Regulators near completion of new reporting requirements for pet insurers

As early as January 2024, pet insurance carriers may be required to start answering detailed questions about everything from consumer complaints to litigation to non-renewals to claims denials.

Market Conduct Annual Statement (MCAS) Subject Matter Expert (SME) Group is nearly finished drafting annual reporting requirements for pet insurance carriers. The latest draft can be downloaded here.

“I believe that 99.8% of our work is done,” Matthew Gendron, the General Counsel for the Rhode Island Insurance Division who is leading the charge as Chair of the MCAS SME Group told TCR in an email on May 17.  He added: “We made the referral up to the Market Conduct Annual Statement Blanks Working Group. I allow for the .2% because Brett will report about our work at the next Working Group call, and answer any questions that come up.  It’s on the agenda as item 2 for next Monday.  But unfortunately, I’m traveling next week and can’t make the call.”

Asked generally to reflect on the process to date, Mr. Gendron wrote:

I feel pretty good about the time and effort we’ve invested in the Pet area in Rhode Island.  And I appreciate that Superintendent Dwyer asked our team to start looking hard at pet about 6 years ago when she was the chair of the NAIC Property and Casualty (C) Committee.  She led the effort to draft the NAIC white paper, and from that flowed the NAIC pet model act, and the Market Conduct Annual Statement, that we hope will be adopted by the Working Group next week.   We hope that all this work will lead to better data being available on the pet line, and that the additional transparency and information will help allow consumers to make better decisions about protecting their pets.

One item remaining unresolved is whether insurers will be required to report claims by coverage type and line item. “Companies overwhelmingly shared that claims systems could not easily break out the data by coverage type and line item,” Cari Lee of Steptoe and Johnson, the attorney representing the pet insurance trade association NAPHIA wrote to the committee on May 1, 2023.

Birny Birnbaum of the Center for Economic Justice has maintained that, “the industry claim of inability to track claims outcomes by coverage is implausible.”  In a letter dated April 20, 2023, Mr. Birnbaum wrote:

During the development of the model, pet insurers argued that waiting periods and pre-existing exclusions were necessary to hold down claim costs and prevent fraud. Insurers specifically called for a waiting period for accidents, arguing the absence of a waiting period for accidents would drive up rates to unaffordable levels. It is unclear how insurers could have offered any of these arguments in the absence of tracking experience for accident claims. Taking this argument from the specific to the general, how could an insurer respond to a situation in which claim costs were rising more than expected in the absence of some ability to assess what was driving the increased claim costs? How can an insurer put together a package of coverages and develop appropriate rates in the absence of some information about the costs of providing specific benefits / coverages?

If we were to accept the (hard-to-believe) representation by NAPHIA and companies
participating in the SME that their systems do not permit tracking of experience by coverage, it is incumbent on regulators to establish MCAS reporting requirements that cause pet insurer to track experience by major coverage to ensure sound business practices by pet insurers. Consequently, we re-urge the working group to retain wellness, accident, illness and other as coverage categories – not policy types – in the claims schedule.