Pet Insurance

Improvements in animal health care have led to an ever increasing variety of treatments available for your pets - coupled with spiralling costs per animal. We are now at the situation where animals can be saved (via expensive diagnosis and surgery) that perhaps would have been 'put to sleep' a couple of decades ago. As an animal loving nation this is no bad thing, but the costs of such treatments and the resulting after care can add up to huge veterinary bills.

One is told that the potential costs of such treatments can be insured against and many companies now offer such pet insurance schemes, but are they worth it, what do they cover and how likely are you to claim more than it costs in fee's?

Types of Pet Insurance

What's usually covered?

What's isn't often covered?

Read the small print

Average cost of a claim

What's the chance of a vet bill costing £500, etc?

How much will the policy cost?

Postcode lottery on Premiums?

Is it worth it?

Types of Pet Insurance

They are called different things by different insurance companies but the type of cover you can buy typically falls into one of three categories.

1. Annual - This is payed for either monthly or annually and covers treatments happening within 12 months of the policy being taken out. The amount covered is usually up to a limit on a per treatment basis. e.g. The policy states £1000 maximum per treatment. Bandy the cat has broken his legs and it cost £800 for lots of work. He gets better but later in the year has to undergo surgery to fix his ear back on after a territorial fight (legs still recovering...) costing £400. Both these are covered as neither exceeds the £1000 limit per treatment for the policy per year. This is the most common policy.
2. Lifetime Cover - These are best suited to long term or on-going illnesses such as diabetes, arthritis or genetic diseases in pedigree animals. There is a maximum claim limit for any treatments (treatments are lumped together here) per year and this limit is reset every year. Note the policy has to be renewed each year for this to be the case.
3. Maximum Amount - A bit like the lifetime cover in that there is no time limit but this policy has an absolute maximum amount payable out per illness which isn't reset per year.

Options 2 and 3 are usually more expensive than 1 but as mentioned are better suited to long term chronic illnesses or conditions which option 1 perhaps wouldn't cover. Some policies combine aspects of some or all of the options.

What's usually covered?

Not always, but usually. 

• Treatment costs - So, if Bandy was involved in a road traffic accident and needed an examination plus X-rays, surgery, medication and nursing back to health with a few days stay at the vets then this would be covered up to the policy limit (usually starting at about £3000 up to £7000 per treatment per year).
• Alternative Therapies - Many insurance policies will allow you to seek alternate therapy treatments for your pets. This may be as part of the normal per treatment budget or separately specified of the order of £500 to £1000. 
• Third Party Liability - This could be important as you could be liable for example if your dog caused a car accident. Some policies only cover dog's on this. The amount covered is enormous usually £1-2million.
• Kennel or Cattery Fee's -  If you have to go into hospital for a few days and no one else can look after your pet then the cost of the boarding will be covered up to a limit £200-£1000.
• Refund of purchase price - If your pet is stolen, goes missing or dies then you can get your purchase money back. It does seem quite macabre to treat pets as objects that have a financial value like TV's or carpets. Cover can be up to £2000 per animal and at that sort of amount you can start to see the financial loss as well as emotional upon the death of the pet.
• Missing Posters - If your pet goes missing some or all of the advertising costs to find it will be covered by the policy. This could amount to cover anything between £200 and £1000 per year. Some of that money can be used as a reward.

What isn't often covered? 

• Vaccinations -  e.g. Annual flu injections
• General Preventative Treatments - e.g. worming, nail clipping or other parasite treatments like fleas.
• Neutering - Unless medically required for an other reason you cannot usually reclaim the cost of routine neutering or spading of dogs and cats.
• Pre-Existing Illnesses - If you know your pet has an illness prior to taken out the policy its best to admit it though chances are it won't be covered by the new policy.
• Becoming Sick Too Soon - If you pet becomes ill in the first couple of weeks of the policy then that will not be included, nor will any subsequent complications and longer term treatments of. This initial period may be anything up to one month after the policy starts.
• Your Pet Is Too Young - It just may not be covered.
• Foods - Any specialist diets or foodstuffs even if prescribed by the vet.
• Dental Treatment - Unless needed through injury.
• Excess - Could be anything from £50 to £100 for every different treatment your pet needs. Third party liability excess is higher but then the potential amount owed is a lot more.
• Euthanasia - Putting the animal 'to sleep' isn't covered nor are any remains disposal costs.

Oh and it's likely that your dogs and cats need to have had all their jabs before the policy starts to be able to make a claim for any subsequent illness.

These are just examples and sometimes they are covered depending on the policy. It's really just a matter of being aware of how complicated the TOC's are and... 

Read the small print

The key thing is to read the terms and conditions very carefully if you want to be clear about what is and isn't covered by the policy. This is especially true when trying to compare policies. Don't assume that because you are using an insurance comparison site that they are comparing exact like for like policies. At the end of the day these sites compare a series of fixed pointers in the policy, like maximum amount claimable per treatment per year and come up with a ranking based on price. It's then up to you to examine each policy closely to see if it covers what you want.

Average cost of a claim?

Is there any data available that allows one to make a more objective judgement about the financial justification of taking out pet insurance as opposed to maybe just saving the money in a savings account? Lot's of insurers quote various scary figures to convince you to sign up and here is a quick survey of some of them to try and get an idea of the average claims policy holders make.

