The rapidly growing pet industry will face a new set of regulatory requirements if legislation from the California State Legislature moves forward.
Sponsored by California Insurance Commissioner Dave Jones, AB 2056 is said to promote consumer protection by “bringing uniformity to policy language and disclosures, increasing transparency in pet insurance policies.”
Particularly at issue are differing policy definitions of a “pre-existing condition,” something that helps generate the nearly 100 complaints the California Department of Insurance receives related to pet insurance every year.
According to the Department, “pet owners often purchase policies either not knowing that pre-existing conditions are not covered or the policy language is unclear as to what constitutes a pre-existing condition.”
The new legislation would standardize definitions of pre-existing conditions as:
“Preexisting condition” means any condition for which a veterinarian provided medical advice, the pet received treatment for, or the pet displayed signs or symptoms consistent with the stated condition prior to the effective date of a pet insurance policy or during any waiting period.
That protects insurers as well as consumers, says Geoff Margolis, deputy commissioner and special counsel for the Department.
“We wanted to make sure we developed a definition that protects the pet owner, but we also wanted to make sure the definition was fair,” Margolis told Insurance Business America. “Individuals are not able to game insurance companies by taking their pet into the vet, finding out it has a condition, and then buying insurance to cover that condition.”
The legislation also provides standardized definitions for hereditary disorders and chronic conditions.
Under the legislation, insurers will be required to “clearly disclose” any exclusions in the policy, on their website and in a separate disclosure form provided to the pet owner upon purchase of the policy. Even more importantly, the would-be law establishes a 30-day “free look” period, which allows purchases to terminate or rescind the contract within a month.
That protects consumers who may not understand exactly what they’re purchasing, Margolis said.
If passed, the legislation will affect roughly 10 or 11 insurers who write pet insurance in California. Various forms of the requirements have already attempted to gain passage, but had failed.
“Pet insurance is an emerging area of insurance that hasn’t been subject previously to specific regulation,” said Margolis.
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