California Adds First-of-its-Kind Pet Insurance Regulations

California became the first state to impose basic requirements for pet insurance Tuesday under a new law signed by Gov. Jerry Brown.

AB 2056 requires pet insurers to disclose basic information about their policies like reimbursement benefits and pre-existing condition restrictions. It also forces insurance companies to give customers a 30-day “free look” period, during which they can return their policy for a full refund.

The pet insurers – who will be part of a $750 million industry by 2015 – must offer a clear explanation of coverage limits such as coinsurance, waiting periods and deductibles.

The California Department of Insurance, a supporter of the law, says the changes address a growing number of complaints they have fielded about the industry. Policyholders have told the CDI they need help paying for sick or injured pets because they learned too late that their policy’s exclusions outweigh the benefits.

For example, CDI officials cite the experience of California resident Gary Lucks, who bought pet insurance after reading marketing materials advertising a 90 percent reimbursement rate. In reality, his insurer only covered 90 percent of the plan’s benefit schedule allowance.

When his dog was diagnosed and treated for cancer, Lucks was only reimbursed one third of the cost.

The CDI says AB 2056 will help pet owners like Lucks make better decisions by understanding what they are getting for their money.

“In the state with the largest number of insured pets, once again California is leading the way by becoming the first state in the nation to enact a law that adds consumer protections to this rapidly growing line of insurance,” said Insurance Commissioner Dave Jones.

A similar measure crossed former Gov. Arnold Schwarzenegger’s desk during his tenure, but he vetoed it. In July, the latest version passed the state Assembly with a unanimous vote.

Only about 1 percent of pet owners in the U.S. hold insurance policies, and Americans spend more than $15 billion every year on veterinary care, the CDI reports.

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