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A 52% price increase this year (or 119% over 5 years) is never going to be ok.

Posted in Client Service @ Jun 12th 2014 - By Judy Gillespie, Director, Vetanswers
The Perils Of Pet Insurance Blog 3

An open letter to all pet insurance companies

Note: I originally claimed my pet insurance had increased by 70% in a year.  This is in fact incorrect and the correct increase is 52% this year.  I was looking at the wrong renewal invoice however I have since realised that in the 5 years I have had the insurance the premium has increased by 119%.....

Every business has the right to make a decent profit for the money invested by the owner and/or shareholders.  I get that and I have no problems with it – in fact I even wrote a blog post about it: I’m a money hungry business person and proud of it!  However I was horrified when I opened my pet insurance renewal and saw a hugely inflated premium staring at me. Yep that was the first thing I saw when I opened the letter.  “That can’t be right” I thought and so I called the customer service number. 

I explained to the staff member that I was sincerely hoping the figure was a typo as surely no business could expect to get away with such a large increase? But unfortunately no – it wasn’t a typo.  It was then explained to me that the price increase was due to an increase in veterinary fees and the fact that the premiums were now being determined using breed, age and location. Apparently a similar method to that used by insurance companies to determine house insurance premiums.

Unfortunately for the poor staff member I then had a fairly spirited conversation where I tried to explain that vet fees had in fact not gone up (certainly not by 50%) and was she perhaps meaning that the range of veterinary services now available had indeed increased which could have an impact on insurance payouts?  She was really only comfortable sticking with her script and I was just getting angry that some of the reasons she was being told to give to clients were in fact wrong and vets were being blamed for the extreme price increase.  So I asked to speak with a manager, however there wasn’t one available but I was told someone would call me back.

After I hung up I realised I had missed some paperwork behind the renewal invoice and I was fascinated to see a letter that said:

Dear Judy......

We have some good news for you to share with Nina!  The details of their PetPlan Covered for Life policy are enclosed!  Woof, Woof – Hooray!

The letter then goes on to talk about some changes in the look of packages, etc. I think - to be honest I really didn’t read any more as I was too stunned by the ‘good news’ bit!   You’re kidding right?  Now you want me to be happy about a 52% price increase?

So the next day I waited for a call.  It was nearing midday when it was suggested perhaps a message on their Facebook Page was the way to go which I tried and unsurprisingly I soon received a call.  I must say the supervisor did a brilliant job and we had a very interesting conversation.

So what were the real reasons behind the 52% increase? 

It was explained to me that the pricing increase had been determined by the underwriters and directors as for the last couple of years the company has been paying out more than they have been collecting in premiums – never a good business model.

The pay outs have significantly increased over the years due to the increase in available veterinary procedures such as treatment for cancers and more complicated orthopaedic surgeries etc.

The premiums had to be significantly increased so there were sufficient funds to maintain payouts (and I suspect for the survival of the company).

Ok, I get all of these reasons – I really do. If revenue is less than expenses, any business is in trouble.

But I can’t for the life of me see that a 52% increase makes any sort of good business sense and this is why.... 

The way I look at it - in this situation there are 2 main groups of pet insurance clients:

  1. Those that can easily take their business elsewhere as they have younger pets with no pre-existing illness or injury, and
  2. Those with senior pets or those with pre-existing illness or injury that won’t be able to get insurance elsewhere. 

Guess who will stay and who will go?  Yep, those with younger pets (i.e. the ones that are less likely to make expensive claims) are likely to leave and find another insurer and those with older pets (i.e. the ones that are more likely to develop age related injury and illness and therefore more expensive claims) will stay – because they have no choice.

Just how many existing clients are going to put up with a 52% increase?  Isn’t it also likely that the number of clients that leave will negate any revenue increase from the premium rise?  Wouldn’t it have made more sense to perhaps work with a 20% rise over three years for existing clients and a different and higher rate for new clients?

