With more than 62% of American households owning a pet, and just 0.3% of the cat and dog population insured in recent years, pet insurance is an industry that is constantly changing as veterinary costs continue to rise.

According to Embrace Pet Insurance, pet insurance is a market that continues to grow, too - written premiums grew at a compounded rate of 18% between 2003 and 2008.

The American Pet Products Association projected pet owners would spend $12.2 billion for veterinary care in 2011. That number grew from $11 billion in 2010 and $8.2 billion in 2006.

As with human health care costs, animal health care costs continue to rise. For cats, owners spent an average of $423 on surgical veterinary visits in 2010, up from an average of $278 in 2008.


Marketplace evolution

Ten years ago, very few people even talked about pet insurance, says Charles Nebenzahl, CEO of Lakewood, N.J.-based PetAssure, a discount veterinary program.

Back in 2003, "pet insurance was primarily a couple of players who didn't do it right, and those who knew about pet insurance had a negative perception of it," he says. "We've seen a lot more players in the market. Some of them are brand names, [but] the perception [still exists] maybe it's too expensive, maybe [it's overpriced], but, 'Hey, this is something I want to look at.' ... People are looking at it."


Off-cycle enrollment

Employers are also looking to offer pet insurance in new ways, including off cycle, says JoAnne Novak, vice president of new business development at Canton, Ohio-based The Hartville Group, Inc., which is a strategic partner of the ASPCA, and sells pet insurance under the ASPCA Pet Health Insurance brand. Employers are interested in offering it off cycle and are interested in more off-cycle start dates than ever before, she says.

Further, requests for proposals are being grouped together with more ancillary benefits.

"It used to be pet insurance was a one-off request. Now I'm seeing a trend where we are looking to add pet insurance along with" other plans, such as pre-paid legal, and auto and home, Novak says.

That builds on a greater interest in ancillary voluntary benefits in the workplace and offering employees more of a choice about where they can spend their own money, she explains.

VPI Pet Insurance is also seeing a greater interest in the product, says Deana Single, director of group accounts at the Brea, Calif.-based company.

"From a voluntary benefit standpoint, it's a huge growth area for us," she says. "There's greater interest from employees as they take a targeted look at their benefits and look at their coverage to make sure everyone is covered."

According to the American Veterinary Medical Association's vital statistics report, at year end 2011, 44.9% of cat owners and 18.7% of dog owners did not take their pets to a vet. Over one-fifth (21.5%) of cat owners and 29.3% of dog owners who did not visit a veterinarian said they could not afford it.

"The affordability factor is critical," said Dr. Mark Russak, president of the American Animal Hospital Association. "And I think if we make it more affordable for clients, then they're going to tend to bring their animals in."


Word of mouth insurance

Most purchasers of pet insurance have had a bad experience or know someone who did in relation to having high vet costs.

Pet insurance is "word of mouth insurance," Single says. "Our calls spike after the family BBQ on Memorial Day and after family vacations. Like teenagers, [people] think nothing will happen to their pet, and when something does it's too late to get insurance, so they vow that the next time they will get insurance."

While not every employee has a pet, precluding an entire population from purchasing the insurance, it is still a type of feel-good insurance for employees.

"It shows the company cares about pets' health, and pets are part of the family," says Novak.

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