Grey areas bedevil the pet insurance industry

In the UK the Financial Ombudsman Service usefully lists the type of complaints that they see from customers of pet insurance companies. A quick glance at them tells me that they are what I would described as “grey areas”. What I mean is, areas of dispute because the facts of the claim fall between a successful and unsuccessful claim.

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Policy wording

For example, complaints are often about the wording of the insurance policy. In the UK, there are more than 250 pet insurance policies available. There’s lots of options and you may be confused as to the sort of cover which best suits you and your companion animal. I wonder how many customers read the insurance policy from top to bottom and understand the wording. If every customer did understand the policy comprehensively then you wouldn’t get disputes over the wording of the policy. This indicates that the policies are (1) worded in a way which is too complicated for the average companion animal guardian or (2) customers hate reading legal documents and avoid it . Or, perhaps the terms and conditions are not fully explained by the person selling the policy. And if the circumstances of the claim straddle a particular clause by which I mean the clause may or may not apply this will result in a dispute. The advice is obviously to read terms and conditions thoroughly and seek clarification before signing the agreement (and take notes of what was said or record it on your smartphone).

Pre-existing conditions

Another source of complaint is pre-existing conditions, or conditions which first become apparent soon after the policy was taken out. I will also describe these as a grey area because the pre-existing condition’s appearance becomes apparent just after the policy comes into effect but was present before the policy was taken out. It straddles the commencement of the policy. Perhaps, sometimes, and without wishing to be unkind, companion animal owners may be aware that their cat or dog has a pre-existing condition but concealed it from the insurance company. They sign the policy and enter the agreement. They then reveal the pre-existing condition but say that it was not pre-existing because they were unaware of it. In doing this they attempt to obtain insurance cover for what would be a chronic condition requiring expensive treatment that was known to them.

Time limit agreements

A further source of trouble and complaint regards time limits on cover for treatment. This probably applies to a 12-month time limit insurance policy. Cover is provided up to a veterinary fee limit or 12 months of treatment which ever is reached first. Cover ceases when one of these conditions is met. I suspect that the problems occur here because the time-limit starts from the date that the companion animal’s illness or injury first appeared. The dispute may be about when the illness or injury first appeared. That is an elastic concept depending upon the observation qualities of the pet’s owner. You can see how disputes arise.

Lifetime policies

Problems can also exist with lifetime policies although these are not mentioned by the watchdog. A story illustrates this. Under lifetime policies the pet’s owner is told that they are covered for any accident or illness suffered by their pet, irrespective of the pet’s age for as long as the insurance premiums are paid. I suspect that the terms and conditions make provision for the insurance company to increase premiums as and when they deem it necessary. This is to cover inflation perhaps and increased veterinary bills due to inflation or other matters such as more expensive machinery. But the open-ended nature of terms and conditions which allow one party to increase the cost of the policy unilaterally is going to cause problems. In the case of Karla and Tony Dearsley their annual premiums multiplied threefold to the astonishing figure of £7,410. This has been described as a “push off” premium or a premium which is meant to encourage the customer to stop ensuring with the company because the policy makes a loss for the insurance company. Under the policy the claims pot was reset at the start of each policy year. The insurance company used this agreed condition of the policy to ramp up insurance premiums to say goodbye to their customer.

The insurance company justified the huge increase in insurance costs because of the age of the dogs and their ongoing medical conditions and claims history. And that sounds fair enough. They have to make a profit. However, the agreement guarantees them a profit if they can charge whatever they like at the start of a fresh year. At the end of the day, the insurance company will always win this kind of dispute unless an adjudicator such as the Financial Conduct Authority for the Insurance Ombudsman finds that the terms and conditions are unreasonable.

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