A recent 154% year-over-year increase to my 10 year old dog’s policy premium from Healthy Paws Pet Insurance had me wondering what in the world had caused such a massive rate hike. Not satisfied by the generic responses the insurer was giving me, I started digging into their rate filings with the California Department of Insurance¹. This is the story that those rate filings reveal.

Brand Entities, Insurers, Underwriters

A brand entity is the face of the insurer. They’re the ones you interact with for claims processing, whose customer service reps you talk to, whose webpages and apps interfaces you use, whose marketing material earned your business. They manage the insurance program and they’re whom you, the customer, have a relationship with.

Under the brand entity lies the true insurer, the entity that has the actual underwriting know-how, the one that builds pricing models, sets the premium for the policies by evaluating risk factors and that ultimately assumes the risk for you.

Sometimes the brand entity and the insurer are part of the same company. At other times, as in the case of Healthy Paws until 2024, the branding entity sells products underwritten by third-party insurers.

In 2024, Chubb, which by then was the exclusive insurer for Healthy Paws Pet Insurance (HPPI) underwriting policies through its Westchester Fire Insurance Company (WFIC) subsidiary, bought Healthy Paws, bringing the branding entity (HPPI) and its exclusive underwriting insurer (WFIC) under ownership of the same parent company (Chubb).

Rating Manuals, Algorithms, Rate Factors

Through rate manuals and the rating algorithms contained within them, insurers document how they classify risk and the rules for how they calculate the applicable premiums associated with that risk. The rating algorithm is like a formula that contains rating variables aka rate factors that each can take on a range of values. A consumer’s rate, calculated using the rating algorithm, by plugging in specific values into the rate factors, can vary significantly for risks with different characteristics.

As a concrete but fictitous example, the rating algorithm for pet insurance might contain a rate factor to account for species of pet. The algorithm will start with a base rate for all pets, let’s say $Base Rate = \$10$. Then the rules in the manual might state that the common house geckos have a species rate factor value of 0.3, cats 0.64 and dogs 1.

  species species_rate_factor
1   gecko                0.30
2     cat                0.64
3     dog                1.00

If this was the only rate factor present in the rating algorithm, the premium for a gecko would be $Base Rate * 0.3 = \$10 * 0.3 = \$3$, the premium for a cat would be $Base Rate * 0.64 = \$10 * 0.64 = \$6.40$ and the premium for a dog would be $Base Rate * 1.0 = \$10 * 1.0 = \$10$.

  species species_rate_factor premium
1   gecko                0.30  $ 3.00
2     cat                0.64  $ 6.40
3     dog                1.00  $10.00

What this insurer is saying by assigning these particular values in this case, is that dogs are riskier to insure, i.e. they are more likely to get into an accident or have an illness where they will call upon the insurer to pay for some of the expenses associated with the accident/illness, as compared to cats or geckos. Because dogs are riskier, they pay a higher premium than cats or geckos, for the same level of insurance.

Part I: The Market Capture

Since 2010, the Healthy Paws Pet Insurance (HPPI) brand has sold policies in California underwritten by four different insurers, the latter three insurers being subsidiaries of the same parent insurance company.

HPPI launched by selling policies underwritten by Markel American Insurance Company (MAIC)² . These were HPPI’s prototype policies in California, sold in the 2010 - 2015 time frame.

Between 2012 and 2015, HPPI started selling policies exclusively underwritten by either ACE American Insurance Company (ACE) or Indemnity Insurance Company of North America (IICNA).

Both these companies were part of ACE Limited (which after it acquired Chubb in 2016 adopted the Chubb name).

ACE and IICNA were eager to gain market share at this point in time.

In their new program filings in 2012 and 2015 respectively, both ACE and IICNA mentioned that their proposed programs were a copy of the program already being offered by their competitor MAIC, but with a few deviations.

