Topics Covered: 

Section 1. Short Title

Section 2. Scope and Purpose Section 3. Definitions Section 4. Disclosures Section 5. Policy Conditions Section 6. Sales Practice for Wellness Programs Section 7. Insurance Producer Training Section 8. Regulations Section 9. Violations

Section 1. Short Title

This Act shall be known as the "Pet Insurance Act."

Section 2. Scope and Purpose

A. The purpose of this Act is to promote the public welfare by creating a comprehensive legal framework within which Pet Insurance may be sold in this state.

B. The requirements of this Act shall apply to Pet Insurance policies that are issued to any resident of this state, and are sold, solicited, negotiated, or offered in this state, and policies or certificates that are delivered or issued for delivery in this state.

C. All other applicable provisions of this state's insurance laws shall continue to apply to Pet Insurance except that the specific provisions of this Act shall supersede any general provisions of law that would otherwise be applicable to Pet Insurance.

Analysis:

The NAIC developed the Act in order to create a more comprehensive and level playing field for the sale, purchase and policy provisions of pet insurance. Because pet insurance is relatively new and previously did not have many standards on the books outside of general insurance laws in most states, this act will help serve the public interest through standardization of the product.

The Act sets forth specific requirements that apply to pet insurance policies sold in a state that adopts the act in full or parts of it regarding how the product may be sold, solicited, negotiated or offered in the state. In addition it sets forth the standards that the policies or certificates of insurance that are sold or issued for delivery in the state must comply with. While many states adopt NAIC Model Acts in full, many states also use only portions of the Model Act or develop their own similar provisions.

What this does is to standardize these processes in the state and give regulators the tools to make sure that companies and agents offering pet insurance comply with the standards set forth in the Model Act and State Insurance Code.

Section 3. Definitions

If a pet insurer uses any of the terms in this Act in a policy of pet insurance, the pet insurer shall use the definition of each of those terms as set forth herein and include the definition of the term(s) in the policy. The pet insurer shall also make the definition available through a clear and conspicuous link on the main page of the pet insurer or pet insurer's program administrator's website.

Nothing in this Act shall in any way prohibit or limit the types of exclusions pet insurers may use in their policies or require pet insurers to have any of the limitations or exclusions defined below.

As used in this Act:

A. "Chronic condition" means a condition that can be treated or managed, but not cured.

B. "Congenital anomaly or disorder" means a condition that is present from birth, whether inherited or caused by the environment, which may cause or contribute to illness or disease.

C. "Hereditary disorder" means an abnormality that is genetically transmitted from parent to offspring and may cause illness or disease.

D. "Orthopedic" refers to conditions affecting the bones, skeletal muscle, cartilage, tendons, ligaments, and joints. It includes, but is not limited to, elbow dysplasia, hip dysplasia, intervertebral disc degeneration, patellar luxation, and ruptured cranial cruciate ligaments. It does not include cancers or metabolic, hemopoietic, or autoimmune diseases.

Analysis:

This section sets forth the requirements for definitions in the policies that insurers must use for the following terms. In addition the insurer must make the definitions clearly available via a link on the insurer's or pet insurance program administrator's website(s).

The Act does not limit or prohibit the types limitations or exclusions an insurer may use in their policies. Insurers may include limitations such as yearly or lifetime limits, and may exclude for example veterinary services rendered outside of the United States. The insurer is also not required to have any of the limitations or exclusions defined in this section.

A number of definitions are presented; note that some conditions may fit more than one medical definition. A condition can be both "chronic" and a "hereditary disorder", for example, or "chronic" and "orthopedic".

The definition of "chronic condition" is straightforward. It is something recurrent, but manageable. For example, a cat or dog with allergies that requires a special diet. The allergies can be treated and managed by feeding the pet a specific diet; however, the specific diet will not cure the underlying condition which is an allergy to certain allergens. Asthma or diabetes in cats and dogs is also considered a chronic condition that can be treated but not cured.

"Congenital anomaly or disorder" is a condition present from birth that contributes or causes illness or disease. English Bulldogs or other short-nosed dog breeds such as Pugs often develop Brachycephalic Syndrome which is the result of selective breeding that gives these dogs their smushed face look but causes severe respiratory abnormalities. These abnormalities restrict these breeds' ability to breathe to the point that even slight exercise on a hot day can bring about breathing difficulties that can even lead to death. Some congenital anomalies can be treated with surgery or exercise of care, such as preventing disk disease in Dachshunds by restricting their climbing and jumping from an early age. Others like dilated cardiomyopathy in breeds like Boxers and Great Danes is a disease where the heart muscle decreases over time and for which preventive testing is not available and must be screened for annually.