If financially this wasn’t an option and the 52% increase really was the only way to go for the survival of the company then it still makes no business sense to do it the way it was done. Why would you send me my claims renewal with the huge increase staring me in the face when I opened the letter, and then rub my nose in it by telling me there is some good news to share with Nina?

Why wouldn’t you put together a letter from the CEO explaining the situation?

It could include something like.....

  • Over the years we’ve paid out xx in payments
  • The veterinary care that is now available for our pets is so advanced it matches the care offered to humans however that comes at a cost
  • Over the years we’ve become the best at paying out 100%/lifetime care/etc.
  • However we’ve kept our premiums too low & our payouts too high for too many years and now we find ourselves in a difficult situation
  • For the sake of the company and to continue to meet our payout obligations to you the pet owner we need to introduce serious premium increases.
  • We understand that this is going to be very difficult for some but we wouldn’t be doing it if it wasn’t necessary
  • We value you as a client and we hope you appreciate what we have been able to deliver in the past and will continue to do in the future

Really... I could keep going....  And most importantly this letter full of honest information should go IN FRONT of the premium renewal.

Just tell me the truth.

I’ll respect a company that is honest enough to say “Ok, so maybe we’ve stuffed up.  We’ve tried to keep our premiums as low as possible over the years and we haven’t been increasing them enough to keep up with the amount we’re paying out for your pet’s care and so now it’s going to hurt and we’re sorry for that.”

I don’t respect a company that blames the industry that should be their closest ally. 

The pet insurance industry and the veterinary industry have a symbiotic relationship and ultimately they both want the same thing: for every pet owner to have insurance for their pet. From a veterinarian and veterinary nurse perspective it would mean they could deliver the very best of care without the lack of finances hindering treatment options.  From the pet insurance company perspective, it obviously would be a huge financial benefit and to top it off they would also love it if vets and vet nurses were able to convince pet owners to take up insurance.

So why aren’t both the veterinary and the pet insurance industries BFF’s?

For example why haven’t both industries got together and worked out some sort of deal where pet owners who actively look after their pets receive a reduced premium?  Vets could issue ‘Health Certificates’ to those pets that regularly receive wellness checks, maintain a healthy weight and are fed veterinary prescribed diets. It would be a win/win situation for both industries!

You see, apart from pet insurance, I also pay $440.00 annually for Nina to be in a Wellness Program which includes:

  • Free consults
  • 20% discount on food
  • 10% discount on drugs & other OTC products
  • Vaccinations
  • 1 x Dental scale & polish
  • 1 x Healthy pet screening (urine, bloods, etc.)
  • 2 x Comprehensive physical exams
  • Amongst other services... e.g weight management, etc.

Nina has only ever been fed veterinary advised food, has never been overweight and has never missed a vaccination. 

So why am I paying the same premium as a pet owner with an overweight dog who is only taken to the vet once a year for vaccination and is fed Chum?  It doesn't make sense.

And then there is the moral side to the story

I have a choice – I can take my business elsewhere.  My heart breaks for those who can’t.  Those pet owners with senior pets who have paid premiums for years and who now have to either find an extra 50% every year to maintain coverage or even more heartbreakingly have to drop the coverage for their senior pet because they can no longer afford it. 

Seth Godin says it succinctly in his blog post Shame is a brand killer: “When your public sees you choosing a path that’s shameful, that they don’t approve of, that offends their sensibilities, it creates a dissonance that might never be erased.”

And what does this mean for you as vets and vet nurses?  You’re the ones that will have to have the difficult conversations with owners if/when these previously insured senior pets do develop a medical problem that requires treatment - and the insurance is no longer there.

Not only does a 52% increase in premiums not make much business sense to me it is also morally wrong for those pet owners that have been clients for years and whose senior pets are now most in need of the insurance.  I can maybe forgive a bad business decision, but I can’t forgive a decision that is morally wrong. 

So now I'd really like to hear your opinions - maybe I've got it wrong - tell me what you think in the comments section below

Follow up to this blog post......

