my cost of care is going to be significantly less. Surgery is considerably more expensive in New York, so why should a person who lives in Kentucky [pay the same for pet insurance?]”

Bonner has a Labrador retriever and uses him as an example. “They eat everything, right?” he said, laughing. “If he eats the television remote tomorrow, I know that’s going to be a bowel obstruction. Because I know that, I know the risk I need to associate with it. And I have the data I need to assess that risk. I know how much my local veterinary practice is going to charge to fix it, and that’s how much I should pay.”

“That goes along with education of why pet owners have to have pet insurance—because their pets are going to have health problems. And different breeds are going to have different problems.”

To Bonner’s mind, the biggest barrier to pet owners purchasing pet insurance is the fact that so few of them know it even exists. “I work for a medical insurance company for pets,” he said. “And my own mom didn’t know it exists! She loves her dog, and she wants him to get the best care possible. But nobody told her that pet insurance is a thing.” (Obviously, Bonner has since educated her on the subject.)

Nationwide’s chief pet officer, Heidi Sirota, agrees with Bonner. “Many people [are] unaware coverage is available or where to seek it,” she said. “For others, cost may be a barrier. Some may not understand or appreciate the protection it provides in accessing or helping with veterinary expenses.”

Demographics also play a role in the pandemic-fueled response to increased concern for pet health. “Although we see the impact of the human-animal bond showing up across all demographics, one trend is the way that millennials prioritize their pets,” Sirota said, citing research showing that 62% of millennials say they would put their pet’s health before their own.

Given that millennials make up 35% of all US pet owners, that’s a sentiment with powerful long-term implications. And educating pet owners on the value of pet insurance is a long-term strategy that will pay big dividends for the profession.

But don’t underestimate the power of pet owner procrastination, said Lynch. “Most people will tell you they plan to get coverage, but they put off the decision and get lost in the details of what coverage to buy.” They get overwhelmed by what coverage to buy versus just making sure they have coverage in place.

Bonner said a big part of educating people about pet insurance is letting them know it exists before they need it: “Say your dog breaks his leg in six different places and you decide you need pet insurance. That’s considered a pre-existing condition and no insurance company is going to cover that because it’s already a problem.”

“If your practice believes
recommending pet health
insurance is worthwhile,
be definitive in your
recommendation and have
some specific reasons why.”

—JULES BENSON, BVSC, MRCVS,
NATIONWIDE

“It’s like getting in a car accident, and then wanting to buy automobile insurance after the fact,” Bonner explained. You can’t buy collision insurance after you’ve had the collision. “That’s not how it works.”

Bonner says the real challenge is getting information about medical insurance for pets into owners’ hands when the pets are still puppies and kittens: “It needs to come up during the adoption process. People need to hear about it when their pets are still healthy.”

“The real issue of why more people aren’t getting their pets insured is because they aren’t hearing about it.” Bonner mentioned the boom in pet adoptions during the pandemic and events that sought to clear shelters by adopting out pets. “But how many of those events were saying, ‘Hey, let’s make sure you insure that pet?’”

“So that, to me, is a barrier of education,” Bonner said. “Do people even know this exists?” Bonner comes back to that 2% figure: “No, they don’t know it exists.”

So how do you educate them?

Jules Benson, BVSc, MRCVS, Nationwide’s chief veterinary officer, says that pet owners still look to the veterinary healthcare team as the primary source for their pet health advice. “If your practice believes recommending pet health insurance is worthwhile, be definitive in your recommendation and have some specific reasons why, with some personal examples from within your practice,” he said. “Yes, we recommend pet health insurance. We see so many unexpected health issues in pets of all ages, from cruciate ligament tears to skin allergies. We recently had a pet who was diagnosed with lymphoma, and the pet owner was able to make medical decisions without having to worry about the financial aspect.”

That touches on a sticking point that continues to impact the industry: many veterinarians in the US simply aren’t comfortable talking about finances in general, and insurance in particular, with their clients. Of vets surveyed in a 2016 NAMPHIA study, only 24% said they agreed completely that they felt comfortable talking with their clients about insurance.

“At the end of the day, the veterinarian shouldn’t be an insurance salesperson,” Bonner said. “That feels terrible. And clients think you’re getting some commission off of it.” But like Benson, Bonner said veterinary staff need to have the ability to explain the value of health insurance for pets.

Bonner’s ideal scenario: for a veterinarian to be able to hand a pet owner off to somebody on staff who can describe the value of health insurance for pets. “If I’m a veterinarian and I know an insured pet brings two-and-a-half times more revenue to me because research shows owners with pet insurance are more compliant, I’m more likely to make sure that recommendation is going out.”

Maureen Blaney Flietner
Tony McReynolds is AAHA’s NEWStat writer.

 

Photo credits: Nuthawut Somsuk/iStock via Getty Images

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