A "Hereditary disorder" is handed down from parent to offspring; allergies are the most common "hereditary disorder", and as mentioned earlier can also be considered chronic. Some of the most common hereditary diseases in dogs after allergies are hip and elbow dysplasia, inherited cancers such as lymphoma, and mast cell cancer, non struvite bladder stones, mitral valve disease, inflammatory bowel disease and other conditions. Cats are susceptible to deafness, feline lower urinary tract disease (FLUTD), and polycystic renal atrophy.

The "orthopedic" definition is pretty self-explanatory involving conditions related to bones, joints, and similar functions.

E. "Pet insurance" means a property insurance policy that provides coverage for accidents and illnesses of pets.

F. "Preexisting condition" means any condition for which any of the following are true prior to the effective date of a pet insurance policy or during any waiting period:

(1) A veterinarian provided medical advice;

(2) The pet received previous treatment; or

(3) Based on information from verifiable sources, the pet had signs or symptoms directly related to the condition for which a claim is being made.

A condition for which coverage is afforded on a policy cannot be considered a preexisting condition on any renewal of the policy

Analysis:

A pet insurance policy is one that specifically covers pets for accidents and illness. A few insurers write more exotic pets including birds and fowl and other animals, such as horses and reptiles.

Unlike human health insurance post-Affordable Care Act, pet insurance still allows for "preexisting conditions" to be excluded or subject to a waiting period prior to any coverage being available for that condition. Examples of pre-existing conditions are a dog receiving treatment for experiencing bladder symptoms such as wetting the floor before the effective date of the insurance policy. Or, the same dog had surgery for bladder stones prior to the effective date of the policy. Both of these instances would be considered preexisting, and the pet insurer could either decline to provide coverage for the condition, or invoke a waiting period prior to covering claims for that particular condition.

If a condition was previously covered under the policy it cannot be considered preexisting when the policy is renewed. In other words if a disease or illness develops during the initial policy period and continues into subsequent policy periods because of renewal of that policy, the insurer cannot treat it as preexisting, and will be required to cover the condition subject to any other policy provisions or limitations.

G. "Renewal" means to issue and deliver at the end of an insurance policy period a policy which supersedes a policy previously issued and delivered by the same pet insurer or affiliated pet insurer and which provides types and limits of coverage substantially similar to those contained in the policy being superseded.

Analysis:

The definition renewal describes the replacement of the old policy at the end of a policy period with a new policy that is issued by the same insurer or affiliated insurer with the same or substantially the same coverages and limits of coverage as the old policy it replaces.

H. "Veterinarian" means an individual who holds a valid license to practice veterinary medicine from the appropriate licensing entity in the jurisdiction in which he or she practices.

I. "Veterinary expenses" means the costs associated with medical advice, diagnosis, care, or treatment provided by a veterinarian, including, but not limited to, the cost of drugs prescribed by a veterinarian.

Analysis:

This insurance covers pets that are treated by a licensed veterinarian in the state in the veterinarian's state of practice. Services must be rendered by professionals who hold a valid license.

The definition of veterinary expenses is important in the determination of coverage for claims submitted. If a claim does not meet the definition it could lead to reimbursement of services rendered being denied by the insurer. An example would be boarding or grooming services even if offered by or at a veterinary clinic. Boarding and grooming are not considered a veterinary expense and would not be covered under the pet insurance policy, although some insurers may offer wellness or other supplemental benefits that may include grooming services.

J. "Waiting period" means the period of time specified in a pet insurance policy that is required to transpire before some or all of the coverage in the policy can begin. Waiting periods may not be applied to renewals of existing coverage.

K. "Wellness program" means a subscription or reimbursement-based program that is separate from an insurance policy that provides goods and services to promote the general health, safety, or wellbeing of the pet. If any wellness program [insert language from state statute or regulation that defines the trigger for insurance contracts, which might include language such as: [undertakes to indemnify another], or [pays a specified amount upon determinable contingencies] or [provides coverage for a fortuitous event]], it is transacting in the business of insurance and is subject to the insurance code. This definition is not intended to classify a contract directly between a service provider and a pet owner that only involves the two parties as being "the business of insurance," unless other indications of insurance also exist.

