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How to Increase the Pet Insurance Penetration Rate

September is National Pet Insurance Month, bringing awareness to an industry that’s on a double-digit growth streak for the sixth consecutive year. According to the latest State of the Industry Report 2021 published by the North American Pet Health Insurance Association (NAPHIA), the total number of insured pets in the U.S. is increasing by 23.4% on average every year since 20161.

The pet insurance industry surpassed its $2.174 billion growth trajectory — despite the pandemic and its impact on the economy. Kristen Lynch, NAPHIA’s Executive Director, explains the “stay-at-home and work-from-home measures introduced during the pandemic create even closer bonds between pet owners and their pets”2.

And yet, in a year that saw record-high levels of pet ownership and expenditures, less than 3% of the U.S. dog and cat population — estimated to be between 135 million and 184 million — have pet health insurance. So, is the market as strong as the numbers would suggest, or is the low penetration rate a potential sign of poor health?

In honor of National Pet Insurance month, here’s a look at how experts weigh in on the data, with unique insight on the obstacles standing in the way of providing affordable access to veterinary care for all pets and their families.

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Problem #1: Inability to choose

As the industry continues to grow, so does the number of companies entering the market space. There are now more pet insurance providers than ever before. NAPHIA — which represents 99% of all coverage in North America — is now more than 20 members strong, comprised of several entities who underwrite insurance policies for multiple brands beneath their umbrella.

We’ve seen well-established brokers (such as Geico, State Farm, and Progressive) expand their suite of policies to include four-legged family members alongside homes, cars, lives, and travel plans. Other corporate giants, including Walmart and Petco, and insurance companies, like Lemonade, have also entered the scene.

On the one hand, an abundance of options is a good thing, as it allows consumers to compare pet insurance plans so they can find the solution that best suits their unique needs. But on the other, it may lead to a perceived information overload in which too many choices prevent consumers from making any choice at all.

Lynch explains “the inability to decide which policy to buy” is one of the top reasons why many pets go uninsured3. As more providers cater solutions to more pet parents, consumers will need to know how to compare all of the different options before them.

Problem #2: Lacking consistency

Complicating matters further are the laws and insurance regulations that vary by jurisdiction. Where you live affects the policies available to you, as well as the terms that apply to them (for example, Nationwide’s Pet Wellness Plan is not available in all 50 states). This could lead to a confusing experience for folks asking for pet insurance reviews from friends or family whose experience is outside of the area.

Insurance jurisdiction is based on the zip code you live in. Therefore, it’s possible for someone to receive a very different price on the same quote for pet insurance in New York compared to a quote on pet insurance in Texas, for example.

Factor in the many other variables that can impact the cost of pet insurance — including the pet’s breed, age, and medical history — and one can easily see how unreliable online customer reviews can be. The shopping experience often becomes quickly frustrating by not knowing which sources of information you can trust, let alone how to get the best insurance plan, causing some potential customers to pass on the product altogether.

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