Violations Rampant in Pet Insurance Industry
Protecting your furry friend isn’t as simple as it seems
By Nic F. Anderson
More Americans have become pet owners in the past decade — spurring a business boom for the rapidly growing animal insurance industry, with close to 5 million pets insured for a total of $3.2 billion in premiums paid during 2022.
But a NYCity News Service examination of state insurance commission records shows at least 17 states across the country assessed at least $1.5 million in fines for violations by the pet insurance industry since 2013 — and ordered close to $5 million in restitution to customers.
Among the states that found repeated violations is Washington state, where the insurance commissioner has repeatedly cited Trupanion Inc., a publicly traded insurance company that is among the largest pet insurance providers in the country.
And Trupanion is far from the only insurer that’s been cited, with companies around the country paying millions in fines and restitution in recent years.
Trupanion declares on its website that it stands “out from the pack by putting pets first.” The Seattle-based firm is growing rapidly, selling pet insurance in the United States and around the world — bringing in $905.2 million in revenue in 2022, according to its most recent annual filing to the U.S. Securities and Exchange Commission.
At least 10 states have cited Trupanion and its subsidiaries for violating local insurance and fraud laws over the last decade in cases involving thousands of pet insurance policies. The violations range from having unlicensed workers sell insurance, improperly paying fees to veterinarians for encouraging pet owners to buy Trupanion policies, and charging different rates to different customers.
Laura Bainbridge, a Trupanion spokesperson, said the violations the NYCity News Service inquired about “pertain primarily to a single issue, specifically, whether our call center agents should be required to hold insurance licenses. While we corrected this issue years ago, resolving such matters with state regulatory bodies can take time. We are fully committed to learning from these experiences and implementing necessary changes to prevent similar issues in the future.”
Multiple Fines
Trupanion operates through different subsidiaries and brand names, including Trupanion Managers USA Inc. and American Pet Insurance Co.
In 2019, the Washington State Insurance Commission fined Trupanion Managers USA $100,000 for paying veterinary clinics more than $100 for customer referrals. Washington state insurance laws prohibit insurers paying any recipient more than $100 per year for referrals, according to the commission.
Trupanion Managers USA has also been fined several times from contracting and using unlicensed and unaffiliated “territory partners” — people who sell insurance policies. The company describes them as “boots on the ground” who travel and make dozens of visits to pet hospitals each week to help promote Trupanion pet insurance.
In 2019, the state fined Trupanion and at least five unlicensed partners who sold “thousands” of pet insurance policies, collecting “nearly $245,000 in commission,” between 2015 and 2018.
Two years earlier, Washington fined Trupanion Managers USA $150,000 for selling nearly 3,300 pet insurance policies — worth about $3.3 million in revenues — through unlicensed territory partners and call center employees.
The state also fined American Pet Insurance Co., a Trupanion subsidiary, $250,000 in July 2016 for charging customers incorrect rates, mishandling complaints from consumers and mishandling policy cancellations, “amongst other issues,” according to the state insurance commission.
In that case, the state suspended $100,000 of the fine after American Pet Insurance Co. promised it would comply with state law. But four months later, the state reimposed $10,000 of that fine after finding American Pet Insurance continued to charge incorrect rates to policyholders.
At least nine additional states — including New York — have also cited Trupanion and its related companies for violations in the selling of pet insurance policies, according to an analysis of public documents compiled by the NYCity News Service.
Maine reached a consent agreement with American Pet Insurance in 2019 after determining unlicensed brokers sold hundreds of policies.
Texas found the same issue with Trupanion Managers, resulting in a 2021 consent order in which the company agreed to pay the state $75,000.
In Vermont, not only were dozens of unlicensed brokers selling policies for Trupanion Managers and American Pet Insurance, but dozens of unlicensed adjusters were processing medical claims filed by pet owners, according to a 2019 consent order.
Trupanion’s spokesperson said in a statement that “our alignment with regulatory authorities stems from our shared goal of delivering maximum value to pet owners while being fair and transparent. Most importantly, we want to reassure pet parents that we’re here to protect their pets throughout their lives, ensuring they receive the necessary care in times of illness or accidents.”
Fixing Laws
Meanwhile, more pet owners are buying policies, with industry-wide growth reaching more than 20 percent a year in the US in 2022.
The average cost for covering a dog for accidents and illnesses is about $640 a year.
That’s helped propel an industry that brought in $3.2 billion in revenues during 2022.
About two percent of American families have insured their pets for covering checkups, surgeries, cancer treatments and other medical treatments. The industry hopes to increase that number, and reach higher levels as in Europe and Australia.