Analysis:

Because pet insurers can exclude or limit coverage for pre-existing conditions, waiting periods for coverage may be applicable before coverage becomes effective. For example: Fluffy, the cat who developed a respiratory illness treatable with antibiotics received treatment for that illness a month prior to the inception of the pet insurance policy. The insurer may determine that illness is pre-existing and will not cover any expenses related to that treatable illness for 30 days after the inception of the policy. This is what is known as a "waiting period". However, had this been a renewal of a policy and the illness occurred a month prior to the renewal date, the insurer would be prohibited from applying a waiting period to the follow up exam for the injury.

Pet wellness plans are plans that provide services that are not covered under pet insurance, which provides coverage for accidents and illness. Wellness plans can encompass routine and preventive care such as spaying and neutering, dental cleanings, microchipping, preventive prescriptions like heartworm medications, and prescription diets to name a few. When a wellness plan because of their payment and coverage structure meets the definition of engaging in the business of insurance in a state that adopts the Act then this definition helps to clarify that fact. Additionally, this makes such a wellness plan subject to all other state insurance regulations.

Section 4. Disclosures

1) If the policy excludes coverage due to any of the following:

(a) A preexisting condition; (b) A hereditary disorder; (c) A congenital anomaly or disorder; or (d) A chronic condition.

(2) If the policy includes any other exclusions, the following statement: "Other exclusions may apply. Please refer to the exclusions section of the policy for more information."

(3) Any policy provision that limits coverage through a waiting or affiliation period, a deductible, coinsurance, or an annual or lifetime policy limit.

(4) Whether the pet insurer reduces coverage or increases premiums based on the insured's claim history, the age of the covered pet or a change in the geographic location of the insured.

(5) If the underwriting company differs from the brand name used to market and sell the product.

Analysis:

Like most other insurance policies the Act requires certain disclosures to be made to the policyholder. Disclosure (1) requires the insurer to disclose if it excludes coverage for any pre-existing condition, hereditary disorder, congenital anomaly or disorder or chronic condition. Unlike human health insurance, pet insurers may exclude or limit coverage for any of these conditions or apply a waiting period before providing coverage for certain conditions.

Most insurance policies contain some sort of exclusions and if the pet policy includes any other exclusions Disclosure (2) requires this statement to be included.

Limitations on coverage through a waiting period or affiliation period, along with the disclosure of any policy deductible, coinsurance provisions or annual or lifetime policy limits are required under Disclosure (3). Like human health insurance policies deductibles and coinsurance amounts are used in pet insurance. Deductibles and coinsurance are set amounts that must be paid before the insurance fully provides coverage. These are considered out-of-pocket expenses.

Insurers may vary in how they handle deductibles and coinsurance; however it is handled within a policy, the insurer is obligated to provide an explanation of deductibles, coinsurance, waiting periods and other provisions to the insureds.

In addition there may be annual or lifetime limitations on coverage. The policy might state that the annual limitation for all services is $10,000 and/or has a lifetime limitation of $25,000. Once either the annual limitation or lifetime limitation of coverage has been reached no further benefits will be payable. With an annual limitation, the limitation will reset the next policy period upon renewal. Pets reaching lifetime limitations may find themselves either being uninsurable or subject to preexisting condition exclusions should they have to seek a new policy as reaching a lifetime limitation will terminate the original policy.

Disclosure (5) is used when the underwriting company differs from the brand name used to sell and market a product. Example of (5) is if Animal Insurers United Insurance Company underwrites the Terrific Pet Plan with all sales and marketing materials using the Terrific Pet Plan name and logo with Animal Insurers United Insurance Company as the underwriting insurance carrier indicated on the policy.

B. Right to Examine and Return the Policy.

(1) Unless the insured has filed a claim under the pet insurance policy, pet insurance applicants shall have the right to examine and return the policy, certificate or rider to the company or an agent/insurance producer of the company within fifteen (15) days of its receipt and to have the premium refunded if, after examination of the policy, certificate or rider, the applicant is not satisfied for any reason,

(2) Pet insurance policies, certificates and riders shall have a notice prominently printed on the first page or attached thereto including specific instructions to accomplish a return. The following free look statement or language substantially similar shall be included:

"You have 15 days from the day you receive this policy, certificate or rider to review it and return it to the company if you decide not to keep it. You do not have to tell the company why you are returning it. If you decide not to keep it, simply return it to the company at its administrative office or you may return it to the agent/insurance producer that you bought it from as long as you have not filed a claim. You must return it within 15 days of the day you first received it. The company will refund the full amount of any premium paid within 30 days after it receives the returned policy, certificate, or rider. The premium refund will be sent directly to the person who paid it. The policy, certificate or rider will be void as if it had never been issued."