A Deviation: Pet Age Factor Locked In at Policy Start

ACE (2012)

… with the following deviation to assist with competitiveness of this program. The pet age factors will apply at the new business pet age and will not increase over the life of the pet.³

IICNA (2015)

Modified pet age factors that will apply at the new business pet age and will not increase over the life of the pet.⁴

Rating Formula (MAIC, ACE 1.0, IICNA 2.0) =
1) Base Rate
2) x Age of Pet Factor
3) x Breed of Pet Factor
4) x Zip Code Factor
5) x Co-insurance Factor
6) x Deductible Factor
7) x Weight Control Risk Management Factor
8) x Affinity Group Sponsorship Factor
9) x Employer Group Benefit Factor
10) + Administrative Expense Fee

This deviation meant that where the competitor (MAIC) would increase the age rate factor, hence the premium, every year over the lifetime of the pet being insured, ACE and IICNA would set the age rate factor once based on the pet’s age at policy start, then keep it at that constant value for the lifetime of the pet if the policy was continuously renewed.

The plot below visualizes how this manifested for three example pets who were insured continuously starting at ages 0, 5 and 8 years old.

Figure 1: Pet Age Factors Compared - MAIC (dark slate), ACE (red) and IICNA (yellow). For a pet insured continuously since (A) 0 years old (B) 5 years old (C) 8 years old.

ACE (red) would undercut the competition no matter what age a pet was insured at. IICNA (yellow), who entered a few years later, undercut the competition for pets who were insured at younger ages - their pricing was no longer competitive for pets insured at 8+ years old.

HPPI continued to sell policies underwritten by ACE and IICNA up through 2018.

Their sweet deals, as discussed in Part I, were designed to lure customers in order to gain and retain market share across all-aged (ACE) or younger-aged (IICNA) pet market segments.

In 2017, IICNA increased their pet age rate factor on pets 1 year or younger, but these new numbers only applied to new business, the existing policy-holders who had insured their pets at ages 0 or 1 year old didn’t see the effect of this change, they remained locked in on legacy rates that were grandfathered in.⁵

Part II: A Sleight of Hand

In 2018, Westchester Fire Insurance Company (WFIC), a third Chubb subsidiary, entered this scene

HPPI+Chubb, through ACE and IICNA, had by this time gained significant market share. Based on their 2019 filing ⁶, at year end 2018, ACE insured 18,504 pets and IICNA insured 71,275 pets for a total premium of $51M which corresponded to approximately 20% of the California written premium at the time.

They were possibly entering a new phase in which managing losses was higher priority than capturing market share.

With the severe price undercutting they’d done in the earlier phase, they might have needed some pricing adjustments to balance their insurance equation.
$Premium = Losses + Expenses + Profit$.

But with that pesky locked-in age rate factor that they’d explicitly coded into their rules that would remain constant through the lifetime of the pet, their hands were tied. They needed a clean slate, free of the shackles of this locked in age factor.

The Clean Slate: WFIC’s New Program

Premium Calculation Algorithm (WFIC, 3.0):
[[ (1) Monthly Base Loss Cost
x (2) Pet Type Factor
x (3) Breed Factor
x (4) Gender Factor
x (5) Territory Factor
x (6) Age at Anniversary Factor
x (7) Coinsurance Factor
x (8) Deductible Factor
x (9) Policy Limit Factor ]
+
[ (10) Claims Fee Base Loss Cost
x (11) Frequency Pet Type Factor
x (12) Frequency Breed Factor
x (13) Frequency Territory Factor
x (14) Frequency Age at Anniversary Factor
x (15) Frequency Coinsurance Factor
x (16) Frequency Deductible Factor
x (17) Frequency Policy Limit Factor ]]

x (18) Age at Inception Factor
x (19) Loss Cost Multiplier

= Final Monthly Premium

[A] A More Sophisticated Rating Algorithm

In its new program rate filing in 2018 ⁷, WFIC published a more sophisticated rating algorithm than the rudimentary one used by its predecessors. It was also able to use better-tuned rate factor values based on experience gained in the field by its predecessors.

Of most interest to this discussion, new Age of Anniversary and Frequency Age at Anniversary factors were introduced, factors that would increase every year based on the age of the pet that year. This was an algorithm unshackled by the locked-in pet age factors. They also kept around the concept of the original age factor, renamed to Age at Inception Factor, whose value was determined at policy inception then held constant.

