Adverse Selection

by Pawlicy Advisor
Pet Insurance Terms
Adverse Selection

What is Adverse Selection?

Adverse selection is an imbalance between higher-risk, sick pets and healthy pets, who may require less coverage, under a pet insurance company’s coverage. Adverse Selection can lead to higher premiums for all pet insurance customers as there is a disproportionate amount of claims from the greater number of pet parents who have their higher-risk pet covered. This can lead pet parents with healthier, lower-risk pets to seek out less expensive coverage policies or skip buying pet insurance at all.

How Adverse Selection Works

When adverse selection is prominent within a particular insurance market, like pet insurance, it can lead to fewer insurance companies, fewer insurance plans offered, and higher premiums for the plans available. This can lead to lower risk, healthier pets being taken off their pet insurance plans.

However, with pets living longer, and longer lives, quality veterinary care will be necessary to help them live a happy and healthy life. This is why pet insurance is still a benefit for many pets. Unfortunately, we never know when the worst could happen to our pets and many pet insurance plans don’t cover pre-existing conditions, so having a plan in place as soon as possible is financially savvy and a way to give yourself peace of mind no matter how healthy your pet may currently be.

Key Takeaways

  • Adverse selection occurs when there is a much higher rate of high-risk, sick pets with pet insurance plans than lower risk, healthier pets.
  • Adverse selection can lead to more uninsured pets, not protected by pet insurance should the worst happen.
  • Whether your pet is high risk or currently healthy, pet insurance is still a great way to protect your pet and yourself financially should the worst happen.

Related Terms

Affiliate Commission
Affiliate commissions are referral fees that a pet insurance company, marketplace, blog, or another source may earn from referring new customers.
Read More.
An agent is an individual authorized to act on behalf of someone else or an organization, such as a pet insurance company.
Read More.
Age Restriction
Age restrictions are put in place by pet insurance companies and refer to when you can or can’t insure your pet based on their date of birth.
Read More.

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