Analysis:

More commonly used in life & health insurance this section of the Act provides for a "15 Days Free Look" period. The policyholder may examine the policy and if they decide that they do not want this insurance they may return the policy, certificate or rider to the insurance company or their agent/producer within 15 days of receipt of the policy, and receive a full refund of any premium paid to the company within 30 days after the return of the policy. The policyholder must not have filed any claims during this free look period in order to return it under this provision. The policy then would be void as if it had never been issued.

In addition the provision requires the insurer to prominently print on the first page or attach to the policy the required disclaimer regarding the free look period and its provisions.

C. A pet insurer shall clearly disclose a summary description of the basis or formula on which the pet insurer determines claim payments under a pet insurance policy within the policy, prior to policy issuance and through a clear and conspicuous link on the main page of the pet insurer or pet insurer's program administrator's website.

D. A pet insurer that uses a benefit schedule to determine claim payment under a pet insurance policy shall do both of the following:

(1) Clearly disclose the applicable benefit schedule in the policy.

(2) Disclose all benefit schedules used by the pet insurer under its pet insurance policies through a clear and conspicuous link on the main page of the pet insurer or pet insurer's program administrator's website.

E. A pet insurer that determines claim payments under a pet insurance policy based on usual and customary fees, or any other reimbursement limitation based on prevailing veterinary service provider charges, shall do both of the following:

(1) Include a usual and customary fee limitation provision in the policy that clearly describes the pet insurer's basis for determining usual and customary fees and how that basis is applied in calculating claim payments.

(2) Disclose the pet insurer's basis for determining usual and customary fees through a clear and conspicuous link on the main page of the pet insurer or pet insurer's program administrator's website.

Analysis:

Disclosures C, D and E address the formula, benefit schedule or use of usual and customary fee methodology upon which a pet insurer bases their claims payments in the policy. The policy will contain which of these payment methods are applicable to a particular pet insurance policy. These disclosures, including a summary description of the methodology upon which claims payments will be based, must be disclosed to a prospective buyer and the policyholders. These disclosures and summary description must be clearly stated and linked on the pet insurer's or the pet insurer's program administrator's website.

Pet insurance is most often reimbursed on an indemnity basis. After the services have been rendered, the policyholder will submit the billing statements and proof of their payment to the insurer, and those services will be reimbursed to the policyholder based upon the claims payment formula or schedule contained in the policy form, and posted on the insurer's or administrator's website(s).

For example: Bear, the chihuahua mix is bitten in the eye by Tobie, the yellow labrador retriever. Bear's owner contacts their usual veterinarian who determines that Bear needs to go to the Emergency Veterinary Clinic for treatment instead of their office. Because this is an accident claim, and an emergency veterinarian is the appropriate provider for this accident, Bear's owner will look to the schedule of benefits in the policy to see how much they will be reimbursed for Bear's treatment and necessary surgery to remove the damaged eye. If the reimbursement rate is $80 for an emergency veterinary examination, and the exam was billed at $100 (assuming the policy has a zero deductible) Bear's owner can expect to be reimbursed $80 for the emergency examination. The schedule shows that surgery will be reimbursed at $500 under the policy schedule. Bear's surgery comes to $659, therefore his owner will be reimbursed by the pet insurer $500 for the surgery portion of the accident.

If the policy reimburses instead under an usual and customary charges methodology, and taking the above example involving Bear, the reimbursement to Bear's owner will be based upon either the usual and customary charges the emergency veterinarian charges all pet owners for those services, or an average of charges in that area charged by veterinarians for those services. The policy and summary of the claims payment methodology would dictate how much Bear's owner is reimbursed for this accident. Assuming the usual customary charge for an emergency veterinarian examination for the above accident for Bear is $100, and the owner is charged and pays that amount. The owner would be reimbursed by the pet insurer $100 subject to any policy deductibles or coinsurance amounts, if applicable, for that examination.

