New Pet Model Act Passed By NAIC

In addition to recently issuing its In-Depth 2021 Property/Casualty Market Share Data Report earlier this summer, The National Association of Insurance Commissioners (NAIC) members also announced this month the passage of its new Pet Insurance Model Act.

“This model law establishes clear rules for the sale of pet insurance and provides important disclosures to pet owners interested in purchasing this product,” said Beth Dwyer, Superintendent of Insurance for the Rhode Island Department of Business Regulation in commenting on its passage. “Now, it is up to the states to see if they would like to adopt or modify the model law for this regulatory framework to be in effect.”

According to the NAIC, pet insurance has exploded over the past couple of years, seeing a 30.5% increase in total in-force premiums from 2020 to 2021, to a total of in-force premiums of approximately $2.8 billion as opposed to $2.175 billion in 2020. This means that over 4.41 million pets are now insured across North America, up 27.7% from the over 3.45 million pets insured in 2020, according to the North American Pet Health Insurance Association.

As a result of this unprecedented increase, the NAIC’s new Act aims to establish the appropriate regulatory standards for the pet insurance industry in general.

Key elements of the model act

As part of this aim, the new Act encompasses four key elements:

Consumer Protections: The model codifies several consumer protections related to policy renewals, required disclosures of waiting periods, policy limits, conditions, benefit schedules, and more. Robust disclosures allow consumers to affirmatively choose the policy that is best for them in a world with dozens of available options.

Preexisting Conditions: The model limits how insurers can deny pet insurance claims related to preexisting conditions of covered pets. And the onus is put on the insurer to prove those preexisting condition limitation applies.

Wellness Programs: The model explicitly requires insurers and their producers to clearly differentiate pet wellness programs from insurance policies to help eliminate consumer confusion between insurance policies and non-insurance wellness programs.

Training Requirements: The model codifies training for insurance producers to ensure that producers are appropriately prepared to present information to consumers.