The Great Insurance Gamble

The history of insurance begins well before the rise of capitalism when medieval merchants decided to hedge their bets against loss and theft. The modern insurance industry dates from the rise of industrialism in the eighteenth century, with London leading the pack. The first animal insurance policy is generally credited to Claes Virgi who founded the Länsförsäkrings Alliance in Sweden to insure horses and livestock in 1890. Sweden also created the first dog insurance policy in 1924. Britain didn’t follow suit until 1947, but now has the second-highest number of animals insured covering 23% of the non-equine companion animal population. By contrast, only 0.7% of the similar population of companion animals are insured in the US.

The principal behind insurance is of course a communal gamble. The insured population provides the pool of resources from which the members can claim according to the rules of the insurer. Thus, the scheme would not work without the element of a gamble in that paying in could be worth it but, from the insurer’s point of view, knowing that only a minority will claim otherwise they would make no profits and the scheme would eventually be bankrupt. Insurance of any sort is therefore constant arms race between providing enough to make the scheme seem worthwhile but not paying out too much so that the scheme collapses.

Companion animal insurance has also led to another “arms race” in that it has made available treatments that could not be dreamed of, even for humans, a few years ago but with a consequential rise in premiums to cover the huge cost of diagnostic technology, surgical interventions and pharmaceuticals as well as behavioural services and complimentary therapies such as hydrotherapy and TTouch. This is possibly beginning to lead to a decline in the number of people taking out health insurance as schemes become unaffordable and the risk of not being insured seems a better option.

Insurers use a variety of means to assess the likelihood of paying out on any given claim. This can lead to a wide variation in the rates of insurance as well as the excess levied (the amount that is payable by the insured person before they can claim on their policy). Excesses are fair in that it would be untenable for insurers to deal with comparatively petty claims but unfair in that they do not (and possibly cannot) take individual’s circumstances into account. Excesses can also be gambled on as some policies allow owners to choose the excess which will of course be reflected in the overall price. Quoting different rates according to breed is also not unreasonable. The owner of a brachycephalic dog for instance, is likely to make far more claims than the owner of a crossbreed with hybrid vigour. Risk also increases with age, so policies tend to get more expensive as the animal ages regardless of any claims, although this is sometimes hidden in policies that even out the cost across the duration of the policy. As with other forms of insurance, the comparative wealth of the population where the purchaser lives will affect the excess rates even if the individual has a low income as do the number of claims made in an area.

I myself am a typical example. Insurance rates for animals where I live are more than double that of other parts of the country. Although the exact details of how insurers work out rates are considered commercially secret, living in an area where the population is relatively affluent means that the locals are more likely to buy an expensive pedigree dog in the first place and more likely to buy insurance to cover fees that include referral services and para-professionals such as behaviourists. They may be better informed about the availability of such services and of course, more likely to have access as the services will be located where the clients are. This made insurance for my pedigree dog (bargain basement rescue!) out of the question for me. The sum that I was quoted for a 3½ year old dog represented 4% of my monthly income. Had I been earning the median income in the year in which I obtained the quote for the city in which I live, it would have represented just 2% and of course, even less for someone living in an affluent area on a much higher salary than the median. Consumer Intelligence data obtained from quotes between May 2017 and May 2018 found that the average annual premium for dog insurance costs UK owners a third of the amount that I was quoted in 2011.

It isn’t just dogs that cost more to buy initially that will affect the rates that insurers charge, but the relative availability of dogs from puppy farms and back street breeders who are extremely likely to need expensive care, as well as the popularity of severely brachycephalic and achondroplastic dogs amongst young, relatively affluent people. The more that in-breeding affects the supply of all dogs and the more that poorly bred dogs are crossed to provide a dog with “oodle” or “uggle” at the end of its name, the more expensive insurance will be for everyone. Obviously the type of insurance will affect the cost and, in general, you gets what you pays for. Accident only is probably the biggest gamble of all as it won’t pay out for illnesses that are the more-likely to occur. Time-limited insurance often comes as a shock to owners when their “cheap” policy turns out only to cover them for 12 months and their dog has a chronic problem. The nest gamble is to decide with on-time limited insurance what the maximum cap in any 12 month period per condition should be. A friend maxed out her insurance in a couple of weeks after her dog was bitten by an adder. Lifetime insurance is the most expensive up front but provides the most comprehensive cover as the cap is re-applied annually. It is the most effective for chronic conditions typically seen with age or in dogs with a particular susceptibility die to in-breeding. Premiums usually increase annually and that can be sharp as the dog enters higher age brackets. Companies also raise the excess which can be as much as 35% of the claim with a 9 year old dog. Not a problem if you have a giant dog who may not reach that age anyway, but a consideration for a breed or cross that may get well into double figures. Puppies are also more expensive to insure than adolescents as they are more likely to be accident-prone and as an effect of the prevalence of sickly puppy-farmed dogs. In addition, not all policies cover all conditions. Many consider essential dental work such as tartar removal to be “cosmetic” for instance. Not all pay for para-professional services such as hydrotherapy or behavioural consultations.

One of the litany of complaints levied at vets is that the “first question that they ask” is whether the animal is insured. I would be willing to bet that the actual first question is more along the lines of “What seems to be the problem?” However, the perception is that all vets are profiteering and will automatically offer the most expensive option if they know that the animal is insured. How many owners consider that the vet may temper the options according to whether they think that the owner will be able to afford the treatment so as not to make they fret if they cannot afford a more complex alternative? No vet should offer more intervention than is deemed necessary to treat the presenting condition, although of course, they may offer less for clinical as well as financial reasons, with the option to progress if no improvement is seen. Of course vets want to use their skills to give animals in their care every chance but they also have to deal with the real world and know that cost is a consideration in addition to welfare. Opinion among vets and owners differs widely as to how much intervention is desirable.

Having just lost a dog myself, I know how agonising it can be to have to weigh up costs as well as clinical and ethical considerations. That is not just the cost of treatment but the cost of aftercare following intervention including time that may be lost from earning or to look after a very sick dog or to pay back a loan. There are no guarantees that intervention will be successful but the cost will remain to be paid and may affect the ability to own another dog. The only illness that my dog had in the 7½ years that he lived with me was the terminal one that was diagnosed a few weeks before his death which was well within the bounds of the average for his breed. So, in the event, the cost of insurance would not have been worth it. Some of that was due to luck and some to judgment in the decision to buy that dog in the first place and the care and training that he had that made him less prone to accident, illness and disease.

Clinical and ethical considerations would always come first for vet (save for the rare criminally irresponsible individual) and owner but it would be untrue to pretend that money is not an issue for both. As to insurance, it may well be that the balance tips away from favouring insurers if fewer people can afford the products. In that case, it is possible that insurers will offer ever-more complex products in which case – caveat emptor.

At the end of the day, animal insurance has been beneficial to owners, animals and veterinary and human science in general but it, like owning a companion animal is a relative luxury that, like all luxuries, must be weighed in the balance before undertaking.

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