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NAIC Passes Regulatory Standards for Pet Insurance

The National Association of Insurance Commissioners (NAIC) announced that it has passed the Pet Insurance Model Act, a model law that establishes clear rules for pet insurance sales and requires disclosures for pet owners.

The new regulation comes on the heels of sharp growth in annual premiums and new policies in the U.S.

Key Takeaways

  • The National Association of Insurance Commissioners passed the Pet Insurance Model Act this week.
  • The model law, which individual states can adopt as-is or modify to fit their needs, provides additional protections for consumers who purchase insurance for their pets.
  • In particular, the law requires certain disclosures for prospective policyholders, as well as rules for the sales process.

NAIC Creates a New Pet Insurance Model Law for States to Adopt

As the pet insurance industry grows rapidly, the NAIC has found some holes in the regulation that could harm consumers, which is why it passed the Pet Insurance Model Act. The law includes four key elements:

  • Consumer protections: The model law provides several consumer protections related to policy renewals, required disclosures of waiting periods, policy limits, conditions, benefit schedules, and more. It also requires robust disclosures that allow consumers to affirmatively choose the policy that is best for them.
  • Preexisting conditions: It limits how insurers can deny pet insurance claims related to preexisting conditions of covered pets. It also puts the burden of proof on the insurance provider to prove that a preexisting condition limitation applies.
  • Wellness programs: The model law requires insurance carriers and producers to clearly differentiate pet wellness programs from insurance policies to eliminate confusion for consumers wanting to purchase one or the other.
  • Training requirements: Training for producers is codified to ensure that they’re properly prepared to provide necessary information to consumers.

Note, however, that NAIC is a regulatory support organization governed by chief insurance regulators from all 50 states, the District of Columbia, and five U.S. territories, and does not have legislative powers. Insurance products and services are regulated at the state level, so while the NAIC can provide model laws, individual states can choose to adopt them, modify them, or ignore them.

The model law comes on the heels of impressive growth in the pet insurance industry. The NAIC states that the industry saw 30.5% growth in annual premiums from 2020 to 2021, as well as 27.7% growth in insured pets.

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