Australian pet insurance can be a confusing web of tricks and traps – yet it can still provide valuable protection to many pet owners.
Virtually non-existent 15 years ago, pet insurance has rapidly grown into a massive industry, providing cover for 350,000 dogs and cats across Australia.
Pet insurance has become widely adopted because it gives pet owners a predictable way to manage pet care costs and avoid the bill shock that can come from an unexpected trip to the vet. It also provides tremendous peace of mind, helping pet owners avoid the need for gut-wrenching decisions about purchasing high priced care.
But watch out – pet insurance is a hugely profitable product, with some of the highest profit margins in the insurance industry. Many of those profits come for a deep bag of tricks that are widespread across the industry.
Knowing what those secret tricks are – and how to avoid them – will help you land sound protection for your furry best friend that is friendly to your wallet too.
Secret #1 – The Illusion of Competition
Start shopping for pet insurance, and you may be surprised to discover that there are more than 20 brands to choose from – finally an Australian market with a bit of competition!
Take a look at the fine print (and you should get used to doing that a lot), and you’ll quickly discover that choice is just an illusion. There are actually only two pet insurance underwriters in Australia – Allianz (which backs the PetPlan and Guide Dogs brands) and Hollard/Petsure (Woolworth’s, Medibank, Bow Wow Meow, and pretty much everyone else).
The pet insurance brands are all effectively marketing companies. All of the insurance, claims processing and administrative work is performed by these two big behemoths. The good news is regardless of which brand you choose, policies are backed by two of the largest insurers on the planet.
Top Tip: Compare pet insurance plans to find the cheapest plan and beat them at their own game!
Secret #2 – Some Insurance Plans Pocket Triple the Commissions of Others
Like most insurance products, every pet insurance plan includes a commission component as part of its premiums, and these commission rates must be (somewhat) disclosed in the product disclosure statement (PDS) that is provided to all prospective customers.
Do a little digging into the PDS of each insurer, and you may be surprised to find that with some plans, fully half of your monthly payment (excluding taxes) goes towards commissions!
Top Tip: Make sure you download and read the PDS prior to purchasing a policy. Search for “commissions” if you want quickly find how much of your premiums goes towards sales, marketing and profits. Several policies have commission rates of just 15%.
Secret #3 – Supporting Your Favorite Charity Doesn’t Really Turn into Much Support
It sounds like a great win-win proposition – purchase pet insurance through a major animal charity and a portion of your premiums will go to help other animals in need for years to come.
While these organizations do some tremendous good helping animals, purchasing the policies that bear their names doesn’t do much to help them. (RSPCA and other organizations license their brand name to marketers and do not provide any pet insurance products of their own.)
For example RSPCA pet insurance widely touts that, “A portion of your premiums will benefit the RSPCA, helping them to protect other Australian animals, as well as those closest to your heart.”
It takes some digging to discover how much support your purchase actually provides. Buried deep down on page 29 of the PDS is the true amount RSPCA, merely “up to 10% of first year premium.
This is typically less than $50, with no further support provided beyond the first year of your policy. Plus, RSPCA pet insurance is one of the many plans with a 50% commission rate.
Top Tip: Purchase a lower priced plan with a modest commission plan, then choose to donate what you like to favorite animal charity.
Secret #4 – Confusing Products That Aren’t Really Pet Insurance.
You think you’re doing the right thing by protecting your pet, but your peace of mind is shattered when you discover that the “pet insurance” you thought you had doesn’t actually pay for dog or cat’s medical care.
For example, NMRA Pet Plus doesn’t pay a cent towards your pet’s medical care and simply provides coverage for boarding or transport if you experience serious car trouble while traveling with your pet.
Greencross Vets Healthy Pets Plus costs $440 per year for a dog, but doesn’t cover medical treatment. It’s a wellness plan, that provides discounts on food, vaccinations and dental care. While you get free consultations with a vet, you’ll need to pay for any treatment completely out of pocket.
Top Tip: If it isn’t clearly labeled as pet insurance, it probably isn’t. Be sure to read the PDS or product terms before you purchase.
Secret #5 – Skimpy Plans That Don’t Provide Coverage You’re Likely to Need
Most pet insurance plans offer three levels of coverage, starting with a lower cost ‘Accident Only’ option. They don’t provide any coverage for illnesses or routine care, and usually have lower annual benefit limits and sub-limits than full-featured policies.
While it may be tempting to reduce your monthly premiums, for many pets these types of policies are nearly worthless. Their coverage is extremely limited and won’t help you if your dog or cat gets sick.
Worse, this coverage is frequently marketed to the owners of older pets who no longer qualify for illness coverage, yet are very unlikely to injure themselves as they slow down with age.
Top Tip: These policies make little sense for most pet owners, so it’s best to just ignore them. Make sure that you have pet insurance in place before your pet turns 9 years old and coverage is hard to find.
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