• Petwise -  "1 out of every 2 pets require veterinary treatment each year following injury, illness or accident." and "The average cost of a visit to the vet is over £130"
  • Therefore, average yearly cost of vet trips £65.
• Pets4Homes - "The average cost of a visit to the vet is over £280"
  • Is it?
• MRL - "average cost of a visit to the vet is currently over £200"
  
  • But they use the Petwise data above which says different?
• CSIS - "The average cost of a visit to the vet is over £220"
  • Hmmn, using Petwise data again?
• C4/Mintel 2001 - "Average cost of treatment for illness or disease was £80, compared with £94 for treatment to injuries"
  • Compensating for vet price inflation (est. 10%) that means average of £142 and £167 per year now, ball-park with the Petwise figure.
• Tesco - "average emergency visit to the vet will set you back around £300" and "Each year 1 in 3 cats and dogs fall ill or are injured"
  • So about £100 average per animal per year then?
• Scotsman - "35 per cent of Tesco policyholders have to claim on their policy at least once a year" and "average vet bill is £300" and "one in ten claims for vet fees is in the region of £750 to £2,500" quoted using Tesco data
  • Therefore, 3-4% of policy holders have a bill of greater than £750 - finally useful data!

What's the maximum a vet's bill might be over a pets lifetime?

This final quote allows us to back-calculate the likely data distribution Tesco have and look at the probability of making differing value claims during the animals lifetime.

Assumptions:

1. Log normal distribution of claims
2. 35% chance of one claim per year
3. Average claim is £300
4. 90% of claims are less than £750
5. Use a binomial distribution (claim or no claim) to work out likelihood or claim greater than X £'s over pets entire lifetime.

Assuming the pet lives for 10 years (about average dog) then it is found (based upon the above assumptions and assuming quoted Tesco data is correct) that you have

• 38% chance of one vet's bill of more than £500 over the 10 year period
• 25% chance of one vet's bill of more than £750 over the 10 year period
• 14% chance of one vet's bill of more than £1000 over the 10 year period
• 4% chance of one vet's bill of more than £1500 over the 10 year period
• 16% chance of two vet's bill of more than £500 over the 10 year period
• 4% chance of two vet's bill of more than £750 over the 10 year period

The data included all pet species and so a cat will likely work out cheaper than a dog and a large dog will work out more expensive.

Remember these figures use the Tesco data which suggested a far higher average claim figure than Petwise. If an insurer reading this wants to give me their entire dataset of claims I will be happy to re-run the analysis :)

Policy Costs

Now we have an idea of how much your average pet will cost in vet treatments over its lifetime how much do the policies themselves cost per year? You really need to examine the small print to compare properly but here we've looked at the top policies (gold or equivalent) from several insurers to see how much it will typically cost.

Assuming

• Cat or Dog
• Male
• One year old
• Castrated (if asked)
• Had all injections (if asked)
• Been micro-chipped (if asked)
• Lives in urban environment in East England
• Purchase cost £25
• Tabby for cat or medium size mixed breed (mongrel) for dog

Insurer	Excess	Amount Covered per Treatment	Annual Premium - Cat	Annual Premium - Dog
Tesco	£50-60	£4000	£73.56	£121.56
Sainsbury's	£50-75	£6500	£104.58	£160.16
RSPCA	Unknown	£6000	£97.19	£157.62
Debenhams	£50	£5000	£110.02	£103.79
Petwise	£50	£5000	£146.38	£137.91
AXA	£50	£7000 per policy	£93.33	£147.30

Data valid as of 01/12/2007

Both Petwise and Debenhams ask almost identical questions in the same format, yet Debenhams are underwritten by AXA and Petwise by Fortis. The fact that Debenhams is offering dog insurance for less than cat is bizarre! Sainsbury's and RSCPA both appear to use AXA and hence the similar prices. Tesco are underwritten by UKI and just seem to be cheaper but you really need to compare the policies to get a proper comparison.

Postcode Lottery on Premiums?

How much difference does it make where you live in the country to how much you will pay in premiums? Here we just look at data for a cat (as above) using Petwise quick quote for speed (didn't get much difference when went for full-quote option in trial)

Location	Postcode	Annual Premium
Boston, Lincs	PE21	£126.76
Plymouth	PL4	£146.38
Birmingham	B10	£234.70
Oxford	OX4	£234.70
Central London	NW1	£401.52

Data valid as of 01/012/2007 

How much difference!! London is of course more expensive but are vet's bills really 3 times more expensive than in Boston or nearly twice as much as in central Oxford? The London premium (good choice of word...) for a £25, 1 year old, short haired tabby cat is more than the fully comprehensive cost of insuring my estate car!

I also checked with Debenhams and the price for a cat rose from £110 to £298 between Boston and Central London - 270%.

I also checked AXA and the price for a cat rose from £93 to £178 and for a dog from £147 to £284 between Boston and Central London - 191% and 193%.

Finally is it worth it?

There is always the peace of mind that cannot be easily calculated but that aside the data that Tesco showed suggests it likely that in the lifetime of your pet you will face substantial (several hundred pound) vet bills that are not easily planned for.

Personal Opinion: When I started writing this article I thought it was a scam to scare you into buying insurance and in some parts of the country this definitely appears to be the case! However, for premiums between £120-160 per year  I would definitely insure a dog - at the very least it gives you third party liability if the dog is involved in a car accident. Plus dogs are more likely to survive RTA's - all the cats we had as kids were almost instantly killed if they were hit by a car. I would also look at reducing my premium by increasing my excess (if possible). Paying a £200-500 bill would hurt but not put me in a debt situation, but £500-1000 plus would be much harder to swallow. I would also consider buying the RSCPA one if only because it uses its commission (20% or at least £20-30 per policy per year) to help the welfare of other animals in its care.

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