Is Pet Insurance Broken?

Christie Keith of Davisburg, Michigan, first obtained pet insurance decades ago after facing two catastrophic veterinary bills of $10,000 and $14,000. One dog had cancer requiring an amputation; another had kidney failure and needed dialysis.

"It was a wake-up call," says Keith, who cashed in her 401(k) to pay the bills. "I've carried pet insurance since."

Keith, who is now 65, has four dogs and has insured her pets with other companies over the years but she settled on Nationwide Pet because it provided the most comprehensive coverage, including wellness exams, she says.

She was shocked when a friend and neighbor she had referred to Nationwide called to say the company sent her a letter telling her it was dropping her pets from coverage. "I called them thinking they would simply offer another plan," says Keith, "but that wasn't the case. They are completely dropping us."

Two of her dogs with pre-existing conditions may not be insurable anywhere, Keith says. "I may be facing an economic euthanasia decision and I thought I was protected," she adds. "I cannot believe Nationwide thinks this is acceptable or ethical based on promoting themselves as pet lovers."

Nationwide declined an interview request for this story, instead pointing to the press release it issued on June 14, 2024, that reads in part, "As pet lovers ourselves, we understand the emotions connected to the protection of our family pets." It attributes its decision to not renew approximately 100,000 policies to "inflation in the cost of veterinary care and other factors." The non-renewals, which will occur next spring and summer, "are not associated with the pet's age, breed or prior claims history," the company says.

Two-thirds of U.S. households, or 86.9 million, own a pet, the American Pet Products Association found in its National Pet Owners Survey of 2023 and 2024. The Insurance Information Institute says 5.7 million pets were insured in 2023, a 17% increase over the previous year. The first pet insurance policy was issued in the U.S. in 1982.

Forbes reports that 98% of people with pets consider them part of their family. This may be especially true for mature adults, as research shows they reap many benefits from having a pet, including providing companionship and relieving loneliness.

"The whole issue with pet insurance is that it is health insurance by nature, but property and casualty insurance by law," says Laura Bennett, founder of Embrace Pet Insurance, who now runs Gosling's Leap, a consulting firm in Cleveland. "Pets are considered property by law, lumped in with fur coats and other property."

Bennett, who isn't personally familiar with Nationwide's decision, says laws allow that company and other pet insurers to non-renew based on risks.

"Costs for pet insurance, as with human insurance, have gone up," Bennett says. "There are a number of reasons for that including the high rising cost of veterinary care, partially due to better, more expensive diagnostics, as well as inflation."

Another reason, she adds, is that private equity firms have bought up thousands of veterinary practices and hospitals, particularly special care hospitals. They often do not change establishments' names, leaving pet owners to think the facilities are still individually owned by local vets and making it easier for private-equity firms to raise prices in areas where they have acquired a significant share of all local vets.

The Atlantic has reported "veterinary-industry insiders" say that perhaps 30% of veterinarian practices in the U.S. now have large corporate owners, up from 8% about a decade ago. For specialty clinics, the total is closer to three out of four, the magazine adds. That may help to explain why spending on pet health care rose to about $38 billion in 2023 from $29 billion in 2019.

A recent Grand View Research report estimates that pet insurance revenue in the U.S. was $3.3 billion in 2023 and is forecast to grow at a compound annual growth rate of 17.5% from 2024 to 2030. Insurance on dogs accounts for almost 79% of the market.

Keith says she's been paying rising premiums, now more than $700 a month on her four dogs, and understands the economics behind the steady increases, but doesn't understand the decision to non-renew clients without giving them the option of choosing other policies.

Unlike the human health insurance market, where companies can no longer deny coverage because of pre-existing conditions, pet insurance has no such regulation. This lack of choice is one thing Bennett says makes the situation faced by pet owners so frustrating. "If your car or homeowner's insurance gets canceled, you can take your business someplace else," she says.

Bennett says this hasn't happened before in the pet insurance realm. "It's awful, really," she adds. "I feel sorry for the pet owners who have been impacted by the Nationwide decision."

Bennett says the 100,000 policy "non-renewals," which will take effect as pets' insurance policies expire over the next 10 months, represents about 10% of Nationwide's pet insurance policies.

"It's hard to know how it will play out," Bennett says. "Premiums have been going up and there has always been the option for pet insurance companies to drop their clients, but that is an element we never imagined anyone using. We will just have to see the reaction to the industry over this. I don't think it will be good."

Given the rising cost of veterinary care and how people generally feel about their pets, Bennett believes coverage is still beneficial.

"Pet insurance, like all insurance, is there when you need it," she says. "I still believe it's worth getting pet insurance as it may be very difficult to pay for expensive surgeries otherwise."

According to iCare Financial, a company that provides financing to patients for medical care, including veterinary care, two-thirds of the pets euthanized each week are killed solely for economic reasons.

That's what Keith is hoping to avoid. However, she has one older dog with so many health issues she doesn't believe she will be able to obtain insurance due to pre-existing conditions. Another dog may only be eligible for accident insurance.

If she cannot find affordable insurance, Keith says she will save the money she would have used to pay premiums and use that to pay vet bills. "Still, that will take time to build, so if anything happens soon, I won't have enough to cover it," she says.

Keith's insurance premiums are much more due to the level of coverage she has on her pets, but Marketwatch found pet insurance averages $60 a month for dogs and $32 a month for cats.

Keith, who has already signed one of her dogs up with Embrace, says although she paid into policies she will no longer have, she still believes pet insurance is worth it. But she adds that the industry should reconsider the way it assesses pets' risk as if they were cars, not living beings.

Bennett suggests researching pet insurance companies and weighing the coverage your pet may need. As with most insurance, premiums are expected to continue to increase. "Look at your policy and continue to examine what you're paying versus the deductible," says Bennett. "As your pet gets older, for example, you may not need certain coverage as you will not want to put your pet through the treatment necessary, depending on the prognosis."

Kerri Fivecoat-Campbell is a full-time freelance writer and author living in Louisburg, Kansas, just south of Kansas City. She is the author of the best-selling book, “Living Large in Our Little House: Thriving in 480-Square Feet with Six Dogs, a Husband and One Remote,” and administers a Facebook page, Living Large in a Little Town. Read More