After writing this blog post Vetanswers ran an online survey: The Perils of Pet Insurance.  It collected responses from 72 respondents and you can read the overview of the survey results here: The Perils of Pet Insurance - Online Survey Results

Comments

Marianne Conolly @ Jun 13th 2014 11:46am
I totally agree with you Judy. In fact, there is not one point I would disagree on. I also love your suggestion of the Health Certificate. Makes sense to me! I'm going to share your blog. Excellent research and as usual very well written.
Judy @ Jun 13th 2014 3:10pm
Thanks Marianne. Now all we have to do is work out how to get both industries talking to each other! Any suggestions??
Rena @ Jun 18th 2014 3:36pm
The Australian Veterinary Association has a pet insurance taskforce which is talking to the industry to try and address a range of issues. Thanks for this information which we can take on board.
Judy @ Jun 19th 2014 12:39pm
Thanks Rena. That's good to know - hopefully the taskforce can bring both industries together!
Mike Tweedie @ Jun 19th 2014 8:06pm
Judy, I think this is a Multi edged sword to look at. Being an equine vet and pet owner I can see it from both sides. Often people feel insurance on a pet means that there can be no limit to what can be spent diagnosing a problem. Our profession also has to take consideration for this in decision making on case management. So yes at times I agree as a vet the expensive MRI or CT scan is indicated but could we diagnose the problem with alternative methods rather than using these often expensive tests. This is a professional decision and I know we should always offer the best we can for our patients and I am not for offering poor service but what I am questioning is both the professions and the clients desire to use tests because we have 'insurance' . If we then sit on the side of the pet insurance case, they see an increase in pay puts and expense associated with veterinary care due to the sudden use of MRI, CT in Australia over the last few years so cases now have an extra $2-3000 dollars added to a diagnosis. The possible best case could be the insurance company puts together a group of specialist vets to be a sounding board for the primary vet to discuss case management. This plan would allow a balanced approach to the management of the case with there being a discussion with the companies before we do tests then send them the bill. I think discussion between the industry and insurance companies are needed for future benefit of our patients.
Judy @ Jun 19th 2014 9:23pm
Thanks Mike. You've mentioned some very good points - and even more reason for the two industries to open up discussions. My concern is that if this doesn't occur fairly soon pet insurance will become unaffordable for many - to the detriment of both industries AND pets and their owners.
Dr. Doug Kenney @ Sep 6th 2014 12:46am
Judy, This is perhaps the most thought-out response to the issue of instances when pet insurance premiums increase dramatically upon renewal. This does happen and can happen with almost any company. What makes a pet insurance policy good (reimbursing based on the actual veterinary invoice, no-limits, etc.) also make it harder for the insurance companies to keep premiums on pace with increasing usage of technology, new drugs and treatments that costs more than the old way, etc. One caution that I have as a veterinarian is that any cooperation between the veterinary community and the pet insurance companies must avoid at all cost any drift toward "managed care" that plagues other health professions. Pet owners and veterinarians alike should avoid any "networks" similar to HMOs or PPOs where you must go to a doctor in the network, fees are negotiated, and someone else besides the pet owner and their veterinarian decides which tests or treatments should be done.
Judy @ Sep 7th 2014 4:28pm
Thanks Dr Kenney. you've made a good point and I can see how the 'managed care' model could in fact make the situation worse than it currently is. As a pet owner I think I'd like somewhere in between - even getting the 2 industries talking would be a great start!
Alex @ Nov 20th 2014 4:29pm
Ha ! 52 % . I wish. I just received my renewal from PIA and its over 100 % higher than last year. $525 up to $ 1085. Fair enough our dog had surgery for IVDD last year and PIA paid out nearly $ 6k however when quizzed today they told me flat out that previous claims have absolutely nothing to do with the premium calculations. Right. Instead they blamed the vets and how much they charge or have the potential to charge given the new technology available etc.....All well and good but vets are not charging 100% more than they were last year nor is their equipment any more expensive to run than last year - maybe power costs a bit more but an MRI or CT cost the same as is does last year or it should anyway. So now I'm stuck in limbo. I renew by the 8th of December, change to accident only cover or scrap it all together
