Embrace Pet Insurance Blog

Pet insurance pet puns

Also known as groaners around here.

Alex and I find ourselves, and people we talk to about pet insurance, popping in pet-related additions to our sentences just to spice up our conversation. Pets are on our brain, after all, and it's always good for a laugh or two.

I can never remember them though when people ask for examples (I was never very good at jokes) so I thought I'd jot some down here every now and then just to help my poor brain. You might find them amusing - or just groan! Either works for me :)

I'm sure you can come up with a few groaners too. Go on, give it a try!

Claims-based pet insurance premiums

Definition: your pet insurance premium depends on your claims history. Also known as risk-based premiums.

What else do I need to know?

I really dislike this approach to setting insurance premiums. I think it goes against the principle of insurance, which is to pool risks together based on similar characteristics, such as pet age and type, zip code, and so on. If claims are higher than expected overall, then everyone shares the burden. We do not, after all, buy insurance to end up self-insuring ourselves. I think it shows an inability of the insurance company to price the risks appropriately in the first place, which is what insurance is really all about.

Pethealth is only pet insurer as of May 2005 to use this approach although VPI used to use this approach but stopped it in 2004. Not all states allow it. I'm sure that Pethealth would say that this approach is needed to make the few bad apples that claim large amounts on their policies contribute more and take the burden off the others.

But what is insurance for, apart from to spread the risks across a larger pool. Of course we do not want to have large claims on our policy - that would mean our cat or dog is horribly sick; however, if the worse happens and we use our policy, we should not be punished for that.

There are other, more intelligent, ways to deal with managing claims that share the risk across a pool. For example, Pethealth does not charge different premiums by zip code. As you can imagine, veterinary costs in Manhattan are much different than those in upstate NY, yet I pay the same premium - how come?

Here are some details from Pethealth's filing in North Carolina (under Lincoln General). Sorry the pictures are a bit small - click on them and they will enlarge.

Distorted Dog - Olympus

Thanks to Adrants, I came across this very strange little movie starring the Distorted Dog.

I suppose the idea is that you'll want to buy an Olympus camera after watching this. I'm sure it will be very viral (I'm passing it on, aren't I?) but I wonder if it will translate into more camera sales.

What do you think?

Travel article on Cleveland the Great

When I first came to Cleveland, just over a year ago, people here often asked me why, as if coming here would be the last thing they would do. Long-time Clevelanders are often down about the place but as an outsider looking in, Cleveland has a lot to be proud of.

That's why I liked the article that Barbara posted on her site today. Check this out if you are  looking for an interesting weekend away this summer. Travel article on Cleveland mentioned by Barbara Payne.

Premium Frequency for Pet Health Insurance

Definition: how often you pay your pet health insurance premiums. This can be monthly (twelve times a year), quarterly (four times a year), semi-annually (twice a year) or annually (once a year) depending on the options the company offers you. Most companies offer monthly and annual options but some offer others.

What else do I need to know?

You may find that if you pay less often (but larger amounts), you get a small discount for doing so. 

For example, if you pay for the whole year up front, you might get a 5% discount compared to if you pay every month. This is because it is less expensive to administer policies that pay less often - there are fewer chances of things going wrong and fewer times to do the accounting (phew!).

Premiums for pet health insurance

Definition: the amount of money you pay to an insurance company in exchange for pet health insurance coverage for your pet. 

What else do I need to know?

If you have two policies from different companies but with the same coverage, deductible, maximums, can you say that the lower premium policy is the better value? Unfortunately, no! Even when everything else is the same, the premiums can be different.

Let me provide a couple of examples to help us understand what is going on but first there's something we should know about cat and dog health. Cats and dogs are just like humans - the older they get, the more likely they are to get sick. It's kind of obvious isn't it but it'w worth highlighting that to help us understand the examples below.

Example 1: the premiums you pay every year match the cost of your pet getting sick. This means that the premiums are low at young ages but go up substantially at the older ages as the pet is likley to be sicker. Let's call this an Increasing Premium Plan.

Example 2: the premiums you pay every year remain the same over the life of your pet. The premiums are an average of the current and future health costs and take into account not only the cost of the vet bills in the future, but also inflation of those bills, how likely you are to keep your policy for all those years, the likelihood your dog or cat will live each year, and so on. Let's call this a Level Premium Plan.

