The #1 thing to look for when looking for pet health insurance
In a survey of responsible pet owner, we discovered that what people want most is to afford the medical care their cat or dog will need.
As a result, when searching for a pet insurance company that can help pay their pet's medical bills, pet owners look at the following features:
- Payout limits (annual, lifetime, unlimited)
- Reimbursement percentage (70%, 80%, 90%)
- Testimonials and reviews
But, there's one thing that most pet owners are not looking for and that pet insurance companies are not talking about.
This undisclosed feature shows what you could expect to be reimbursed from your pet insurance company.
We call it a "payout ratio"
Payout ratios are something not often talked about, but they affect every pet owner that enrolls with a pet insurance company.
A payout ratio is the amount of money a pet insurance company pays out in claims.
PAYOUT RATIO = MONEY PAID OUT IN CLAIMS ÷ TOTAL MONEY COLLECTED
THIS IS HOW A PAYOUT RATIO IS CALCULATED:
Depending on the quality of the pet insurance company, every company will have a different payout ratio.
The average payout ratio for the pet insurance industry is 55% according to a 2017 IBIS World report
This means, for every $1 the average pet insurance company takes in, they pay $0.55 back to policyholders.
If a company has a low payout ratio, it may be because their policy has exclusions and fine print that limit coverage for injuries and illnesses. When coverage is limited, pet owners are reimbursed less and pet insurance companies keep more money for themselves.
If you enroll with a company that has a 55% payout ratio, you need to ask yourself if you're getting the best value for your monthly payments.
You should ask a pet insurance company how much they pay out in claims before getting into business with them
Why should you pay month after month if you never get back a reasonable amount of money in reimbursed claims?
If you call up a pet insurance company you are interested in, they can tell you their exact payout ratio.
When researching pet insurance companies, you should always look for companies with payout ratios that are much higher than the industry average.
IBIS World – 2017 Pet Insurance Industry Report shows that Trupanion pays out at a higher rate than the average pet insurance company.
In fact, Trupanion targets a payout ratio 15% higher than the industry average.
We try to do more than any other pet insurance company to get money back in the hands of loving and responsible pet owners.
Our payout ratio and devotion to pet owners is part of the reason why New York Times review company, Wirecutter, rates us as the best pet insurance.
Payout ratios are influenced by company pricing structures
To help pet owners get back more money in claims, we use what is called a “cost-plus model.”
There are many different ways to calculate monthly pet insurance costs for cats and dogs, but the cost-plus model is considered one of the best pricing structures, and enables us to pay out as much as we do.
In fact, Insuranceopedia acknowledges that one pricing structure is superior in the health insurance industry. “Cost plus models may represent a much fairer and simpler way to handle medical billing so that all parties can benefit from a model that does not favor one party over another.”
Part of what makes this pricing structure so effective is its transparency. According to Insuranceopedia, the model itself does not favor one party (patient, health care provider, or insurer) over another. This protects everyone from fraudulent, marked up, or duplicate charges.
By pricing for pets in a fair and transparent way, we can afford to target a payout ratio that is 15% higher than the industry average.
You shouldn't pay more now for less later
When choosing a pet health insurance provider, don’t just look at payout limits, reimbursement percentages, and testimonials. Also look at the company’s payout ratio.
If a company’s payout ratio is at or below the average, think about what this could mean when you need reimbursement for your pet’s medical emergencies.