Judy @ Nov 20th 2014 5:30pm
Hi Alex, wow - that's certainly a huge increase! It really makes me angry that an insurance company is STILL blaming the veterinary industry alone for such crazy price increases. Maybe you should send them a link to this blog post and see what they say!
Alex @ Nov 20th 2014 7:32pm
Hi Judy. Yep, crazy. I was fully expecting a rise of 10% but not over 100. Sure the dog is getting older (11, kelpie) but that's the risk they are insuring. She may not have another issue for the rest of her life. As it is, this dog costs more to insure per year than both my 4WD and work van put together. I would argue that the chances of a vehicle claim are far greater than a pet claim. Is there a pet insurance ombudsman ?Must look into that.
Judy @ Nov 20th 2014 7:41pm
Hmm Alex - that's a good question. I just did a quick search & found one for the private health industry: http://www.phio.org.au/about-phio/about-phio.aspx I wonder if they also look at pet insurance issues?
Alex @ Nov 20th 2014 8:50pm
Apparently they are overseen by the Financial Ombudsman Service. 1300 780 808 www.fos.org.au info@fos.org.au
Judy @ Nov 21st 2014 8:58am
Thanks Alex - I might add that information to the body of the blog post.
Sam Herbert @ Dec 1st 2014 12:01pm
Hi Judy.. just found your original June 2014 posting today after receiving my own 70% Insurance premium hike notice today. It's the same Insurance provider but their story seems to have changed. I was told that effective March 2014 following a complete review of their risk profile model, certain breeds were more expensive to cover than others. Apparently Gordon Setters did not feature favourably according to this new model, hence the increase from $59/m to $101/m. As was your experience, the covering letter hasn't changed ("Woof, Woof..") - all froth n bubble, conspicuously devoid of any mention of the premium change. I made this point in my call to them today, adding that as an existing customer of 7 years I have previous renewal notices that explained any variations (i.e, increases) upfront in the covering letter. 7 years and no prior claims - their new model is about Breeds now, no consideration for individual policy holder performance. I just hope my own Private Medical Insurer doesn't adopt Petplan's new model - where as an Anglo-Saxon I might find I am in the same category as Scotland's Gordon Setters! Thankfully we now have more choices for Pet Insurance - at least 3 other Insurers will provide my dog comparable coverage 'for life' at the right price, which I told P/P is a risk I am prepared to take. Thank you for your original posting and to all those who have added to it since. Hopefully PP might get the message finally.
Judy @ Dec 3rd 2014 5:58pm
Thanks Sam - I'm glad you found the post useful. I'd love to know which other pet insurance companies you're considering as I'm embarrassed to admit that I still haven't found a new one for Nina!
Erin @ Feb 24th 2015 11:28am
Hi Judy, like Sam before me it's only today that I've found your post as a result of me searching to see if any one else had recently received their annual pet insurance policy renewal. We adopted a one year old cat from the RSPCA 12 months ago and as we live on a moderately busy road I took out pet insurance with PIA. Aside from our cat now being the ripe old age of 2, she has had no help problems and thus no vet claims but yet my insurance has gone up 60%. Like you I completely understand that prices for insurance go up, as do in every industry but 60% is ridiculous. I've immediately cancelled my policy on principle and have taken out a new policy elsewhere that at least includes a donation to charity.
Judy @ Feb 24th 2015 2:26pm
Hi Erin, thanks for your comment. It's a shock when you open up that renewal letter isn't it! Would you be willing to share the name of the company you've chosen to sign up with as I'd be interested to know which company offers a charity donation.
Walt @ Mar 6th 2015 1:11am