Each example is a legitimate way of charging for a policy but they look very different when you compare quotes for a new policy. Since level premium policies include some portion of premium for higher vet costs later in life, increasing premiums start off lower than level premium policies; however, increasing premiums soon grow more than the level premiums and can become extremely onerous right when you need pet insurance the most.

Just to make things more complicated (sorry!), there is another wrinkle that distracts the issue. That is where the premiums stay level or increase but the coverage decreases over time. For example, that happens when the pre-existing conditions reset every year and conditions your pet had last year become excluded the following years (see this blog entry for more detail) or you reach a low maximum for an illness and have no more coverage.

So, what do the current pet insurers do?

VPI: a combination of the increasing premium plan plus decreasing coverage. VPI increases the premiums every 3 years and does not reset the pre-existing conditions every year.

Pethealth: a combination of the level premium plan plus decreasing coverage. The premiums do increase twice at older ages and coverage drops off once you have met a lifetime maximum for that illness (highest maximum is $6,000 as of June 2005). They are also introducing the claims-based premium. Basically, your premiums go up if you claim on your policy.

Hartville, Pet Protect, Pet Partners:  a combination of the level premium plan plus decreasing coverage. They reset the pre-existing conditions every year.

The bottom line is to keep in mind what you are signing up for. If your premiums are going to increase in the future, find out what they might look like so you aren't surprised in the future.

Lower premiums don't necessarily mean better value.

busy networking in Cleveland

Last night, I attended a panel discussion at the Cleveland Public Library on Women in Technology. I attended for a number of reasons:

• Nikki DiFilippo, one of the people behind the scenes, is a friend of mine and encouraged me to come
• I was originally asked to be on the panel but politely declined as I am a user of technology, not actually in technology and wouldn't be what the audience was expecting (they had an excellent panel without me, of course)
• I don't get out of the house much, and
• The library has air conditioning!

So, I wasn't sure what I was actually going to get out of the discussion but it turned out to be an excellent networking event.

In the beautiful garden where the reception took place, I talked with Sara Aros, one of the National City Women’s Business Advocates and while there's nothing much the bank can do for us now (we need some revenue to get a bank loan), it's good to get to know Sara for the longer term. Banks are much more likely to lend you money if they have known you for a while.  Besides, Sara has many interesting stories to tell and is an entrepreneur at heart, making her a very interesting person to hang out with. She is also looking for a poodle to complete her home so I promised to help find a good breeder for her.

I also spoke with some very lively women and William with the Consortium of African American Organizations who were very uplifing and full of fun, as well as several of the panelist (Leslie Carruthers, The Search Guru being one) and organizers, and a number of other people interested in women in technology. 

Whether or not any of these people can help Embrace is not the point. Getting to know energized and empowered people is. And besides, maybe I can help these new friends in their goals. I'm a big believer in paying it forward.

Now, anyone know any good poodle breeders in NE Ohio?

Hello MBA hopefuls!

I have been getting a number of people coming to check out my blog from a referral in a popular MBA blog, which is very nice indeed. Welcome!

However, I'm sure many of you are puzzled about being directed to a blog about pet insurance when you might have been expecting something more MBA-related. Sorry about that, if that's the case for you.

Just to join the dots... I wrote the first Wharton diary when I was an MBA student from October 2001 to May 2003 - over 400 entries in all - and I update an alumni version every now and then, just in case you are interested.

So, now I'm putting my Wharton MBA and my past experiences to good use in Embrace Pet Insurance, the start up that keeps going and going. I think I'll blog a bit more about what it's like to be an entrepreneur as well as on pet insurance going forward. It might put pet health insurance in a different perspective if you see what goes on behind the scenes.

Now, back to pet insurance...

Getting ready for our trip

I keep telling Barnes we are off to Winnipeg tomorrow night and that he'll be able to go outside again soon. He's been sitting on our window ledges sniffing the air when he can lift his wilting head off his paws. It's been very hot here (over 90 degrees Fahrenheit for the last week or so) and we have no air conditioning. Barnes is a big and furry cat so he will probably care more about the cool air in Winnipeg than being able to go out at first - then he'll go out and be a very happy puss.

It should be a fun trip but we'll miss Barnes when we come back to Cleveland on Sunday.

Article: Barbara Payne's Capitalist Cleveland Blog: Pets are big business

Barbara Payne is a friend I met last year here in Cleveland. She kindly wrote up a discussion we had recently about Embrace and I thought you might like to see it.

Link: Barbara Payne's Capitalist Cleveland Blog: Pets are big business.