Two Large California Pet Insurers Set to Hike Rates in 2024

More than 84,000 California pet owners could see double-digit rate increases for their pet insurance coverage this year. In April, the state’s Department of Insurance approved significant rate increases for Metropolitan General Insurance Company and American Modern Home Insurance Company.

Metropolitan, which sells pet policies through MetLife and Embrace, will be allowed to raise rates as much as 56% under the DOI’s approval. American Modern Home can increase rates by 23% for its full-coverage pet policies and almost 46% for its accident-only plans.

The rate hikes will apply to 22,578 Metropolitan policies and 61,691 American Modern Home policies in California.

Increasing veterinary costs are pushing claims costs higher, and pet insurers are raising premiums to offset those costs, says Srimukh Oddiraju, licensed insurance agent and CEO of Fletch, a technology provider to several leading insurance firms.

“There is a national veterinary shortage that doesn’t meet current demands, resulting in higher costs of pet medical care,” Oddiraju says. “This is exacerbated by the roll up of vet clinics. In theory, vet clinic consolidation should lead to efficiencies of scale, but it has often been followed by increasing costs passed to the pet parents.”

With the approved increases, the average annual pet insurance policy premium for Metropolitan will rise to $833 statewide, and slightly over $778 for American Modern Home, according to rate filings from both companies. Nationally, the average annual cost of accident and illness pet insurance in 2023 was $676 for dogs and $383 for cats, according to the North American Pet Health Insurance Association (NAPHIA). Accident-only plans averaged $204 annually for dogs and $116 for cats.

Insurers report recent losses

Metropolitan General reported to the DOI it paid 36,473 claims in 2022, totaling $5,164,072. It incurred a loss of $1,465,816 the year before. In 2021, American Modern Home incurred a loss of $20,824,582, its rate filing shows.

In 2021, Metropolitan General reported a loss ratio of nearly 61% for its pet insurance lines, according to its rate filing with the California DOI. American Modern Home’s was 68.32% for the same year. An insurer’s loss ratio speaks to its profitability by comparing the ratio of losses (claims) an insurer paid out to the premiums it earned in a given year. The closer to 100% an insurer’s loss ratio is, the less profit the company makes that year.

“Many pet insurers were focused on policy acquisition and premium growth as their priorities, and were not able to take rate as proactively as costs changed,” Oddiraju says. Now, with veterinary costs rising, “pet insurance firms have been increasing premiums to offset the rising cost of claims.”

What’s next? Rate hikes could happen soon

Affected policyholders in California could see their pet insurance premiums increase when their policies come up for renewal. The DOI approved effective dates of March 15, 2024, for Metropolitan’s rate increase and May 14, 2024, for American Modern Home’s.

California represents more than 20% of the U.S. pet insurance market in terms of gross written premiums, according to NAPHIA data. Nationwide, pet insurance covers 6.25 million animals.

Pet owners should expect to see premiums continue rising. And while comparison shopping may help pet parents find lower rates, they should proceed with caution.

“Most pet insurance firms do not cover pre-existing conditions,” Oddiraju says. “This means that switching from one pet insurance firm to another ‘cheaper’ firm can be risky if certain existing conditions do not get covered.”