WOW! I got the infernal "Woof! Woof!" letter from Petplan yesterday. I'm still in shock. These guys are both shameless and unforgivably cheesy. This blog post was exceptional. Points out what Petplan did wrong -- a case study in how to message a pricing change badly, infuriate customers and cause irreparable brand damage in the process. Our premiums went up by 75%. To rub salt in the wounds, they've accepted our money for years and now that our dog is 10, slugged us with this increase ( no option to take policy elsewhere due to age). Our understanding of "Covered 4 Life" was that Petplan were offering us a commitment to provide cover at a fair cost for life. To take our money when the actuarial risk was lower (dog younger) and then jack now makes a mockery of their "promise" to customers. Above all else, this was very badly communicated to customers. Judy, they should have read your post and given you a job in marketing. Woof! Woof!
Walt @ Mar 6th 2015 1:28am
One other thing for Petplan customers to consider: If the insurer has been selling a "covered for life" policy (and accepting premiums on that basis) there may be a cased to argue that they cannot significantly alter the term sof the policy or the basis for underwriting it -- especially if those changes adversely affect existing "C4L" customers. In effect, the C4L promise is a commitment to continue offering the same type of cover that has ALREADY BEEN UNDERWRITTEN at a reasonable level of annual cost increases. What they have done in 2014/15 is issue us with new policies with substantially different underwriting procedures. Like Judy, I was told on the phone that the basis for underwrtiing the policies had changed. I believe policyholders could have a reasonable case to take to the Financial Ombudsman Service on the basis that we were led to believe our existing policies would continue materially unchanged for the life of the pet. In my view, it is potentially unconscionable conduct to offer this type of policy and then change the underwriting to jack up premiums when there is an existing policy in place. I don't imagine it would hurt if FOS saw a stack of these cases being lodged by aggrieved policyholders (like myself). Note: FOS has jurisdiction over unfair premium increases only where there is "non-disclosure, misrepresentation or incorrect application of the premium, taking into account reasonable increases". I will leave it to your judgment as to whether any of the above apply! INFO SHEET: http://www.fos.org.au/custom/files/docs/fact_sheet_premium_increases_100512.pdf
Judy @ Mar 6th 2015 11:10am
Hi Walt - thanks for your comments although I'm not sure i'd be keen on a marketing role. - maybe they could just pay me to consult? ;-) I wish you had read my blog post 6 months ago as I think your advice is very interesting. I hadn't considered it from the 'covered for life' aspect potentially meaning that they can't substantially make change to the original policy. If you choose to follow this idea further I'd be really keen to hear what happens and then I could possibly write a follow up post. Let me know how you go! Regards Judy
Walt @ Mar 9th 2015 1:25am
Hi Judy, thanks for the response -- and your efforts to publicise this poor commercial decision making from Petplan/Allianz. Did you end up changing insurer? The sheer frustration from my side is that I have been with Petplan for years (changed for years ago from a Hollard reseller after my sister told me about the "covered for life" promise at PP). Petplan's premiums were fair value for money. Alas, our dog has just turned 10 and we've copped at 75% YEAR-ON-YEAR INCREASE and our contribution has gone from 25% to 50%. It feels like they waited until we could no longer shop around and then jacked the premium. We essentially have four options: 1) Move to an accident-only policy with the other insurer (ah the irony!). 2) Continue paying extortionate rates. 3) Self-insure (i.e., put $100 a week in a separate interest-bearing account). 4) Take the matter to the ombudsman on grounds that it was unconscionable conduct for the insurer to underwrite a new policy (with totally different terms) once our dog had reached an age where we couldn't shop around. I can't see how this can possibly be acceptable conduct -- they are absolutely giving their industry a terrible name. Just check the reviews on productreview.com.au! One other suggestion to anyone who sees this and feels similarly: FILE A COMPLAINT WITH ASIC AS WELL AS THE OMBUDSMAN. ASIC targets its resources based on perceived consumer threats. The more of us that complain about this unconscionable conduct, the more likely it is that ASIC may undertake a targeted review on the company (or sector as a whole). To take out a policy with a company during the low-risk period of insurance, pay thousands in premiums (with one $200 claim) and then get taken over a barrel like this really sticks in our craw. In hindsight -- and as advice to others -- I would stick with the self-insurance option as the sector needs customers to vote with their feet. The pet insurance industry in Australia needs to understand that taking premiums during a client's low-risk period (i.e., young pets) and then jacking up premiums two-fold and adding a co-payment of 50% once the customer is locked in (i.e., 9-year-old pet) is simply unscrupulous behaviour and a great way to destroy your business. Caveat emptor pet owners!