According to Bainbridge, over the last two decades, Trupanion has “helped protect over 3 million cats and dogs and paid out over $2.5 billion in veterinary invoices on behalf of our pet parents.”
With this growing market, Mike Kreidler, the Washington State commissioner, has said he wants to improve oversight of the industry.
“I’m always concerned when those in the insurance industry commit multiple and repeat violations,” Kreidler said in 2019, according to a press release from his office.
“I’ve worked closely and at length with Trupanion and American Pet and I expect their business practices to improve going forward. These violations are not difficult to fix and these laws are fairly straightforward to comply with.”
‘Read the Fine Print’
In addition, his office said at the time that it was working with the National Association of Insurance Commissioners on a model law to better regulate pet insurance.
“Consumers should closely read the fine print when they are thinking about buying pet insurance,” Kreidler said in the 2019 statement. “The desire to protect pets is understandable, but many of these products exclude common conditions found in certain pet breeds. We’ve also found that premiums increase and benefits decline as pets age.”
Kreidler’s office did not respond to requests for comment for this story.
The National Association of Insurance Commissioners adopted a model law in 2022 that it recommends for states to regulate pet insurance. That guidance included barring insurers from dismissing previously covered pet health issues as a “preexisting condition” during renewals, mandating that insurers clearly communicate a policy’s fine print up front and giving pet owners 15 days to ask for a refund of a new policy.
Maine adopted the recommendations in large part for its pet insurance law that year.
New Jersey is also considering changes to its pet insurance laws, including a 30-day return policy on new plans and a clear explanation of plan exclusions, including for preexisting conditions. They’re also considering barring pet “wellness” plans from being sold as insurance.
Operating Without a License
Trupanion is far from the only pet insurance company in the country to be cited in recent years for violations.
In Iowa, the insurance commissioner found Independence American Insurance Co., a major pet insurer, had been selling pet coverage policies in the state for seven years without a license. The company — which brought in more than $500,000 from premiums from 2012 to 2019 — was ordered to stop selling insurance until it got a license in Iowa, and to pay a $7,000 fine, according to the Iowa Insurance Division.
The most egregious violations were overcharging consumers through rate increases and not disclosing the increases to their customers.
Arizona found in 2017 that policies were being offered by PurrfectWags in Glendale, Ariz., particularly on the internet, even though the company was not certified in the state as a pet insurer.
New Hampshire’s Insurance Department found that Eusoh Inc., a California company, was selling its pet insurance policies even though it was not licensed in the state. The agency sought a cease-and-desist order in 2022.
Cracking Down
Pet insurers have also caught the attention of state regulators for other violations.
In Rhode Island, the state Department of Business Regulation found United States Insurance Co. and Spot Pet Insurance Services were improperly trying to induce potential pet insurance customers by offering $25 Amazon gift cards, and was ordered to stop.
Back in Washington state, the insurance commissioner found United States Fire Insurance Co. policies were sold improperly under the name of ASPCA Pet Health Insurance, an insurance product affiliated with the American Society for the Prevention of Cruelty to Animals, a well-known nonprofit dedicated to preventing animal cruelty.
But even though the ASPCA allows insurance policies to use its name, Washington state said the move misled consumers because United States Fire Insurance Co did not properly disclose the distinction to customers.
United States Fire Insurance was fined $50,000 in 2016 for not properly disclosing the underwriter, as well as for using unlicensed brokers to sell pet insurance and for charging the wrong rate. The insurance commissioner suspended half of the fine as long as the company followed a compliance plan to fix the problems. But in 2019, the rest of the fine was reinstated because the state found it had not corrected the violations.
In 2019, the state also found Healthy Paws Pet Insurance & Foundation of Washington was selling other companies’ pet insurance policies, but deceptively advertising them as their own policies in emails and on its website. The firm also offered discounts that the insurance commission deemed discriminatory, saying the lower rates were not offered to all consumers. The company was fined $20,000, documents show.
Instead of selling its own policies, Healthy Paws was actually hawking the pet insurance of two other firms, ACE American Insurance Co. and Indemnity Insurance Co. of North America, according to state regulators. Those firms are part of the Chubb Corp. of N.J.
The Washington insurance commission found the two Chubb companies had overcharged 18,000 consumers in the state for nearly five years. The agency fined them $950,000, and ordered them to repay customers $4.7 million for the overcharged premiums — among the largest penalties levied against pet insurers by Washington state. The commission also set up a compliance plan for the companies, and suspended $200,000 of the fines, contingent upon whether it fixed the problems.
“We found tens of thousands of law violations among the two companies,” Kreidler said in a 2020 press release. “The most egregious violations were overcharging consumers through rate increases and not disclosing the increases to their customers.”
