Potential Solutions for Pet Insurance Affordability
Background and Purpose
Pet insurance has become increasingly unaffordable.
Pet insurance began in the US in the 1980s. It was a little-known insurance product with U.S. market penetration reaching approximately 1% in the mid-2010s. The popularity of pet insurance picked up steam especially from the late-2010s/2020s. As veterinarians became increasingly aware of pet insurance and how it may help their customers afford the cost of veterinary care, some veterinarians increased the amounts they charged their customers at pacing higher than inflation. This trend has continued to accelerate.
As the increased costs of veterinary care flow through to pet insurers, insurers being able to maintain affordable pet insurance offerings becomes increasingly challenging. To deal with this, insurers request larger and more frequent rate-increase requests from regulators. As such, regulators are placing more scrutiny on this industry.
For pet insurance to be a viable industry, identification and analysis of each component of the rapidly increasing cost of pet insurance is key. Furthermore, proposing potential solutions to make pet insurance an affordable and viable industry is significant.
Research Objective
The Society of Actuaries Research Institute General Insurance Research Committee is seeking researchers to identify and analyze the various by-component inflationary forces on pet insurance affordability in the United States and Canada. In addition, we seek ideation of potential solutions that are likely to improve the affordability of pet insurance. The following are examples of proposed topics that may be addressed:
- Managed-care version of pet insurance: Is pet insurance “PPO” or “HMO” viable?
- Make pet insurance covered by ERISA, tax-deductible premiums for employee-benefit pet insurance (U.S.)?
- Pet insurance fraud-prevention
- How to pay for new veterinary technology without insurers encountering significant loss of profitability
- Regulator perspective and how it may influence the cost of pet insurance
Note that the list above is not meant to be exhaustive but merely examples of proposed topics that may be researched.
Proposal Requirements
To facilitate the evaluation of proposals, the following information should be submitted:
- Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
- An outline of the approach to be used (e.g. literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
- A description of the expected deliverables and any supporting data, tools or other resources.
- Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
Please note that as a policy, the SOA Research Institute generally does not provide funding to cover academic institution overhead expenses.
As a guide for developing the project budget, please review the Historical Project Cost Guide (see Appendix) - A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The General Insurance Research Committee is interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
- Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.
Selection Process
The General Insurance Research Committee will appoint a Project Oversight Group (POG) to oversee the project. The General Insurance Research Committee is responsible for recommending the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the General Insurance Research Committee will make the final recommendation, subject to Society of Actuaries Research Institute (SOA) leadership approval. An SOA staff research actuary will provide staff actuarial support.
Questions
Any questions regarding this RFP should be directed to Research-CC@soa.org.
Notification of Intent to submit Proposal
If you intend to submit a proposal, please email written notification by February 27, 2025, to Research-CC@soa.org.
Submission of Proposal
Please email your proposal to Research-CC@soa.org; proposals must be received no later than March 14, 2025. It is anticipated that all proposers will be informed of the status of their proposal by the end April 2025.
Conditions
The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries Research Institute and the researcher.
The Society of Actuaries Research Institute reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Society of Actuaries Research Institute also reserves the right to redirect the project as is deemed advisable.
The Society of Actuaries Research Institute plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).
The Society of Actuaries Research Institute may choose to seek public exposure or media attention for the research. By submitting a proposal, you agree to cooperate with the Society of Actuaries in publicizing or promoting the research and responding to media requests.
The Society of Actuaries may also choose to market and promote the research to members, candidates and other interested parties. You agree to perform promotional communication requested by the Society of Actuaries Research Institute, which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.
Conflict of Interest
You agree to disclose any of your material business, financial and organizational interests and affiliations which are or may be construed to be reasonably related to the interest, activities and programs of the Society of Actuaries Research Institute.
Appendix
The cost ranges below are intended as a guide for budgeting project costs for proposals in response to SOA Research Institute Request for Proposals (RFP). Please note these figures span the 33rd to 66th percentiles for all projects as well as projects that involve a specific approach (lit review, survey, etc.). They are based on historical costs over several recent years. Expected costs for some RFPs may fall outside these ranges depending on the nature of the work and resources required for completion.
All Contracted Projects
This category includes all contracted projects that the Institute has undertaken within the last several years.
The 33rd-66th percentile project costs range is $25,000 - $50,000.
Literature Reviews
This category includes projects that involved only a literature review or the cost for the portion of a larger project that included a literature review.
The 33rd-66th percentile project costs range is $15,000 - $20,000.
Surveys
This category includes all projects that had a survey as their primary component.
The 33rd-66th percentile project costs range is $28,000 - $55,000.