F. If any medical examination by a licensed veterinarian is required to effectuate coverage, the pet insurer shall clearly and conspicuously disclose the required aspects of the examination prior to purchase and disclose that examination documentation may result in a preexisting condition exclusion.

Analysis:

Some pet insurers require a veterinarian to examine the pet prior to issuing a policy. If such an examination is required, then the insurer must clearly and conspicuously disclose that requirement along with required aspects of the exam prior to purchase. The insurer is also required to disclose that such an examination may reveal a preexisting condition that may lead to an exclusion of coverage for that condition. For example: Libby, a Lab/Greyhound mix, is found to have a heart murmur during the required examination. While this heart murmur may not require any treatment, only monitoring at the time of the policy application, it would be considered a pre-existing condition, and the pet insurer may exclude coverage for the heart murmur.

G. Waiting periods and the requirements applicable to them, must be clearly and prominently disclosed to consumers prior to the policy purchase.

Analysis:

Pet insurers that utilize waiting periods prior to coverage kicking in must clearly and prominently disclose to consumers the waiting periods and requirements applicable to them prior to the policy purchase. For example: The insurer invokes a 14 day waiting period for all illnesses after the inception date of the newly issued policy. So if Fuzzball, the Siamese cat, was experiencing symptoms of an urinary tract infection or was treated for one a week prior to the inception date of the policy, the insurer can invoke a 14 day waiting period before it would provide coverage for any covered expenses related to that illness.

Waiting periods help to avoid adverse selection for policyholders who wait to purchase the coverage until it is needed. Adverse selection occurs when the buyers have information that the issuing insurer may not have which could result in high claims immediately after the policy is issued that were not accounted for in the pricing of the policy.

H. The pet insurer shall include a summary of all policy provisions required in Subsections (A) through (G), inclusive, in a separate document titled "Insurer Disclosure of Important Policy Provisions."

I. The pet insurer shall post the "Insurer Disclosure of Important Policy Provisions" document required in Subsection (H) through a clear and conspicuous link on the main page of the pet insurer or pet insurer's program administrator's website.

J. In connection with the issuance of a new pet insurance policy, the pet insurer shall provide the consumer with a copy of the "Insurer Disclosure of Important Policy Provisions" document required pursuant to Subsection (H) in at least 12-point type when it delivers the policy.

K. At the time a pet insurance policy is issued or delivered to a policyholder, the pet insurer shall include a written disclosure with the following information, printed in 12-point boldface type:

(1) The [insert state insurance department]'s mailing address, toll-free telephone number and website address.

(2) The address and customer service telephone number of the pet insurer or the agent or broker of record.

(3) If the policy was issued or delivered by an agent or broker, a statement advising the policyholder to contact the broker or agent for assistance.

L. The disclosures required in this section shall be in addition to any other disclosure requirements required by law or regulation.

Analysis:

Disclosures H through L spell out the specific disclosure documents and summary documents that must be prepared and delivered by the insurer to the policyholder or placed on the insurer's or pet insurer's administrators website. This section included specifications for those documents and websites, including contact information for the insurer, agent or broker and state insurance department. These disclosure documents are in addition to any other such documents and disclosures required under state insurance laws or regulations.

Section 5. Policy Conditions

A. A pet insurer may issue policies that exclude coverage on the basis of one or more preexisting conditions with appropriate disclosure to the consumer. The pet insurer has the burden of proving that the preexisting condition exclusion applies to the condition for which a claim is being made.

Analysis:

In the Definitions Section, Definition F establishes what constitutes a preexisting condition upon which a pet insurer may exclude coverage for one or more such preexisting conditions when issuing a policy. This policy condition requires that the insurer provide appropriate disclosure regarding the excluded preexisting condition to the policyholder. In addition, when a claim for reimbursement of veterinary bills is made, the burden is on the insurer to prove that the conditions upon which the claim is made is excluded due that excluded preexisting condition(s).

For example: Sam the Basset Hound's allergies are excluded asa preexisting condition. His owner takes him to the veterinarian with what appears to be a flare-up of the skin allergies but turns out to be inflamed red skin with a rash like appearance due to bug bites that caused Sam to excessively scratch the area. The veterinarian treats the inflammation with a topical cream that is also used for skin allergies. The insurer initially denies reimbursement based upon the use of the topical cream as being related to Sam's preexisting skin allergies. Sam's owner appeals the decision, and upon further review the insurer reverses the previous denial under the preexisting condition exclusion, as the veterinary records prove the claim was not related to Sam's skin allergies, and the insurer erred in their initial denial.