[B] More Policy Parameter Choices

The new program also offered more policy parameter choices around deductible, co-insurance and premium limit amounts.

In conversations with the regulator detailed in the next section, WFIC focused exclusively on [B] when discussing what was different between WFIC and ACE/IICNA’s programs.

The Conversations: WFIC Responds to the California Department of Insurance (CDI)’s Objections

🐭 2018-10-29 WFIC
“Note that once this proposed new program is approved, all new business will be written using the proposed program. As the proposed program is for new business only, this filing will not impact current policyholders in the older programs.”

😼 2018-11-01 CDI
“Previously you indicated in the General Information section of the filing that this program is for an Affinity Group which includes 831 employers. Please clarify if this new program is for an Affinity Group or if you will be only offering it to new business.”

😼 2018-11-06 CDI
“You have advised this new submission is for new business only. Please advise if you plan to move the policy holders from you current program to this new program in the future.”

🐭 2018-11-08 WFIC
“No, we are not moving existing policyholders to the new program.”

😼 2018-10-22 CDI
“There are currently two other Pet Insurance programs written by Chubb, one with Indemnity Insurance Company of North America and another by ACE American Insurance Company. Please provide us with the coverage differences between these programs and this new program submission.”

🐭 2018-10-29 WFIC
“The proposed program offers various policy limit options whereas the older programs only offered coverage on an unlimited basis. The proposed program also offers deductible options above $1,000, whereas the older programs did not.”

😼 2018-11-06 CDI
“It has come to our attention you are calling the current pet program under Indemnity Insurance Company and ACE American Insurance Company, as well as this new submission by the same program name, Healthy Paws. This new program should be under a different program name since it is separate and different from your current program.“

🐭 2018-11-08 WFIC
“This program will be called Pet Insurance Program”.“

😼 2018-11-08 CDI
“The following forms list the program name for this coverage as”healthypaws” Pet Insurance: LD-50812, Pet Insurance Policy LD-50811, Pet Insurance Policy Declarations Page LD50793, Pet Health Insurance Notice The new program filing must include a copy of the forms that will be used and the form must contain the correct program name. Please provide us with this information as soon as possible so we can continue our review of your filing.“

🐭 2018-11-14 WFIC
“Chubb respectfully requests that the Department accept the forms as submitted using the “Healthy Paws Pet Insurance Name” for the following reasons. All forms that will be used have been included in the filing and Chubb maintains that these forms contain the correct program name. “Healthy Paws Pet Insurance” has been the name of this pet insurance product since 2009. Consumers throughout the United States know the program by that name. The forms we have submitted are being used on a countrywide basis to preserve consistency and brand integrity for Healthy Paws customers. Maintaining state-specific versions of these forms would result in increased costs (which would be passed to California consumers) and additional administrative burdens. We also note that the name of the insurance company providing the insurance appears on the relevant forms and is conspicuous throughout the customer buying experience. Based on the foregoing, we would appreciate it if the Department would please accept “Healthy Paws Pet Insurance” as the program name and continue its review of this filing.“

😼 2018-11-14 CDI
“We have discussed the matter with our Bureau Chief and we are fine with your request. However for our record keeping purposes it would be helpful if you would could distinguish between the program with a number or letter for the different companies.

🐭 2018-11-19 WFIC
“We would like to use Healthy Paws 3.0 as the name for this program for recordkeeping purposes. The coverage differences we had pointed out applied to both of the older programs…“

😼 2018-11-19 CDI
“After discussing this matter with my Bureau Chief last week we have determined we need a side by side comparison of all three programs so we can determine if there are significant coverage differences between the three programs. The explanation you have provided in your response is not sufficient.”

😼 2018-11-28 CDI
“We have reviewed your coverage comparison chart but do not note any significant coverage differences between the three programs. In light of our interest to have more Pet Insurance coverage available in California, we will approve your filing, however in the future any new programs will have to contain either mutually exclusive guidelines or significant coverage differences.”

