Are Vets sleep-walking into an insurance catastrophe?

I was having lunch with a friend the other day and we got talking about the financial performance of practices and the increasing reliance on pet insurance to pay the bills. Yes, I know, I need to get out more, but it got me thinking and we had to agree to disagree on whether the cost of veterinary care is sustainable from an insurance point of view.

His position: we can continue to build our veterinary businesses on the premise that it’s good to have more insured clients, that insurers will continue to offer great coverage and that it’s a reliable income source. Vets must offer more services to make the most of the insured client in their clinic.

My position: I’m worried the vet profession is offering ever higher standards of care with increased complexity and cost due to fancy kit and we are at significant financial risk of changing insurance models.

I think we’re at risk of sleep walking into a funding crisis if the pet insurance market changes.

The conventional wisdom for vet clinics is that we should increase the proportion of insured clients in our business. That gives peace of mind to owners, improves animal welfare by allowing us to practice optimum veterinary medicine and means we are fairly rewarded for our efforts. We’ve been able to develop our veterinary clinics, improve our services, apply new techniques and buy new kit. It’s been a reliable source of income.

The Pet Insurance industry has compiled a lot of data about what vets are doing and what vets are charging. They’ve actually got some of the most powerful data in veterinary medicine. We should bear that in mind, because the insurance industry has flagged some potential concerns, whilst at the same time promoting pet insurance.

Let’s look at some facts, based upon a 2016 Association of British Insurers press release¹.

• Pet Insurers paid out a record £657million in claims in 2015, up 9% on 2014.
• That’s £1.8 million a day, almost all of it flowing into veterinary practices.
• There were a record 911,000 pet insurance claims, also up 9% from 2014.
• The average claim was £720; the average insurance premium was £241.

The numbers are huge and they pay a fair chunk of our wages. The average claim is three times the average premium. Is that sustainable for insurers?

In the same month, the ABI published an agenda for a roundtable discussion², with some worrying agenda items:

1. Rising pet insurance claims and premiums
   • Identifying the main factors behind the rises in premiums and increases in claims.
   • What actions can be taken forward to but insurers/industry/ABI to help address rising costs?
2. Low up-take of pet insurance
   • What are the factors behind this and can the industry evidence these?
   • How can the industry better highlight the value of pet insurance to consumers? What are the issues the industry should focus on to do this? High vet fees; the levels of cover provided; other?

You start to hear tension in the system when you talk to clients, friends and colleagues. Overall insurance affordability, escalating premiums and policy limits are the topics you hear and it’s very easy to make a value judgment on keeping your pets insured. We all have stories of owners electing to stop insurance, running out of funding for a major problem or suffering the consequences of a poorly chosen policy. We also hear the reports of inappropriate charging, fraud and a “go the extra mile: they’re insured” mentality within the profession.

I might be talking out of school here, but consider what’s already happening

• Approved referral centres for certain insurers.
• Vertically integrated primary, secondary and tertiary care vet services within corporate groups.
• NHS funding failing to keep up with the increasing costs of providing care.
• Turbulent times in the American health insurance market, struggling to find an affordable solution.

Consider the human health insurance market. We have approved consultants, in approved hospitals with tariffs and allowances for approved procedures. Pre-approval is a fact of life. If you don’t get the right approvals from your insurers, they’re not going to pay. It’s an exercise in managing costs as well as healthcare.

Vets are at risk of sleep walking into this funding crisis. We don’t hold the cards. The insurers have the data to analyse this to the n-th degree and could tell us how it should be. They could specify procedure types and cost limitations for certain procedures. They could mandate certain referral pathways, but they haven’t yet.

But it’s not all bad is it? I think we can get upset about this or embrace it. Here are a few things to consider in your clinic and as ever, the Veterinary Business Consultancy can help you get your head around this. Drop us a line.

• Promote the benefits of pet insurance. It’s still the right thing to do.
• Closely understand the proportion of your income that is reliant on insurance policies. That’s your risk zone.
• Refer early: you owe it to your clients to spend their insurance coverage wisely.
• Consider carefully what services you should offer. Are you serving your clients well with what you offer? Are you the right person to offer these services?
• Practice Evidence Based Medicine. If the data is lacking, challenge yourself. Why are we doing this thing, in this way?
• Be nothing less than totally transparent with your charges

We’ve had the luxury of practicing veterinary medicine in a period of fantastic growth in what we can achieve. It’s been matched by increases in the cost of delivering that care.

Let us be mindful that we don’t snap the elastic that connects us to the insurance industry.

1. Association of British Insurers press release 29/3/2016. http://www.abi.org.uk
2. Agenda for the ABI Pet Insurance Roundtable, 16 March 2016. http://www.abi.org.uk