Changing attitudes, the proliferation of technology and the expectations of a generation of millennials raised in an age of digital diagnostics have led to some radical transformations in veterinary medicine. Specialized clinics now routinely provide animal dental, cardiac, vision and even cancer care.

Not surprisingly, these highly specialized services carry a correspondingly high price tag.

In the case of human medicine, health insurance fills the void, helping to make expensive care more affordable for most policyholders; a similar option is becoming more popular among pet owners, although it’s not exactly the same type of insurance people associate with health care.

“It’s actually a property and casualty purchase,” said Liz Watson, chief marketing officer of the Ohio-based Hartville Pet Insurance Group. “But it does have different rules that go along with health insurance to give it a health insurance feeling.”

Her company provides insurance plans through proprietary and private brands that include the American Society for the Prevention of Cruelty to Animals (ASPCA). It’s not a new concept, but pet health insurance has taken more than a century to really catch on. The North American Pet Health Insurance Association (NAPHIA) traces the industry’s history back to Norway in 1890, when the first policies for horses and livestock began to appear.

It wasn’t until 1924, in Sweden, that a dog received insurance coverage. Much later, during filming of the revised series in 1982, television dog Lassie became the first American dog to receive a pet insurance policy, issued by the Veterinary Pet Institute (VPI).

Many Options

According to the NAPHIA website, more than 11 companies make up the current pet insurance marketplace in America, with many of them marketing or underwriting multiple white label or co-branded products. They provide a variety of coverage options with a large number of variables. Among them are companies such as Petplan, Pet First, Healthy Paws, Embrace and Trupanion.

So far, the Nationwide Mutual Insurance Co. remains the only major insurer to offer such coverage. Having underwritten VPI since that company’s establishment in 1980, Nationwide rebranded its entire family of companies under the Nationwide name in 2014.

Nationwide Spokesman Adam Fell said that insurer’s most popular Whole Pet With Wellness plan could save pet owners up to 90% on veterinary expenses with one cumulative annual deduction of $250.

Pre-existing conditions, veterinary fees, waste disposal, board and grooming fees are not covered. There are, however, no breed exclusions, prescriptions are covered and there is no waiting period for hereditary conditions under this plan.

“We’re also one of the only insurers that covers birds and exotic pets like snakes, lizards and other reptiles,” Fell said.

Of course, he added, premium costs can vary by region, breed and age.

Hartville offers two levels of wellness coverage, Watson said, covering annual exams, core vaccines, spaying and neutering, blood screenings, microchips and more. The company’s advanced plan adds more vaccines, flea, tick and heartworm medications, annual dental cleanings and other options.

Market Growth

Pet health insurance isn’t nearly as widespread as other types of insurance types, but it’s making headway.

“We estimate that about 1.5% to 2% of companion dogs and cats are covered,” Fell said, “and the industry is growing significantly.”

“We’re seeing annual growth of 10% to 15% in the number of policies issued, depending on which competitors you’re looking at,” Watson said.

It is even starting to show up as a voluntary employment benefit, as an add-on option to packages offered by commercial enterprises. “There are major changes in the way it is being distributed on platforms and exchanges,” Watson said, “and it is currently one of the most requested volunteer benefits among new hires.”

NAPHIA’s 2016 State of the Industry Report, based on data gathered independently from member companies, showed that the total gross written premium increased this year, while the current U.S. market for pet health insurance saw an increase of 17.1% from 2014.

NAPHIA also estimated a current pet insurance market value of $660.5 million, and tallied more than 1.6 million pets insured at year-end 2015 in North America.

According to Fell, VPI/Nationwide alone insures more than 585,000 of those pets.

Value Proposition

As documented in the American Pet Products Association (APPA)’s annual survey, Americans spent $15.4 billion on veterinary care in 2015. The survey also found that surgical vet visits cost an average of $551 for dogs and $398 for cats, while routine vet visits cost an average of $235 for dogs and $196 for cats.

“It used to be that people took their companion animals to the vet once a year, maybe paid no more than a couple hundred dollars for all of their shots, exams and any necessary treatments, and they were good to go until the next checkup,” Watson said.

And if an animal contracted a debilitating chronic or hereditary disease, or suffered a major accident or injury, it was likely euthanized.

“These days, it’s much more of a value proposition because attitudes have changed,” Watson said.

The Millennial Generation is contributing to the increased popularity of pet health insurance as well. “They want to be responsible pet owners,” Watson said, partly because their demographic trends toward greater environmental responsibility overall.

Lifestyle also influences their choices, Fell observed. “There’s a tendency to marry later and have children later, so many Millennials have house pets for companionship and are closely attached to them.”

Sense of Security

The costs for specialized veterinary care can be staggering, even for routine procedures. Part of the reason lies in the cost of the imaging and diagnostic equipment used.

“It’s the same type of equipment that’s used in the [human] medical field,” said Katie Newbold, CEO of the Virginia-based Chesapeake Veterinary Cardiology Associates (CVCA), which has offices in Annapolis and Columbia.

But there’s also a major difference in how veterinarians perform diagnostic tests and acquire imagery from animals as opposed to humans.

“Dogs and cats simply can’t remain still, particularly in a stressful situation that creates fear,” said Dr. Ira Luskin, hospital director of the Animal Dental Center, which also has offices in Annapolis and Columbia. “They can’t hold a bite wing like a human and wait patiently while a technician takes an x-ray of their mouth, so they have to be anesthetized, even for a simple X-ray.”

On the industry side, NAPHIA’s 2016 “Driving Growth of Pet Health Insurance Research Report” suggested that “tremendous medical and financial value” is derived from the increased use of pet health insurance. According to the studies, dog owners with pet health insurance spend 29% more annually for veterinary care, while cat owners spend 81% more.

The research confirmed that owners aren’t buying the insurance for economic reasons, but rather for the sense of security that they are doing the best for their pets.

“Pets have always been part of the family, but the family now wants the same level of medical care for their pets that they’re accustomed to themselves,” Watson said. “That’s where pet health insurance is making a difference.”