The Truth about Cats and Dogs

Although many Canadian households include a dog or a cat, only a fraction of them currently have pet insurance. This market is expected to grow, so it’s worth taking a closer look at this insurance product.

According to a survey conducted by Ipsos-Reid for the Canadian Veterinary Medical Association, 56% of Canadian households had at least one dog or cat in 2008, but only 4% of dog owners and 2% of cat owners had purchased pet insurance.*

Pet insurance has been available in Canada only since the late 1980s. By contrast, in countries where the product has been available for longer, usage of pet insurance is more common: about a quarter to a third of pet owners in the UK have pet insurance, which has been available there since the 1950s; and almost half of pet owners in Sweden, where pet insurance has been available for over 100 years. Uptake in Canada is expected to increase as pet owners become more familiar with the product – and more sensitive to the costs of veterinary care for pets.

Types of pet coverage

The most common coverages available for dogs and cats are accident coverage, and combined accident and illness coverage. Some companies also offer products for preventive care, such as payment plans designed to help smooth out the costs of routine veterinary services. Although pet insurance is a form of property insurance, it includes some features that are more common in health insurance, such as co-pays.

Accident coverage

Accident coverage generally pays the costs associated with medically necessary veterinary services provided to treat a pet for injuries caused by an accident. Depending on the policy, this may include the cost of examination, diagnostic procedures, hospitalization, treatment, surgery, prescription medicines required as a result of the accident, and some alternative therapies. Accident coverage does not cover illness, non-essential services, or routine or elective procedures.

Most accident policies have a co-pay or co-insurance amount, which means the pet owner pays a portion of the covered costs – typically 10-30%. There is usually an annual deductible as well.

Policies also state a maximum coverage amount. On some accident policies this is a per-year amount, while on others it is a per-accident amount.

Some policies offer additional benefits, such as coverage for cremation or burial expenses, the cost of advertising and rewards to recover a lost pet, or costs for boarding a pet if the owner is hospitalized.

Illness coverage

Illness coverage is not available on its own; it is always combined with accident coverage. It targets expenses related to treatment for sickness, disease and injuries. Pre-existing conditions are not covered.

Most policies have a separate maximum for illness coverage, which can be on a per-illness basis per year, or simply a maximum amount per year regardless of the number of illnesses the pet is treated for.

Like accident coverage, illness coverage is subject to a co-pay and a deductible. When a pet hits certain age thresholds, the deductible typically increases. Pets are more likely to experience illness as they age, so the insurance risk increases with age as well. Some companies apply a claims risk management practice that can result in an adjustment to the premium based on the claims history, which in turn can be affected by the animal’s age.

Exclusions

The approach to exclusions for certain conditions varies. Some insurers assess the risk at the point when they extend coverage, asking for the pet’s veterinary records up front to determine whether there are any pre-existing conditions or exclusions. Under other policies, the assessment of whether a particular condition is excluded takes place only when a claim is actually made. Under these policies, the insured is asked to provide the veterinary records as part of the claims process.

Exemptions for pre-existing conditions can be temporary (if the condition is one the pet can recover from) or permanent. If the insurer deems a pre-existing condition temporary, the insurer might set an exclusion period – for example, 6-12 months. At the end of the period, after a review of the medical history during the exclusion period, the exclusion may be lifted. Adjusters facing a pet insurance claim will need to take care to ensure they have complete and up-to-date information on such exclusions.

Pet insurance policies also commonly carry exclusions for things like nuclear incidents and war, as well as risky activities the insured did not disclose at the time of application – for example, using the animal for commercial guarding or organized fighting.

Additional coverages

Dental care issues are fairly common with pets, and the cost of canine and feline dental care can be high. Insurance coverage is available for certain types of pet dental care. It is usually offered as an optional extension, although some policies automatically include coverage for dental care up to a limit.

As with human health care, many other special treatments and therapies are available. Most illness policies will cover some prescribed “alternative therapies”, such as hydrotherapy, chiropractic, massage, acupuncture and homeopathy; and certain “behavioural therapies” used to treat behavioural problems that result from an underlying medical condition. There is usually a separate annual limit for each category of therapy.

In addition, the costs of medical devices prescribed by a vet are often covered to a specific amount.

Although pet insurance has not yet been widely adopted in Canada, pet owners are increasingly viewing their pets as members of the family and seeking high-quality care when medical issues arise. As owners deal with the costs of sophisticated veterinary diagnostics, interventions and therapies, their usage of pet insurance is likely to increase. The combination of property and health insurance policy features are an interesting aspect of claims under these policies.

Pets & premiums

For accident-only pet insurance, premiums are typically a flat amount that differs only by species (dog vs. cat).

•     For illness insurance, underwriters consider a wider range of factors:

•     species (cat or dog – dogs are typically more expensive to treat)

•     breed

•     location (which influences veterinary costs)

•     claims history (for older pets)

For either type of insurance, premiums are also influenced by the co-pay and deductible chosen. 

Pet Policies

Most pet insurance policies have a relatively short waiting period before coverage takes effect – for example, 48 hours for accident coverage and 14 days for illness coverage. Dogs and cats can be insured at any age, but most policyholders take out the coverage when the pet is young.

This article is based on excerpts from ADVANTAGE Monthly, a series of topical papers on emerging trends and issues provided to members of the Chartered Insurance Professionals’ (CIP) Society. The CIP Society is the professional organization representing more than 15,000 graduates of the Insurance Institute’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) programs.