Lemonade announced its launch of pet insurance today, saying approximately 70% of its existing renters and homeowner policyholders have pets. The new coverage starts at $12/month with a 10% discount available if pet owners bundle pet insurance with a Lemonade renters or homeowner policy.
With its announcement, Lemonade joins other major companies entering the U.S. pet insurance market. In the last year alone, MetLife acquired PetFirst Healthcare, NSM Insurance Group acquired Embrace Pet Insurance, Synchrony Financial acquired Pets Best Insurance to pair with its pet care financing subsidiary, Care Credit, and Zoetis launched Pumpkin Pet Insurance. Others, such as Bought By Many, which announced an investment of nearly $100M from venture capitalists and strategic partners this Spring, have their eyes on entering the U.S. pet insurance market soon.
What’s with all the buzz?
The U.S. pet insurance market is still relatively new. A handful of pet insurance providers existed in the U.S. until the last decade, when new entrants began offering holistic accident and illness coverage in place of coverage that limited reimbursement for each type of veterinary procedure. In recent years, pet insurance has become much more consumer friendly: phone applications are used to file claims, waiting periods are waived for puppies and kittens, routine care is covered, and veterinarians are available on-demand for free consultations.
U.S. pet insurance executives and investors commonly draw comparisons between the U.K. and U.S. markets. In the U.K., there are approximately 85 pet insurance companies and over 25% of dogs are insured. In the U.S., there are only approximately 15 pet insurance companies and only 2% of dogs are insured. The argument: if the U.S. pet insurance market grows in line with the U.K.’s market, another 30 million pets will be insured. That is the equivalent of over $15B in total available annual insurance revenue opportunity.
So why hasn’t growth happened yet?
Growth of the U.S. pet insurance market hinges on the product’s awareness and acceptance.
The awareness issue is readily being solved. Announcements such as Lemonade’s increase the product’s visibility substantially. As new pet insurance offerings become available, companies such as Lemonade and Zoetis pour advertising dollars into their sale. Similarly, as pet owners hear their family, friends, breeders, adoption groups, and veterinarians discuss pet insurance more, they develop a greater understanding of the product’s potential value in hedging financial risk.
Pet insurance acceptance is largely dependent on coverage quality and veterinary endorsement. Pet insurance companies are working hard to streamline digital enrollment experiences, improve customer support functions, and develop coverage options that align with consumer preferences. Marketplaces, like Pawlicy Advisor, also play a key role in collaborating with veterinarians to ensure the pet insurance market evolves in ways veterinarians approve.
Simply put, the product acceptance issue is also readily being solved too and the U.S. market is at an inflection point, primed for significant growth.
Overview of Lemonade’s Coverage
New York State insurance filings provide a clearer picture of Lemonade’s new pet insurance offering.
Similar to other companies, Lemonade offers an Accident & Illness policy with the option for wellness coverage for an additional fee:
- The coverage appears industry standard, covering diagnostics, procedures, and medications for accidents and illnesses.
- The wellness add-on policy covers a capped amount of the annual costs for wellness exams, heartworm tests, parasite tests, bloodwork, and up to three vaccines.
- The reimbursement rates are 70-90% and deductibles are between $100 and $500 (which is industry standard).
An interesting point to note, Lemonade separates exam fees and physical therapy for accident and illness-related conditions as custom add-ons for an additional fee. These features are commonly included by other providers instead of being offered as an additional coverage option. For some pet owners, this customization may be a nice value-add, allowing them to trim down plans to their desired features.
The base price for Lemonade pet insurance in New York is closer to $25/mo than the $12/mo cited in Lemonade’s press release. It is common for insurance companies to modify pricing based on geographical location, which is related to regional pet health risks and veterinary treatment. This is something all U.S. pet insurance companies do. The $12/mo cited by Lemonade is likely available only in select locations. Most insurance providers charge a higher price in New York than in other states, and an even higher price for those pet owners living in the New York City area. Lemonade’s pricing is no different: insurance starts 50% higher—at $38/mo—for pets in downtown Manhattan and Brooklyn (sorry, city dwellers).
Also similar to other pet insurance offerings, Lemonade’s pet insurance varies pricing by breed. For example, a Lemonade-insured French Bulldog is 63.7% more expensive than a Lemonade-insured Beagle. Price differences exist because many breeds have unique health risks.