To summarize, CDI asked WFIC:

Is this new program for new business only? WFIC responded yes and that existing policy holders in older programs would not be impacted. This, in hindsight, would prove to be untrue.
What is different about this program as compared to the existing programs? CDI’s position was that if it’s a different program, it should have significant differences and that it should be identified by a different name.
- WFIC’s reponse on the differences question was to point to minutiae related to section Section 2.1.2 above without explicitly mentioning Section 2.1.1. The new rating manual that they were proposing was part of the filing, so CDI could have connected the dots regarding Section 2.1.1.
- On the naming question, WFIC convinced the regulator that for brand recognition reasons the name of the new program should be the same as the existing programs, i.e. “Healthy Paws” just with a 3.0 versioning suffix. This would set the stage for an easy switch in the future.

The Switcheroo: ACE & IICNA Policy-Holders Forced into WFIC as New Business

WFIC’s new sophisticated, age-factor-unlocked program, sold under the guise of increased policy parameter choices to the regulator and anyone in the public paying attention, was approved at the end of the 2018 calendar year
In 2019 WFIC matter-of-factly filed to get CDI approval to transition over the existing policy-holders from ACE & IICNA over to WFIC. ⁸, They did the exact thing they claimed they were not planning to do in the conversations in the previous section.
Transition, roll-over, whatever euphemism they used, in actuality, existing policy holder policies were cancelled and rewritten into WFIC, so they were conveniently ‘new business’. No grandfathering of rates based on what had been promised to the policy holders when they bought those policies. Policies were transitioned at policy anniversaries starting on October 20, 2019.
In the filing seeking the approval for the transitioning, Chubb maintained that CDI had asked them to consolidate the three programs. I did not find anything in the filing documents that supported this claim, but there may have been back room conversations that were not made part of the public record.

🐭 2020-08-11 WFIC
“As you may recall, last year we worked on addressing the fact that Chubb Group had 3 Pet insurance programs and the CDI requested that it consolidate its programs into a single program. Chubb agreed to do so and initiated rolling over two of its programs into its Westchester Fire Health Paws program…”
They threw a bone. It amounted to asking CDI to rate cap their increases for three years to ease in the price change. They ended up getting approval for two of the requested three years, the second year of which was the pandemic year. So they earned some kudos for caring (and likely some pandemic pet policies to help offset their losses due to kindness).

🐭 2020-08-11 WFIC
“This rollover, however, would have a significant premium impact on some policyholders, so the Department agreed to permit a phase in of the premium rate increases…”
In the cover letter requesting this capping for the second year, a bit of truth made it out, that the real difference in the three companies was a significant difference in rates. And an admittance that older pet policy-holders were a captive customer base without any other options due to pre-existing conditions.

🐭 2020-08-10 WFIC
“Given the difference in rates between the three companies, WFIC initially requested to cap premium increases for a period of three-years…
Obtaining coverage from another insurer may not be a realistic option for many of these pet parents, especially if their pets have preexisting conditions or are at an age that that will likely not be covered by a new insurer.”
Pre-existing Conditions

Switching pet insurers becomes harder over time. This is because anything, not just an illness/injury treated or claimed with the original insurer, but even a symptom or treatment merely discussed with the vet, that is on the pet’s medical record prior to the coverage start date with the new insurer becomes a potential pre-existing condition, thus a potential exclusion under the new insurer. Many insurers also have maximum pet age limits on new business.

By the end of 2020, the transition, and receiving approval for the second year of rate-capping to ease the transition was complete. The “switcheroo” was done. Chubb used Healthy Paws Pet Insurance’s well-established brand value and trust to effect a fundamental underwriter policy change that was a complete about-turn from what had earned HPPI its reputation and, now captive, customer base.

In 2021, WFIC continued to push the limits on creative pricing strategies by getting a rate filing approved that would allow it to automatically increase base rates every year up to an approved limit, without having to make rate filings to have these increases approved. ⁹

🐭 2020-08-10 WFIC
“Due to this being health insurance for dogs and cats, loss costs will be susceptible to veterinary medical trends which we estimate to be compounding at a rate of up to 9% per year. A trend factor of up to $(1+0.09)^(x/12)$, where x is the number of months since the effective date of this filing, may be applied to this base loss cost to account for the aforementioned inflationary effects.”

