Pet insurance is key to a healthy profession – have you got it covered?

What are the benefits – both in terms of animal welfare and practice profits – of having a high percentage of insured clients?

In research from 2016 commissioned by Agria across a cell of 183,000 animals, over a 12-month period 19.7% of dogs and cats were insured. These insured cases accounted for 30.6% of visits to practice and represented 38.6% of consult turnover, highlighting the disproportionate impact insured clients have on practice performance. Factor in a progressive 5% increase in insured clients to these numbers and making sure as many clients are insured as possible becomes an important business imperative for veterinary practices.

Aside from the obvious commercial benefits, insurance allows a practice to investigate presenting symptoms, pursue early diagnosis and determine treatment plans without recourse to a client’s ability to pay or the impact on the household budget. In short, it funds the necessary treatment to return a sick or injured animal to full health… where appropriate – and we will revisit that word “appropriate”. Undoubtedly, swifter resolution is better for the pet.

In doing so, the financial worry for owners of an unwell animal goes away, leaving them to concentrate on their pet’s recovery, not their bank account. For the vet, any stress around an owner’s ability to fund the treatment necessary evaporates, meaning enhanced levels for professional satisfaction.

How do the products and services offered by your company benefit both the pet owner and the veterinary practices in which their pets are treated?

Very simple – “lifetime every time”. Around 18 months ago, Veterinary Times covered a survey on pet insurance claims repudiation. Although it was felt the overall rejection rate was somewhat overstated, one key figure extrapolated from the stats stood out and concurred with other separate studies. That metric was circa 12% of claims are rejected because a condition is pre-existing. Whether due to ignorance by the owner or otherwise, insurance in these situations is not meeting expectations, which fuels dissatisfaction and market attrition.

Agria sells lifetime cover only – and that’s “lifetime” as understood by the profession. Yes, mechanisms exist with products to tailor the overall cover to meet budget limitations, but, importantly, this ensures the underlying lifetime basis is always preserved.

In what ways can practices drive up the number of insured clients and what does your company do to help?

Talk about insurance to new owners and existing clients at key life stages – just as vets routinely do with diet and food. Include generic case studies in waiting rooms and on websites.

New insurance regulation will undoubtedly constrain product and provider advice and recommendation, but talk about the importance of insurance and, as a practice, cover the broad differentiation in product types – at every point of client contact.

Don’t make it onerous or take support staff out of their comfort zone as this will mean, ultimately, they will never get it wrong because they will never mention insurance for fear of mistake.

Having sown the seeds, delegate the detail to the experts – the insurance provider.

Agria has a comprehensive selection of tools and a simple, modular learning platform to help practices simply and effectively promote insurance, whatever their preferred engagement with present or future insurance regulation.

Is the insurance model, as it stands, sustainable when figures from the Association of British Insurers (ABI) showed one-in-four dog owners and one-in-seven cats owners have their pets insured?

The most recent ABI data (released in April 2017 for 2016 returns and adjusted for the 4% or so of policies from non-ABI members), when set against a conservative estimate of 16 million dogs and cats in the UK, suggests the actual penetration was marginally less than 24.5% in 2016, and represents 1 in 3 dogs and 1 in 6.4 cats. When considering pedigree/non-pedigree client perceptions of intrinsic value and risk, we see further polarisation between populations.

However, with the volume of sales each year, there must be significant fallout from the industry – this virtually matches new business sales. Also, conservatively, this suggests at least 20% of uninsured pets that were previously insured could still be insured, but their owners have cancelled the insurance – either due to price and value issues, perceptions of the state of health of their pet or a bad experience from their insurance provider.

Sustainability of pet insurance is partly impacted by the relatively low footprint insurance has across the UK’s dog and cat population. But the bigger challenge is escalating premiums directly correlated to veterinary charges. Insurers have squeezed most of the available efficiencies from their operations and, with the industry working on an estimated 3% margin (according to a Mintel report published in 2016), very little scope exists for error.

Insurers can always make the numbers add up to “100” by flexing excesses and increasing prices, but whether veterinary clients are prepared to continue to pay is the $64,000 question. The alternative is increasingly restrictive cover, which will – over time – also challenge clients to question the value for money of their pet insurance products.

How important is it veterinary practices engage directly with their clients about growing the insurance market, and how is this best done?

As a practice unit, vets deal in animal health. Vets are a key influencer in pet health matters, so it is hugely important they engage [with clients] about the insurance market.

What is likely to happen to the insurance market if the level of insured pets remains so low?

If premiums remain palatable and underwriters have sufficient experience to risk rate and price correctly, the status quo remains intact. The challenge is as claims increase and premiums follow, continuing to rise ahead of consistently low domestic inflation rates, the point will come where price becomes a significant barrier at purchase and renewal.

The natural defensive reaction from insurers will be for cover to become more restrictive, limiting exposure and allowing more competitive pricing. The point will come, however, where the risk/value equation stacks up for fewer owners, who will then increasingly choose to self-insure.

Along the way, the more comprehensive lifetime policies are likely to be compromised first – not great for pets, vets or owners.

For the secondary consultation sector, this scenario doesn’t bode well. With insurers suggesting anywhere between 65% and 85% of referred pets are insured, this specialist strata of the profession is absolutely dependent on insured clients. Yes, some clients will always find the funds to provide the best or most expensive cover for their pets, but if insurance disappears – or, in endeavouring to remain competitive, excludes referral per se – there are not enough of these clients to perpetuate the current referral sector business strategies.

But it is very much within the profession’s control to delay or indefinitely postpone these scenarios by ensuring a balance when presented with insured pets, rather than an open cheque book, as some quarters of the insurance industry may like to suggest is happening.

The balance being the pragmatic delivery of what’s needed rather than what’s possible, sensibly managing the expectations of the insured owner – even those expecting a “return on their investment” or demanding life despite the welfare implications – and, quite rightly, pulling out all the stops when needed and appropriate.

Insurance exists as a safety net – we sometimes see it strung at kerb level rather than head height. In the words of one very eminent practitioner offering succour: “your problem is too much is being done to not very ill pets”.

How does the number of insured pets correlate to the future health of the private veterinary sector?

A robust, healthy insurance sector is essential if the veterinary profession is to achieve its full potential. If the pool of insured pets was bigger and the principle of insurance working more efficiently, applying the dynamics of the first paragraph would undoubtedly result in the opportunity – perhaps on a diminishing basis – for higher turnover and profit in both sectors.

Competitive pressure may mean some of the upside for insurers is reinvested in ensuring prices remain affordable, with the greater pool of risk offering the industry greater certainty and stability.