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ASIC stopped over 50% of pet insurance products from being purchased


The Australian Securities and Investments Commission (ASIC) recently issued stop orders on more than 50% of pet insurance products, barring them from being purchased for 21 days. The ban was lifted late yesterday but sends a strong message to all Australian pet lovers.

This unprecedented move reflects a concerning lack of clearly defined target customer bases for the products these companies offer. The affected insurance providers include major brands such as The Hollard Insurance Company and Petsure Australia brands, including RSPCA, Woolworths, Medibank, AAMI, Petbarn, Guide Dogs, Bupa, and HCF, among others.

Two Australian providers who were not affected by the ban, Petsy and Knose, are encouraging consumers to make informed decisions when selecting pet insurance products.

The stop orders were issued due to the companies' failure to adequately define the specific type of customers for whom their insurance products are suitable. ASIC is troubled because the insurers did not use clear and measurable criteria when determining their target market. Specifically, they did not consider whether customers can afford the insurance premiums and upfront payments for treatments before being reimbursed by the insurer after a claim is approved.

"There are a few pet insurance providers, including Petsy and Knose, who are committed to continually assessing and fine-tuning our services to offer extensive coverage and unfaltering support to our clients. It's essential that pet owners thoroughly research and choose insurance products that they fully comprehend," said Monica Limanto, CEO and co-founder of Petsy.

PetSure adds that it is committed to providing extensive coverage and support to pet parents, with market-leading policy features, including no overall annual benefit limit options, high annual benefit limit options of up to $30,000 and policy options that include cover for dental illness, routine care and alternative therapies. PetSure also processes 95% of eligible claims the next business day - that’s one claim every 10 seconds.

"Pet insurance operates differently from human health insurance, and it’s important for us to clear any misconceptions about this. One way we've done this is by changing the term 'waiting periods' to 'exclusion periods' for better clarity. We also perform a pre-existing condition assessment at our own expense to set clear expectations and ensure a smooth, transparent process for our customers," Limanto added.

Tiaan Dreyer, CEO of Knose Pet Insurance, expressed a similar sentiment. “A huge misconception in the market is that pet insurance works just like human health insurance. That is simply not the case. In most cases, you have to pay the invoice first and make a claim for reimbursement. Knose and Petsy are among the very few companies that actually include a condition on signup, confirming the policyholder understand they will need to have the funds available to pay the invoice and then make a claim,” Dreyer said.

PetSure confirmed that when a customer signs up for a PetSure administered policy, they have access to a comprehensive FAQ section on the brand partner website with detailed information about the claims submission process. This information is also captured in the product disclosure statement (PDS), available on our brand partner sites.

The GapOnly® claims innovation, offered with PetSure administered policies, means customers are not out-of-pocket while waiting for a claim to be reimbursed. PetSure is the only pet insurance provider in the Australian market with this claims option available. Now available at over 1,000 clinics Australia-wide, GapOnly® allows customers to claim on the spot and simply pay the gap while still at the vet clinic.

PetSure is committed to supporting pet healthcare moments for people and their pets across Australia, and we pay out $1.2 million per day in veterinary cost reimbursements.

“These stop orders are proving that the Australian pet insurance industry requires more transparency when it comes to products and how they affect consumers. Far too often, we take for granted the comprehensive healthcare we have access to in this wonderful country. We can walk into a hospital, receive immediate care, and not once be asked 'who's going to pay for this?' The considerable funding directed towards human health in Australia isn't a global norm, and unfortunately, it doesn't extend to our pets – there's no Medicare for pets or significant government subsidies," said Monica Limanto, CEO of Petsy.

"In a country where pets are considered part of the family by many, it's a realisation that the government doesn't share this view in terms of financial support. Take, for instance, an X-ray or a CAT scan for humans, which won't cost us any out-of-pocket due to taxpayer funding. These same procedures still cost veterinary practices around $300 each time, and without governmental support, these costs fall directly on pet owners OR pet insurers," Limanto added.

Petsy, currently the highest rated pet insurance provider in productreview.com.au and others in Australia, is committed to delivering peace of mind and support during unexpected veterinary emergencies with comprehensive coverage and exceptional service. With a deep understanding of the needs and financial circumstances of pet owners, Petsy aims to uphold transparency, regulatory compliance, and prioritise the well-being of beloved pets.

Despite the confusion, it is crucial for customers to understand that pet insurance is more akin to car insurance than human health insurance. Unlike the latter, where the Australian government provides subsidies for human health insurance through Medicare, pet insurance requires owners to pay upfront, and then get reimbursed once a claim is assessed and processed per the coverage criteria.

The lack of government subsidies and Medicare for pets means insurance claim reimbursements are solely paid through the premiums received by those who insure their pets. This results in varying premiums depending on your and your pet’s risk factors.

Common misconceptions about pet insurance and how it doesn’t work just like human health insurance

While Australian pet owners can make claims amounting to thousands of dollars, with companies like Petsy and Knose even paying out over $20,000 for individual cases, there are certain aspects you need to keep in mind.

The following table outlines the main differences between pet insurance and human health insurance in Australia:

Feature

Human Healthcare and Insurance

Pet Insurance

Subsidised by the Australian Government

Yes

No

Gap payments

Usually only have to pay a small amount

Usually have to pay the full cost upfront

Reimbursement

Not usually required

Usually required

Medicare

Yes

No

Can you sit out a waiting period then make a claim

Yes

No, waiting periods have to pass symptom-free before the cover is achieved, and claims can be made

Understanding the Target Market Determination (TMD) and its importance is crucial when it comes to insurance products. The TMD document details the type of customers for whom a financial product is appropriate based on their likely needs, objectives, and financial situation. This helps insurance companies ensure they're selling to the right people and protecting their interests, a requirement enforced by ASIC.

This move by ASIC marks the first time that stop powers have been exercised due to deficiencies in defining the TMD for insurance. ASIC's stop powers are an administrative mechanism that can halt offers under a disclosure document when there are concerns about product design and distribution obligations not being met.

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