As Pet Insurance Gains Pup-ularity, NAIC Forms New Working Group

Faegre Drinker Biddle & Reath LLP
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Faegre Drinker Biddle & Reath LLP

Calling all pet parents! At least 20 companies currently provide pet insurance, but there has traditionally been little regulatory supervision surrounding these products — until now. The National Association of Insurance Commissioners (NAIC) has recently announced that it is developing a new model law for pet insurance, which will likely be released later this year. A primary focus of the NAIC is to analyze and consider the extent to which veterinarians should discuss pet insurance with their clients without being licensed to sell the insurance. As described, the model law will attempt to set an industry standard for whether someone suggesting pet insurance to a pet owner must be licensed to sell insurance. The American Veterinary Medical Association has suggested specific guidelines on this front, advocating that veterinarians and other professionals should be permitted to discuss at least the availability of pet insurance without being licensed as an insurance broker.

While pet insurance is not new, it is increasing in popularity. As the types of insurance products offered continue to diversify, there is little surprise that pet insurance is among those lines of insurance forecasted to steadily increase over the next few years — especially considering that approximately 85 million people in the United States own at least one pet. And as pet ownership continues to rise — coupled with an increasing American mindset that “pets are family” — the street for the industry growth is already paved.

In 2019, the NAIC issued an analysis of the history and development of pet insurance in this country. Pet insurance first was promulgated here in 1980, and the industry has steadily grown. In 2017, for example, pet parents paid approximately $1 billion in pet insurance premiums to protect their precious family members. These premiums covered approximately 2 million dogs and 400,000 cats during that year. It is anticipated that premiums could top $10 billion by 2025.

Although the NAIC model law will not be released until later in 2021 — and states are not required to adopt the law, or may choose to only adopt portions of the model statute — the creation and release of a model law on pet insurance will be the most significant regulatory occurrence to date for the product. We will keep a paw on the impact that the forthcoming model law (and its progeny) will have on pet insurance products, policyholders and insurers in the near future.

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