B. A pet insurer may issue policies that impose waiting periods upon effectuation of the policy that do not exceed 30 days for illnesses or orthopedic conditions not resulting from an accident. Waiting periods for accidents are prohibited.

(1) A pet insurer utilizing a waiting period permitted in Subsection 5B shall include a provision in its contract that allows the waiting periods to be waived upon completion of a medical examination. Pet insurers may require the examination to be conducted by a licensed veterinarian after the purchase of the policy.

(a) A medical examination under Subsection 5B(1) shall be paid for by the policyholder, unless the policy specifies that the pet insurer will pay for the examination.

(b) A pet insurer can specify elements to be included as part of the examination and require documentation thereof, provided the specifications do not unreasonably restrict a consumer's ability to waive the waiting periods in Subsection 5B.

(2) Waiting periods, and the requirements applicable to them, must be clearly and prominently disclosed to consumers prior to the policy purchase.

Analysis:

As described above in Definition J, a pet insurer may issue a policy with a waiting period prior to coverage under the policy coming into effect for illnesses or certain orthopedic conditions that do not result from an accident. Waiting periods for accidents are not allowed under the act. The waiting period for coverage to begin cannot be more than 30 days. Pet insurers that utilize waiting periods must have a mechanism in place that allows for the waiver of the waiting period upon the completion of a medical examination of the pet by a licensed veterinarian. The Act further specifies who pays for the examination, and what elements are included in such an examination as long as they do not cause unreasonable constraints on the policyholder's ability to get the waiting period waived. Taking the example of Fluffy, the cat with a treatable respiratory illness that was treated with antibiotics one month prior to the inception date of the policy, where Fluffy quickly recovered from her illness. Fluffy's owner purchases the policy and requests an exam paid by the insurer to prove that Fluffy has completely recovered and that no waiting period for coverage is necessary. The results of that examination prove that Fluffy has completely recovered from that illness to the satisfaction of the pet insurer, and the 30 day waiting period is waived.

Insurers must also clearly and prominently disclose the waiting period and requirements applicable to consumers prior to the purchase of a policy.

C. A pet insurer must not require a veterinary examination of the covered pet for the insured to have their policy renewed.

D. If a pet insurer includes any prescriptive, wellness, or non-insurance benefits in the policy form, then it is made part of the policy contract and must follow all applicable laws and regulations in the insurance code.

E. An insured's eligibility to purchase a pet insurance policy must not be based on participation, or lack of participation, in a separate wellness program.

Analysis:

Policy Condition C prohibits pet insurers at time of renewal from requiring a veterinary examination as a condition for renewal. Such exams are allowable when a consumer applies for the coverage as pet insurers can exclude preexisting conditions or set waiting periods on coverage, but cannot be a condition for the renewal of a policy.

Under Condition D if there are any prescriptive, wellness, or non-insurance benefits included in the policy, they must be made part of the policy and are subject to all applicable insurance laws and regulations in that state. For example, routine vaccinations, dental work, and preventive medications like heartworm prevention products for dogs are considered wellness benefits. However, these wellness benefits and others may be incorporated into the pet insurance policy, and if so then they are subject to state insurance laws and regulations. Stand alone or separate wellness plans that are not part of the insurance policy are treated differently under the act.

Finally, the pet insurer may not condition a policy issuance upon the consumer's participation or non-participation in a separate wellness program. For example, Animal Insurers United offers the Happy Pet Wellness Program along with its regular pet insurance. A a consumer seeking a pet policy from Animal Insurers United to cover their dog Hank for accidents and illness cannot be required to also purchase or participate in the Happy Pet Wellness program in order to secure the desired policy.. The insurance company cannot deny the issuance of that accident and illness policy because the consumer declined the Happy Pet Wellness Program.

Section 6. Sales Practices for Wellness Programs

A. A pet insurer and/or producer shall not do the following:

(1) Market a wellness program as pet insurance;

(2) Market a wellness program during the sale, solicitation, or negotiation of pet insurance.

