Between the Lines

Pet Insurance Is the Only Working Health Insurance Market in the U.S.

There’s an opportunity to build a U.S. insurance business that actually prices according to risk

Photo: Tim Macpherson/Getty Images

The American health insurance market looks nothing like what you’d design if you were starting from scratch. The dominant payment scheme — employer-provided health care — is literally a vestige of regulatory arbitrage allowing companies to evade wage controls in World War II.

If you’ve ever wanted to redesign health insurance from scratch, good news! Pet health insurance operates under a completely different regulatory regime, and we’re in the early days of the market — the very early days, with pet insurance penetration in the United States close to 1%.

There are several reasons to expect the pet insurance market to grow:

• Pet ownership is rising.
• Spending per pet is rising — there’s a macro argument here, that pets act as a substitute for kids, and they’re increasingly favorably priced relative to the alternative.
• Pet health care is advancing, just like human health care is, and in modern economies advanced health care mostly consists of expensive health care. There’s a back-and-forth…