Welcome to Ask an Adviser, EBN’s weekly column where brokers and advisers answer (anonymous) queries submitted by our readers. Looking for expert advice? Please send questions to [email protected]. This week we asked Reed Smith’s Lauren Gubricky and John Wisneski: How would the proposed model rules improve insurance protections for pets?
Employers are increasingly offering a pet insurance discount as part of a solid benefits package for employees – and with good reason. Millennials are the largest generation represented in the workforce, and some may be more likely to have pets than children.
But the pet insurance industry has had a rough start, at least for policyholders, mainly due to the claims process and unexpected denials of coverage. A new law that went into effect just last month aims to improve this product by strengthening protections for pet insurance holders.
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Consider the case of Gregory Allen, a restaurant worker in Maryland, and his cat, Sir Purrs A Lot, who he adopted after losing his job due to the pandemic. The cat soon began to exhibit an “excessive grooming” disorder that can cause wounds and infections. Gregory thought he had done the right thing by buying pet insurance for Sir Purrs A Lot, but was surprised when the insurer denied cover for his vet bills on the basis that there was a two-week waiting period for cover and that the cat’s grooming disorder is a pre-existing condition.
A similar situation happened to a California resident, Samantha Bonar, and her dog, Kaya, who survived cancer years ago and was recently diagnosed again. Samantha’s pet insurer denied coverage for Kaya’s treatment, saying the cancer was a recurrence of the first, despite the fact that Kaya’s vet said otherwise. After much back and forth, the insurer finally agreed to cover Kaya’s cancer treatment.
The National Association of Insurance Commissioners’ Model Pet Insurance Act aims to remedy these situations. The law, passed on August 1, 2022, aims to protect pet owners by focusing on required disclosures, pre-existing conditions and wellness programs.
Specifically, the new law requires the pet insurer to “disclose … if the policy excludes coverage due to a … pre-existing condition,” such as Sir Purrs A Lot’s grooming disorder, and whether there is a waiting period before any coverage begins . Importantly, it specifically states that a pet insurer “has the burden of proving that the pre-existing condition exclusion applies” when denying coverage. This could have prevented Samantha’s situation, where Samantha herself bore the burden of proving that her dog’s cancer was unrelated to the first cancer.
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The law also requires that insurers clearly explain how compensation will be paid. For example, whether costs are reimbursed based on a benefit schedule or “usual and customary charges,” which can mean lower reimbursement rates because it’s not based on what pet owners actually paid their vet . Finally, it provides that purchasing a wellness program (which covers preventative care) “will not be a requirement for purchasing pet insurance,” which should make coverage less expensive.
As a model law, individual states must choose to adopt it before pet insurers must comply. However, when states inevitably adopt it, or some version of it, pet owners — as long as they read their policies — should better understand their coverage and how it applies to their sick or injured pet.