Ten years ago, $10,000 worth of major medical equine insurance may have come with an annual price tag of about $300, says Mike Foy, president of Foy Insurance headquartered in Exeter, New Hampshire.

Today, “you’re paying at least double that,” says Jade Stanbrook, broker, Foy Insurance – Equine Division—and your policy is almost guaranteed to contain broad limitations for emerging high-tech treatments.

Why? It’s simple: “Major medical losses have been outrageous for insurance companies,” Stanbrook says. “For the most part, they never make any money off major medical—they make their money off mortality.”

How are these changes impacting agents and their equine insureds? IA spoke with Foy and Stanbrook to get the scoop on how the equine insurance market has transformed in response to mounting major medical losses over the past decade.

IA: How is technology changing the nature of equine risk—and, as a result, underwriting, coverage and pricing options for insureds?

Stanbrook: Regenerative medicine is the big one, which includes stem cell therapy, platelet-rich plasma, IRAP joint treatment and shockwave. More than ever, vets are using nuclear scintigraphy and MRIs to diagnose ailments. All of that requires the horse to go into the hospital, usually for an overnight stay. These treatments are incredibly effective—they really hasten the recovery process. But they were not people’s go-to in the past.

Back then, your horse may have taken much, much longer to recover, or it may not have recovered at all. For example, if you had a horse with a lameness issue, there were more conservative methods. People still follow some of those conservative methods—stall rest, waiting it out.

But especially for performance horses, not only do people love their animal, they have also spent a pretty penny to get them to the show ring. They want those high-tech treatments, but those high-tech treatments are incredibly expensive. That’s why you’re seeing the cost increase and some of those limitations when it comes to major medical insurance.

Walk me through some of those coverage restrictions.

Stanbrook: The exclusions tend to be for the more expensive types of treatments. Carriers are either placing coverage limitations or they’re adding copays. There have always been deductibles too, but now, a lot of companies’ solution is to also say, “We’ll still offer major medical at a lower cost, but now there’s a 20-40% copay.” That’s pretty hefty compared to what it used to be.

Foy: Is that 20-40% of the entire bill? Or is there a maximum out-of-pocket cost?

Stanbrook: If you have a $10,000 major medical policy, your copays are in conjunction with your $10,000 total for the whole year. And that’s pretty easily blown through if you have a major claim. The copay may apply generally to everything, or it may apply to one specific thing, like diagnostics or nonsurgical treatment. So your $10,000 major medical might last a little longer because you’re paying 20% of it now, but you also have your deductible on top of that.

The blanket exclusions that exist on different policies are not generally as broad as that, although I have seen one company offer no coverage whatsoever for stem cell treatments. Most of them have a cap for treatment—up to $1,000 toward stem cell, for example, and that’s within that general $10,000 or less major medical you may be carrying.

But the companies are getting more critical with excluding preexisting conditions as well. If your horse has a past issue, not only do you have your blanket exclusions and limitations that exist in the policy, but you also have additional exclusions based on that horse’s past health record. And each company can interpret that medical condition in their own way. Sometimes their exclusion wording is very broad, and sometimes it’s more concise. A lot of times, it depends on what exactly that medical issue was.

I’m also finding that more companies want to see more comprehensive, specific pre-purchase vetting paperwork. They don’t want the veterinarian to fill out the generalized forms that we have. There are still some that don’t require it unless there’s been a past medical issue with the horse and they want a more elaborate understanding of what that problem was, but most carriers are heavily scrutinizing those vet forms. It’s more work, it’s more underwriting. It’s no longer as simple as just an application, unless a horse is really healthy.

Foy: As a good example: My family bought a horse, and during the X-ray, we noticed there were bone chips somewhere in the leg. That caused an exclusion to be put on our policy.

Stanbrook: And the thing that kills you is if you had purchased the horse and not had those X-rays done, which is your prerogative, and that horse is perfectly fine because those bone chips haven’t caused any issues, you could have coverage if something happened down the road. It’s very tricky—if anything, ignorance is bliss. Some people buy horses sight unseen from across the country. It can be very, very hard to work with pre-existing conditions, because it can be so incredibly grey.

How does all this translate from a rate perspective?

Stanbrook: One or two companies are still keeping their rates low, but they tend to be incredibly stingy with what they’ll accept in an effort to keep their claims down. They may be a really good fit for someone who just purchased a horse and did a really comprehensive pre-purchase exam that shows that horse is in perfect health. That’s not to say a perfectly healthy animal can’t drop dead or have a major accident tomorrow, because they can. That’s what makes it so tricky to underwrite, because you take all these different things into account—the horse’s usage, their age, their past medical—and you do your best to figure out what’s going to happen with them. That’s just one way carriers are trying to combat those losses.

Other companies have made several small increases over a period of time, and some chose to just make a huge increase all at once. And let me tell you, that’s a tough sell. They may be a great company to work with, they may have great claims servicing, they may maybe even be a go-to for the nicer horses with the people who are willing to pay a little more in order to have a stronger policy. But when you make a huge increase like that, suddenly the other companies that have some of those limitations don’t look so bad.

And then some major carriers have just left the market altogether. It’s a bit more radical than you see in other types of insurance. I’ve seen companies come in really strong, but then they start to experience a lot of heavy losses, and they have to make some radical changes. And that’s tricky as an agent, because you’re constantly looking for that competitive edge.

How are insureds reacting to these changes?

Foy: I guess if you have unlimited funds you can buy everything you need, but by the same token, if you have unlimited funds, I would say don’t even bother buying the coverage.

Stanbrook: That’s definitely the trend—people who have the significant funds tend to make other people insure their horses if they’re leasing them out. The horses that range in value between $10,000 and about $50,000—those are the owners who are usually tapping themselves out a bit more financially to purchase a major medical policy, but they’re also the ones who need it the most, because they typically don’t have those funds saved up on hand. Having a $10,000 medical bill can be a big financial strain.

Foy: My dad always used to say, “Be cautious with people’s money and careful with their kids,” because with insurance, you’re doing what it takes to protect the family. Well, horses and animals are family. Most people don’t want to spend a lot of money on this stuff—they want to spend the right money. Mortality policies are just not standard contract language. Agents need to educate themselves on the differences in policies.

Jacquelyn Connelly is IA senior editor.