California sets disclosure guidelines for pet insurance

California has passed a unique bill requiring pet insurers to disclose a breadth of baseline information to consumers, a practice that, according to the California Assembly, has been widely disregarded at the expense of pet owners.

The new bill, sponsored by Assemblyman Matt Dababneh, requires insurers to communicate their underwriting practices to pet owner’s such as taking into account the number of claims made, insurance limits, and if the policy excludes coverage due to a pre-existing condition or hereditary disorder.

The bill also gives consumers a “free look” period, where they can return their policy within 30 days for a full refund.

“California consumers will now have greater protection when they purchase pet insurance,” said California Insurance Commissioner Dave Jones. “In the state with the largest number of insured pets, once again California is leading the way by becoming the first state in the nation to enact a law that adds consumer protections to this rapidly growing line of insurance. I would like to thank Governor Brown for signing our bill and giving Californians piece of mind when it comes to protecting their pets.” 

The bill, which was signed into law by Governor Jerry Brown on Sept. 30, is expected to give pet owners a better understanding of their policies, including strict definitions of what constitutes a pre-existing condition, an issue for many consumers with illness-prone breeds.

Costs on the rise

Pet insurance has seen a dramatic rise since 2008, increasing by roughly 13% each year, according to the North American Pet Health Insurance Information (NAPHIA). Yet despite this increase, it is estimated that only 1% of cats and 3% of dogs are insured.

To increase the amount of policies and as technology increases the cost of veterinary care, a number of states have taken it upon themselves to promote pet owners to buy insurance.  

“Pet insurance plans may not make sense for every pet owner, but given that emergency or catastrophic veterinary bills cost thousands of dollars, it is worthwhile for consumers to consider and evaluate these products,” said New Jersey Department of Banking and Insurance Commissioner Ken Kobylowski said in a press release last month.

The bill will go into law June 15, 2015.