Pet health insurance functions like traditional health insurance, but the product is actually a form of property and casualty insurance since pets are legally classified as property. These insurance policies provide coverage for accidents and illnesses for family-owned pets, and may also cover wellness care such as vaccinations, heartworm testing, and spay and neuter procedures. Because pet health insurance has a dual nature, underwriters incorporate quasi-medical underwriting when formulating their pet insurance policies.

What is pet insurance underwriting?

Underwriting is the process an insurance company uses to determine their risk in offering pet insurance coverage. In addition, underwriters are responsible for discovering pre-existing conditions that they will exclude from your pet’s policy. Pet health insurance companies typically outsource their underwriting, which involves using computer software to calculate the risk variables, to one or more underwriting companies.

Pet owners looking for a pet insurance company should always research the companies underwriting the policies. The underwriter is responsible for paying claims, so their financial health is important. Places you can research pet insurance underwriters include:

●      A.M. Best’s Website — This rating website was created by the largest, most established insurance rating and information agency, and provides information about the underwriter’s financial strength rating, as well as their outlook rating. 

●      Better Business Bureau (BBB) — The BBB rates companies using an A+ through F letter grade system that indicates their confidence that the business is operating in good faith and will resolve customer concerns filed with the Bureau.

●      National Association of Insurance Commissioners (NAIC) — Insurance underwriters in the United States are regulated by individual states rather than the federal government. Pet owners can check on the NAIC website to see if the underwriter is licensed for business and if they’ve had any complaints filed in a particular state. 

When researching an underwriter, use the underwriter’s name, as opposed to the insurance company. The name can typically be found on the insurance company’s website.

Underwriting rating factors

Before the Affordable Care Act went into effect on January 1, 2014, insurance companies could deny coverage for pre-existing conditions, charge more for certain characteristics, and subject people to waiting periods. Pet health insurance is similar and allows underwriting rules that reduce the risks for pet insurance companies. All underwriters enforce a mandatory waiting period before pet insurance becomes effective and claims are eligible for reimbursement.

Underwriting formulas are different for every pet insurance company, but most commonly involve multiplying a base rate by several rating factors. Some companies use a simple formula involving only five factors, while others incorporate many more. These rating factors include:

●      Age — Younger pets are considered less risky and receive a lower rating than older pets. For example, an age rating may start at 1 for pets ages 2 to 11 months, and increase to 4.5 for pets older than 20. 

●      Species — In general, cats are less expensive to insure than dogs, and birds and exotic pets may be pricier. One company rates dogs by a factor of 1, and cats by 0.55.

●      Size or breed — Some companies use size as a factor, while others focus on specific breeds. Cats and small dogs are at lower risk than large- and giant-breed dogs, so they are given a lower rating. When a breed is the focus, mixed-breed dogs are usually rated lower than purebred dogs. One underwriting company classifies dog breeds into 10 breed groups. Group one, which includes small breeds such as chihuahuas and Shih Tzus, has a 0.7 rating factor, while Group 10, which includes breeds such as rottweilers and Doberman pinschers, has a 2.75 rating factor. 

●      Gender — Male pets are more likely to get injured, and typically cost more to insure than female pets. One underwriter gives male pets a 1.05 rating, and female pets a 0.95 rating.

●      Spay/neuter status — When companies consider a pet’s spay/neuter status, the rating typically changes only for intact females who are bred, to cover the medical costs associated with pregnancy and delivery. One underwriter rates pregnant females at 1.733 and all other pets at 1.

●      Weight status — Some companies offer a discount to pet owners as an incentive to keep their pet at a healthy weight to reduce obesity-linked medical costs.

●      Geographic location — The geographic factor represents the relative local veterinary care costs for a specific area. Most companies assign a rating for every zip code in every state.

●      Deductible — The lower the deductible, the higher the rating factor. One underwriter rates a $100 deductible as 1, and a $1,000 deductible as 0.5.

●      Continuous enrollment — Some companies provide a discounted rate for pets enrolled continuously for 12 months. This discount is typically relative to the pet’s age at enrollment.

●      Insurance payout — A higher payout has a higher rating factor. One underwriter assigns a 1.05 rating for a 90% payout and a 0.55 rating for a 50% payout.

●      Annual maximum — Some companies set annual maximum payouts. One underwriter assigns a 0.70 for their lowest maximum payout of $1,000 and a 1.67 rating for an unlimited payout.

●      Exam fee coverage — Policies that cover exam fees have a higher rating. One company rates a policy that includes exam fees at 1.2, and 1.0 when exam fees aren’t covered.

●      Recovery and complementary care — Extra coverage that includes non-traditional care, such as acupuncture and rehabilitative therapy, has a higher rating. One company rates this optional coverage at 1.137, and policies not including this care at 1.

Knowing the underwriter for the pet health insurance company you choose is important to ensure the company is in good financial health since they are responsible for paying your claims. Research multiple pet health insurance companies and their underwriters before enrolling your pet.