CNBC recently reported that pet insurance has become the third-most-requested employer-sponsored benefit in America -- the product is now becoming more available as a result of more companies approaching this market.
Here's why: More than 62 percent of households own a pet (68 million dogs and 73 million cats), and these pet owners spend $18.2 billion on veterinary care each year. The cost of veterinary care is increasing every year, and there are many new treatments available for trauma and chronic diseases. While effective in returning a sick or injured pet to its family, these treatments can be costly and may require a long-term financial commitment.
Other issues that pet owners face include liability for injury or damage caused by a pet and loss of a pet through injury or illness. Pet insurance policies on the market can meet all of these needs.
One MGA says that one of his agents recently sent two payroll stuffers to 440 employees of a client company. One encouraged 401(k) enrollment, the other pet insurance. He received 160 inquiries about pet insurance -- and none for the 401(k). This kind of response underscores the fact that pet insurance is a rising phenomenon that clients are interested in.
Types of pet insurance
Although pet insurance is technically property and casualty insurance, from the pet owner's perspective, it works much like life and health insurance for humans and can be offered as a value-added cross-sell.
Life insurance for pets recognizes that, when a pet dies from an accident or illness, the owner may have incurred significant veterinary costs in addition to the cost of replacing the animal. These policies can pay thousands of dollars for show pets and hundreds for the death of a companion animal.
Pet health insurance helps pet owners control the cost of veterinary care by reimbursing them for the cost of treatment by any qualified vet. There is a range of plans available, with premiums as low as $59.95 a year.
Basic coverage typically includes medications, X-rays, diagnostic procedures and laboratory tests, surgery, hospitalization, tooth extraction, and euthanasia for humane reasons for an injured animal. The pet owner can add similar protection for illness care.
At the other end of the spectrum, there are policies that cover preventive care, including checkups, vaccinations, fecal exams for parasites, heartworm and flea treatment and prevention, tests for common ailments, dental cleaning, spray and neuter surgery, even holistic homeopathic consultations.
Liability insurance covers pet owners against injuries inflicted by their pets. Dogs, for example, bite nearly 5 million Americans each year. There are a number of ways that pet owners can protect themselves: Personal liability coverage through homeowner's or renter's insurance, automobile insurance, even workers' compensation insurance can apply depending on the circumstances. However, a growing number of major insurers exclude certain breeds in certain states and may even quietly eliminate coverage that protects pet owners. For these reasons, demand for insurance designed specifically for companion animals can be expected to grow.
Marketing pet insurance
Although pet owners enthusiastically embrace insurance products once they know about them, only a relatively small number have insured their pets. The reason: The marketing of these products has historically been weak.
Because premiums are typically small, the cost of traditional advertising to acquire a list of prospects is prohibitive. Today, savvy use of the Internet is turning the equation around. On the consumer level, attractive Web sites geared to the interests and needs of pet owners can be leveraged to develop a base of motivated prospects.
On a business-to-business level, agents have found it efficient to concentrate on larger employers, associations, and professional employer organizations that have access to tens of thousands of prospects. It costs these organizations nothing to offer this popular benefit, and employees can pay their premiums by payroll deduction or credit card. Sales are tracked and commissions calculated through the Web.
The insurer or agent can then provide the employer with sales material, including payroll stuffers and flyers, through a dedicated Web site.
At the employee level, response to stuffers can be substantial -- 10 percent to 20 percent. When you consider that not everyone has pets and that some are insured through other companies, this is a good return, especially if you are marketing through large organizations with 50,000 or 100,000 prospects.
"Most people consider their pets members of the family," an MGA notes. "In my case, I have two cats, a wife, and a daughter -- in that order (at least as far as the cats are concerned). When one cat flew into the house obviously dizzy and disoriented, we rushed him to the vet. A battery of tests, a prescription, and $600 later, I was relieved to be able to submit the bill to my insurance company and get most of the money back.
"Some people say, 'Why would you spend that on a cat?' I say, 'How could I tell my five-year-old daughter that I can't heal her pet?' It's a very emotional sale."
J. Matt Lile, III RHU, president of Vsurance Inc., is also CEO of Advanced Insurance Group of America and its subsidiaries and is the President of Cosmopolitan Life Insurance Company, a private insurance company chartered in Arkansas. Vsurance Inc. is a new provider of animal resource centers that include Purrfect Pet(TM) Insurance. For more information, visit www.vsurance.com.