Analysis:

Section 6 provides the parameters for the sales practices allowable for Wellness Programs for both the insurer and the producers in the state. Wellness programs are not permitted to be marketed as pet insurance. They cannot be marketed during the sales, solicitation or negotiation of a pet insurance policy. Because Pet Wellness Programs are either stand-alone or supplemental plans, they cannot be included as an inducement to purchase a pet insurance policy, nor included during the sales or underwriting process when a consumer is seeking or obtaining pet insurance. For example: An insurer or producer cannot say something along the lines of "Keep Fido and Fluffy happy, buy an Animal Insurers United Pet Policy and we will throw in access to our Happy Pet Wellness Program for a small monthly fee."

Pet Wellness plans differentiate from pet insurance in that wellness plans cover the routine expenses that pet owners are expected to incur in order to keep a pet healthy. A Pet Wellness Plan is one that is a supplemental or stand-alone product that is not providing insurance coverage, but rather provides wellness benefits and services at a discounted or set price. Such policies cannot be sold as if they are the actual accident or health insurance for pets.

For example: A veterinary clinic may have their own pet wellness plan that provides a package of discounts for services such as yearly vaccinations, heartworm and other preventative medications, boarding and grooming, and an annual wellness visit. Pet insurance on the other hand covers the unexpected expenses such as accidents and illnesses that cannot be predicted, such as accidents or illnesses, but can also incorporate wellness benefits provided they are made part of the policy and follow state insurance laws and regulations.

B. If a wellness program is sold by a pet insurer and/or producer:

(1) The purchase of the wellness program shall not be a requirement to the purchase of pet insurance.

(2) The costs of the wellness program shall be separate and identifiable from any pet insurance policy sold by a pet insurer and/or producer.

(3) The terms and conditions for the wellness program shall be separate from any pet insurance policy sold by a pet insurer and/or producer.

(4) The products or coverages available through the wellness program shall not duplicate products or coverages available through the pet insurance policy; and

(5) The advertising of the wellness program shall not be misleading and shall be in accordance with Subsection 6B of this Model.

(6) A pet insurer and/or producer shall clearly disclose the following to consumers, printed in 12-point boldface type:

(a) That wellness programs are not insurance.

(b) The address and customer service telephone number of the pet insurer or producer or broker of record.

(c) The [insert state insurance department]'s mailing address, toll-free telephone number, and website address.

Analysis:

These provisions further differentiate between a wellness program and pet insurance, and set the parameters by which a wellness program can be marketed and advertised along with disclosure requirements.

C. Coverages included in the pet insurance policy contract described as "wellness" benefits are insurance.

Analysis:

If the pet insurance policy provides any benefits that are described by the policy language as "wellness" benefits, they are considered insurance and thus regulated by state insurance code and regulations.

Section 7. Insurance Producer Training

A. An insurance producer shall not sell, solicit, or negotiate a pet insurance product until after the producer is appropriately licensed and has completed the required training identified in Subsection C of this Section.

B. Insurers shall ensure that its producers are trained under Subsection C of this Section and that its producers have been appropriately trained on the coverages and conditions of its pet insurance products.

C. The training required under this subsection shall include information on the following topics:

(1) Preexisting conditions and waiting periods;

(2) The differences between pet insurance and noninsurance wellness programs;

(3) Hereditary disorders, congenital anomalies or disorders and chronic conditions and how pet insurance policies interact with those conditions or disorders; and

(4) Rating, underwriting, renewal and other related administrative topics.

D. The satisfaction of the training requirements of another state that are substantially similar to the provisions of Subsection C shall be deemed to satisfy the training requirements in this state.

Analysis:

Training and licensing of producers is required within the insurance industry, and pet insurance is no different. Section 7 of the Act spells out the licensing requirements for producers who sell pet insurance, and the topics that must be included in that training required for licensing. The Act also allows for those individuals who have completed the licensing in other states that are substantially similar are deemed to have completed the training requirements in the state covered by this Act. Many states have reciprocity for producers when training requirements are similar; the same is allowable here.

Section 8. Regulations

The commissioner may promulgate rules and regulations to administer this Act.

Section 9. Violations

Violations of this Act shall be subject to penalties pursuant to [insert state administrative code].

Analysis

Lastly, the Act affirms that the commissioner may create rules in order to administer this Act if a state adopts the Act, and that violations of the Act will be subject to penalties as listed in the state's insurance regulations.

NAIC Pet Insurance Model Act reprinted with permission.

The NAIC does not endorse nor support the conclusions in this analysis of the Pet Insurance Model Act.