What we like about Lemonade’s pet insurance coverage
Lemonade loops mixed breeds into generic buckets instead of listing specific mixed breeds independently. For example, if you have a Labrador Mix, you would enroll him or her in Lemonade pet insurance as either a Medium Mixed Breed or a Large Mixed Breed depending on weight. There is no “Labrador Mix” in the breed selection. From a pricing perspective, this should help owners of riskier mixes (typically larger breed animals) save money on their insurance. Its filings show Lemonade reduces its base insurance price by 17% for medium mixed breeds, for example. Since 60% of pets are mixed breed animals, a large number of pet owners could benefit.
Lemonade also follows an insurance industry trend, which is to bundle insurance products to reduce insurance premiums. Lemonade Renters and Homeowner’s policyholders are eligible for a 10% discount on their pet insurance. Many pet owners will likely take advantage of this opportunity. Other pet insurance providers offer discounts, but they are typically given to owners of multiple pets or allocated to strategic distribution partners.
Lastly, Lemonade features $50,000 and $100,000 annual coverage limit options. An annual coverage limit is the maximum amount of money an insurance company will pay out annually for veterinary treatment. Most pet insurance providers offer between $5,000 and $15,000 or Unlimited annual coverage options. Since even the largest insurance claims are typically under $100,000, these two new options help save pet owners on their insurance premiums while providing significant protection against the most expensive veterinary procedures.
What could be improved
The price of Lemonade’s pet insurance is less favorable in other regards. For example, Lemonade is the only pet insurance provider we have seen who has made insuring long-haired breeds more expensive. For example, according to state filings and a test of Lemonade’s website, pet insurance for a “Long-haired Chihuahua” is 67% more expensive than pet insurance for a “Chihuahua.” Similarly, insuring a “Long-haired Dachshund” is 22% more expensive than insuring a “Dachshund.” Logically speaking, Lemonade is trying to accurately price its insurance and may believe a long-hair trait is affiliated with health risks arising out of breeding practices. In practice, however, most veterinarians and pet owners do not decipher between short-hair and long-hair breeds in medical records and the average pet owner may unsuspectingly pay thousands more out of pocket by selecting a more expensive version of his or her pet’s breed.
Lemonade’s wellness program also offers narrower coverage than industry peers’ wellness programs. Lemonade does not cover dental cleanings or spay/neuter procedures, for example. At Pawlicy Advisor, we often receive requests from pet owners who want coverage for these conditions and they are often covered by other insurers’ wellness programs.
Finally, most pet owners are unaware pet insurance prices typically increase as pets age. As pets age, their health risks increase, and insurance companies need to raise their prices to account for these risks. Most pet owners who cancel pet insurance cancel because of its cost. While Lemonade’s pricing at enrollment for pets is stable for the first few years of a pet’s life, pricing can increase to a projected five times higher over the course of a pet’s life. The largest projected annual price increase we identified was 30%. It’s very important pet owners understand insurance costs not just in terms of cost today, but in terms of cost over a pet’s typical lifespan to ensure they can afford coverage over time.
Is Lemonade's Pet Insurance Worth It?
Lemonade's pet insurance offering is solid option on par with the rest of the industry. Lika all pet health insurance plans, it really depends on a variety of variables. Your dog or cat's breed-specific risks play a huge role in what provider's coverage option is best. Of course, location, age, pre-existing conditions also matter here.
If you're a single-pet parent who already has Lemonade's homeowners or renters insurance, their new pet insurance could make sense since you'll get a 10% discount. If you're a multi-pet parent, several other companies will give you a 10% discount too, and their coverage/pricing might be a better fit depending on your unique pet.
At Pawlicy Advisor, we offer objective education and data-driven pet insurance comparison. Our algorithm scans and prioritizes recommendations based on breed-specific risk factors, age, location, and the fine print in each provider’s policy. This enables us to rank insurance policies across top providers by lifetime cost and coverage value for each unique pet.
Since Lemonade's pet insurance just launched, they're unfortunately not on Pawlicy Advisor's marketplace yet. If you're considering pet insurance and want to know which plan is best for you, I'd recommend you use Pawlicy Advisor to scan top providers and see what your quotes, discounts, and recommendations are. This will also help you understand what factors you should be looking for in an insurance policy for your particular breed. Then, request a quote from Lemonade and compare.