Judy @ Mar 10th 2015 10:12am
Thanks Walt - I totally hear & agree with your frustrations. I haven't reinsured Nina which I feel guilty about but I feel I'm damned if I do & damned if I don't! She's turning 9 this year so I know I need to make a decision one way or another. But how do I know if the new insurance I choose won't also end up with astronomical premium increases? I did try to have a conversation with those in the pet insurance industry as I think they need to be working more closely with those in the veterinary industry to come up with a better product. See examples in my blog post but e.g rewarding owners who actively work to keep their pet healthy with lower premiums, etc. But the communication seemed to dry up & they stopped responding to my emails. After reading your comments I did email the FOS last Friday , briefly explaining the situation and asking if it fell within their Terms of Reference & I'm waiting on a response. Perhaps it's time I attempted to start up the conversation again with the pet insurance industry contacts!
Judy @ Mar 10th 2015 1:44pm
Hi Walt...and all others who may be interested. I just received this reply from the 'Financial Ombudsman Service' in response to my email inquiring if their terms of reference also included pet insurance. And in case you're wondering, PetPlan is a member of the FOS: "We have received your email, however, it is not clear that you intended to lodge a dispute with us. If you would like to complete lodgement, please respond to this email. The answers to your questions would depend on the issue in dispute. I would suggest calling us on 1300 780 808 and selecting options 2 and then 3. The role of the Financial Ombudsman Service: The Financial Ombudsman Service (FOS) is an independent dispute resolution service that considers disputes between consumers and Financial Services Providers. We can consider certain types of disputes about banking, credit, insurance, investments and other financial services. FOS only has jurisdiction to consider disputes if the financial services provider concerned is a member of FOS. A list of our members can be found here: www.fos.org.au/members.
Walt @ Mar 11th 2015 12:11pm
Good on you Judy! One thing re FOS: the process is generally to appeal first to the insurer's internal dispute resolution (IDR) service first -- which in the case of a re-seller like Petplan might involve going through Allianz's IDR scheme. If that doesn't lead to a satisfactory resolution then it's time to try FOS. Just ensure that your complaint is tightly worder around their terms of reference (i.e., does it involve "non-disclosure, misrepresentation or incorrect application of the premium, taking into account reasonable increases"?). FOS is swamped so you need to ensure your case falls within their TOR or they'll refuse to hear it. Allianz is a member of FOS so it should be able to hear claims on the basis of "misrepresentation (covered for life indeed!) or incorrect application of the premium" and "unconscionable conduct" in relation to older pets. Cheers, Walt
The Terrier @ Mar 11th 2015 12:46pm
Petplan Australasia Pty Ltd is indeed a FOS member, which gives FOS jurisdiction to hear unresolved complaints. FOS Member number: 13844 ACN/ABN: 64069468542 Trading as Petplan Australasia Pty Ltd Member details Date joined: 1/01/2009 Complaint contact Mr Doug Ford Complaints Manager Petplan Australasia Pty Ltd PO Box 208 Sunbury VIC 3429 Business: 03 9339 3333 Fax: 03 9339 3355 Email: dougford@petplan.com.au
Judy @ Mar 11th 2015 1:35pm
Hi Walt & The Terrier, thanks to both of you for your input. I should mention here that I won't be pursuing a complaint, partly because I don't have the time and it's been 9 months since I wrote this post so I think my complaint would be too old anyway. I really did the research to make the information available to others. I also don't necessarily want to 'PetPlan bash' as I'm not convinced that they're that much worse than many of the other pet insurance companies - they're just the only company I've had any dealings with. My ultimate goal is to have both the pet insurance and veterinary industries communicate and work together to develop a product that is affordable for pet owners, financially viable for the companies and allow veterinarians to offer the best possible treatment to their patients. Surely that should be possible?

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