This change was approved, but soon after retracted on request by CDI.

😼 2022-10-04 CDI
“It has been brought to the attention of our Bureau Chief, Mr. David Li, that we have approved an inflation factor (up to 9%) in the Westchester Fire Pet Insurance filings (#18-4792 and #20-3401) State Exception Page (please see attached). As we have disallowed the use of inflation factors for premium trending in other pet filings, Mr. Li has decided Westchester Fire should also remove the inflation factor for this Pet Insurance program. Please submit a filing at your earliest convenience to remove the inflation factor from the State Exception Page.”

WFIC complied by not using the auto-adjusting rate factor related to vet inflation for the next couple of years and then removed it in a subsequent filing in 2024¹⁰. It continued to tune its algorithm’s rate factor values for better pricing and loss reduction.

In 2024 ACE and IICNA, now down to zero policy holders since the forced transitions of its policy-holders to WFIC in 2019 and 2020, withdrew their programs.¹¹ ¹² WFIC was now the only Chubb player in the state.

In 2025 within 6 months from getting their prior rate filing approved, WFIC got yet another rate filing approved ¹³. The big theme in this latest revision was a change in the pet age factor curve used specifically by California to force quit older pets.

Part III: Twisting of the Knife on Older California Pets

For a 10-year-old dog living in a high cost of living zip code in California, who was insured continuously since she was 4 months old under the original IICNA 2015 rating rules, the hope was a long, adventurous life where misadventures would be protected by a premium driven by that mellow yellow age factor, locked in at a low 0.85.

That was the plan. In reality, she experienced the lighter blue curve starting at age 5 years, when she was force-rewritten into the WFIC 2018 rating algorithm. Then in 2025, at age 10, she got tossed up even higher onto the dark blue line, corresponding to the California exception rates WFIC was approved for. She was put on a premium trajectory impossible to justify. She was far from the only one.

It was a crafty, well-executed, legal?, ruthless play: a cohort was reeled in, retained, rewritten, then quietly priced out.

Figure 2: Pet Age Factors Experienced by Lyra - IICNA 2015 until 5 years, WFIC 2018 5-10 years, WFIC 2025 10+ years

Figure 3: Future premiums assuming no changes to rate other than from Lyra aging by a year every year

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Footnotes

California state filings can be accessed by the public at the System for Electronic Rates & Forms Filing (SERFF) website. SERFF is maintained by NAIC, the National Association of Insurance Commissioners. To access a pet insurance filing for California referenced in this post: Navigate to SERFF - CA, Click on the ‘Begin Search’ button, Click on the ‘Accept’ button if you accept the terms, In the resulting form, for Business Type, select ‘Property & Casualty’, For Type of Insurance, select 09.0 Inland Marine, then ‘Close’, In the SERFF Tracking Number field, enter the SERFF ID of interest, Click on the result to reveal the filing and supporting documents↩︎
File No. 10-2837, SERFF MRKC-126573195, NEW-PROGRAM filing by MAIC↩︎
File No. 12-8028, SERFF PERR-128748772, NEW-PROGRAM filing by ACE↩︎
File No. 15-3965, SERFF ACEH-130039428, NEW-PROGRAM filing by IICNA↩︎
File No. 17-3611, SERFF ACEH-131054142, RATE filing by IICNA↩︎
File No. 19-2234, SERFF ACEH-131976407, RULE filing by WFIC↩︎
File No. 18-4792, SERFF ACEH-1316346842, NEW-PROGRAM filing by WFIC↩︎
File No. 19-2234, SERFF ACEH-131976407, RULE filing by WFIC↩︎
File No. 20-3401, SERFF ACEH-132536766, RATE filing by WFIC↩︎
File No. 23-1365, SERFF ACEH-133665486, RATE filing by WFIC↩︎
File No. 24-1128, SERFF ACEH-134128283, WITHDRAWAL filing by ACE↩︎
File No. 24-1186, SERFF ACEH-134128313, WITHDRAWAL filing by IICNA↩︎
File No. 24-2456, SERFF ACEH-134339049, RATE filing by WFIC↩︎