TheWall: Insurance: Providing fur kids with accident and illness coverage

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on November 18, 2019 - November 24, 2019.
-A +A

Growing affluence levels around the world have seen more individuals keep pets and treat them as extended family members. An increasing number of millennials prefer to have pets instead of children while senior citizens are keeping pets as companions to help them stay active after retirement.

In Asia, data on pet ownership is relatively scarce, although some indicators of its growth are provided by the pet industry. A Mordor Intelligence report, titled Malaysia Pet Food Market — Growth, Trends and Forecast (2018 to 2023), says the region’s pet food sector grew 5.54% year on year in 2017 and Malaysia was seeing higher pet food sales. It points out that e-commerce platform Lazada started with 30,000 pet products in 2012 and grew that to six million in 2017.

MSIG Insurance (M) Bhd chief operating officer Jennifer Hsu says the company observed this lifestyle shift a few years ago. She also noticed that pet shelters were mushrooming and more Malaysians were treating their pets like members of the family.

“We recognised this lifestyle change, especially among those who live in Kuala Lumpur and other urban areas. So, as a general insurer, on top of providing the usual coverage for houses and cars, we thought that people should have the option of insuring their pets,” Hsu tells Personal Wealth.

She points out that a typical pet owner spends about RM750 a year on average on medical expenses. This does not include annual medical check-ups, vaccinations, critical illness costs and spaying and neutering procedures, which can end up being quite costly.

In November 2017, MSIG launched the country’s only pet insurance policy. Hsu quips that the timing was ideal because the following Lunar New Year was the Year of the Dog, which helped the insurer push the cause forward.

She says there are currently more than 100 cats and dogs insured under the policy. “We think there is potential to develop the product further. But at this time, it is just an option for people interested in insuring their pet cats and dogs.”

When MSIG was structuring the policy, its goal was to create a policy that Malaysians could relate to. So, it came up with a product that closely resembled its personal accident (PA) insurance policies.

“If you look at how we have positioned the benefits, we are providing medical coverage, followed by accidental death, and all the way down to things like burial and third-party liability. It is not so different from the coverage for human beings,” says Hsu.

“The coverage is similar to what we offer human beings under our PA or medical insurance so that people can relate to the coverage structure and purpose. We figured it would probably be an easier starting point for Malaysians to understand what pet insurance is all about.”

There are three plans under MSIG’s pet insurance policy, with annual premiums ranging from RM212 to RM530, depending on how extensive a coverage the pet owners want. Pets need to be between 12 weeks and 9 years old, microchipped, duly licensed and not on the country’s list of banned or restricted breeds.

“We did not want to make the policy complicated and define premiums based on breed, age and gender of the cats and dogs. So, with three simple plans, pet owners have the option of selecting a higher or lower limit for their coverage,” says Hsu

The age of the pet is capped at nine years old because that is the level of risk that the insurer is able to undertake, she adds. “Policies and products are always reviewed. If there is a sustainable proposition to take it beyond the nine years, we will definitely look at it. But because it was something new, we needed to make sure that we knew what we were accepting as risk.

“Anything beyond that age range is subject to prior underwriting by us, as to whether we wish to accept that particular risk. It is on a case-to-case basis, but that scenario has not cropped up yet because the policy has only been around for two years.”

Only cats and dogs are currently eligible for this policy, says Hsu. “We want to make sure that the product is sustainable for a while and because it is new, we need to have sufficient understanding of the two most popular pets before we extend coverage to other pets. We need to understand the illnesses that pets like parrots, iguanas and hamsters are likely to have, for example. Cats and dogs are the two most common pets, so that gives us economies of scale to warrant this product.”

The differentiating factor between the three plans are the claim limits for veterinary and surgical fees to cover treatments for injuries and illnesses, death from injury or illness, boarding kennel and cattery fees and third-party liability. The claim limit for burial or cremation costs and advertising and reward costs for the recovery of a missing pet is the same in all three plans, which is RM1,000.

The pet insurance policy also covers third-party liability, which ranges from RM50,000 to RM100,000. Hsu highlights that there is a RM1,000 deductible when it comes to third-party liability coverage, which means the policy owner has to bear the cost for the first RM1,000 worth of loss.

“Let’s say the claim comes up to RM5,000. The first RM1,000 is paid by the owner and the balance is paid by us. As we know that some owners let their pets roam around on their own, the policy will be triggered if someone gets hurt or their property is damaged and the pet has been proven to be liable,” she says.

A unique benefit of the pet insurance policy is the boarding of pets upon hospitalisation of the owner. Hsu explains that the coverage is for pet owners who have to be hospitalised for more than four days. “Due to the hospitalisation of the owner, sometimes pets need to be placed in boarding kennels. So, we decided to add that as a benefit of the policy.”

The microchipping challenge

In Malaysia, it is not common practice for pet owners to have their cats and dogs registered with the local council. The number of pets that are microchipped is even smaller.

Hsu says some of those who are interested in taking up the policy back out when they learn that their pet needs to be microchipped. She believes that the resistance is due to a lack of awareness of the benefits of microchipping.

A microchip that is roughly the size of a grain of rice is used as a method of electronic identification. It is injected between a pet’s shoulder blades at the back of its neck. Each microchip stores an identity number unique to each pet, like the MyKad for Malaysians. However, it does not act as a tracking device in the event that the pet goes missing and is picked up by the authorities. A microchip scanner is used to identify the pet.

The microchip is essentially a radio frequency identification (RFID) chip. So, it can last the pet’s lifetime. Typically, each microchip number is recorded in a database, with details of the animal and its owner. This can aid in pet ownership disputes as well as in the event that the pet’s collar goes missing or is stolen.

Hsu says microchipping is the major challenge the insurer faces when acquiring new customers because of the way the pet industry is governed, as pet microchipping is not compulsory. “Many consumers do not see the need to have their pets microchipped. But we require it as part of the policy’s eligibility because we do not want any disputes at the point of claim.”

Another reason for microchipping is to weed out non-genuine pet owners and those who may misuse a pet to take advantage of the insurance policy. Hsu says a responsible pet owner would be happy to take the time and effort to get the pet microchipped.

She also points out that when a cat or dog gives birth to a litter of kittens or puppies, the newborns tend to look alike. So, some owners may only insure one from the litter. “By right, you should insure all of them, not just one. So, if there is an accident or claim, we do not want to get into an argument about which pet was insured. The whole purpose of microchipping your pet is the identification process and so that there is no dispute.”