Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of Pet Insurance
Transcript
- Lucas: So we've spent the last twenty episodes proving that your raise is finally beating the cost of everything from jeans to used cars. Today, let's tackle one that hits a little closer to home for a lot of people: pet insurance. Luna: Oh, I actually just got a quote for my golden retriever last week. I was surprised it wasn't as bad as I expected. Lucas: Right, and that's exactly the point. Historically, pet insurance felt like a luxury line item. But if you look at the data from the July CPI report that came out yesterday, the cost of pet insurance is up about 2.1 percent year-over-year, while average hourly earnings are up 2.9 percent. That gap is the whole story. Luna: So the raise is outpacing it by about 80 basis points. That's a real shift. Lucas: Exactly. And it's not just a blip. For the last five years, pet insurance premiums were climbing at 6, 7, sometimes 8 percent annually. Now they've settled into this much more moderate groove. Luna: What changed? Did insurers get nicer, or is something else going on? Lucas: A few things. First, the market has gotten a lot more competitive. There are at least a dozen major players now, from Lemonade to Nationwide to Trupanion, and they're all fighting for market share. That pushes premiums down. But the bigger structural shift is telemedicine. Luna: Telemedicine for pets? I've seen those ads for video vet visits. Lucas: Yeah, and it's actually working. When your dog eats something weird at 9 p.m., instead of a $150 emergency room visit, you do a $30 video call. Claims data shows that telemedicine usage has cut the average cost per claim by about 18 percent. Luna: That's a huge number. So the insurers are passing those savings on? Lucas: Some of it. And that's why the typical monthly premium for a dog policy is now around 70 dollars, depending on where you live and your pet's age. A cat is cheaper, around 35. Compare that to your median weekly earnings of 1,204 dollars, and we're talking about 2.4 percent of one week's pay per month. Luna: When you put it that way, it's a rounding error for most people. But I'm guessing the story isn't that simple for everyone. Lucas: No, it's not. And this is where the economics gets interesting. The headline numbers hide a lot of variation. If you have an older pet, or you live in a state with high vet costs like California or New York, premiums can be double the national average. And then there's the question of what's actually covered. Luna: Right, because some policies only cover accidents, not illnesses. Or they have a per-incident cap. Lucas: And that's the trap. A cheap policy that doesn't cover cancer treatment isn't really comparable to a comprehensive one. So when we say 'your raise is beating the cost,' we're talking about a typical policy with decent coverage, not the bare-bones stuff. Luna: But even with that caveat, the trend is real. And it's not just pet insurance. The CPI report showed that overall pet-related costs, including food and vet visits, are up only about 2.3 percent year-over-year, which is below the headline inflation rate. Lucas: That's a good point. And it's part of a broader pattern. For the first time in years, wage growth is actually outpacing the cost of many services that were previously impossible to afford. We've seen it with haircuts, with renters insurance, with streaming subscriptions. Now it's pet insurance. Luna: So is this sustainable? Or are we going to see premiums spike again? Lucas: The industry analysts I've been reading say it's probably going to stay moderate for at least the next couple of years. The main reason is that the cost of veterinary care itself has been flattening out. Thanks to consolidation among vet clinics and more standardized pricing, the double-digit inflation we saw in vet bills has cooled to around 3 percent. Luna: So the underlying input costs are under control, which means insurers don't need to raise premiums as aggressively. Lucas: Exactly. And there's another factor: pet insurance is still a relatively young market. Only about 6 percent of American households have it. That's up from 3 percent a decade ago, but there's still a lot of room to grow. Insurers are willing to keep premiums low to build market share. Luna: But that also means they're taking on risk. If they're underpricing policies now, they could hit a wall later. Lucas: And that's the counterargument. Some actuaries are worried that the current pricing doesn't fully account for the cost of new, expensive treatments like immunotherapy or advanced imaging. If those become more common, premiums could jump in a few years. But that's a problem for the future, not today. Luna: So for a listener who's been putting off pet insurance, what's the takeaway? Lucas: The takeaway is that if you have a pet and you've been thinking about insurance, this is probably the best time to get it in recent memory. Your raise is finally giving you a little breathing room, and the market is competitive enough that you can shop around for a price that fits. Luna: And that's a nice feeling. I mean, we're used to the opposite narrative, where every year something gets more expensive and you feel like you're falling behind. Lucas: And this episode is part of that same narrative, just on the positive side. We've been documenting this for months now, and it's genuinely a shift in the economic landscape. But we can keep doing this because of a small group of listeners who chip in each month. Luna: Yeah, we don't run ads, and that's a choice. We want to keep these episodes free for anyone who wants to listen, and listener support is what makes that possible. Lucas: If you've found this series helpful, and you have a little to spare, you can support us at buy me a coffee dot com slash fexingo. It's not a big ask, but it adds up and it keeps us going. We're grateful for anyone who does. Luna: And we're back to the economics. So, Lucas, one thing I'm curious about: how does pet insurance fit into the bigger picture of worker purchasing power? Lucas: That's a great question. The way I think about it is that pet insurance is a discretionary expense that's becoming less discretionary. As more people work from home and rely on pets for company, they're willing to pay to protect them. And the fact that real wages are growing means they can afford to. Luna: So it's a sign of economic confidence, in a way. Lucas: Exactly. And the data backs that up. The share of households with pet insurance is strongly correlated with wage growth. When people feel secure in their jobs and their paychecks, they're more likely to sign up for a monthly subscription that doesn't have an immediate payoff. Luna: But it's also a hedge against a vet bill that could wipe out your savings. So it's both a luxury and a safety net. Lucas: And that's what makes it such a fascinating economic indicator. It sits at the intersection of discretionary spending and risk management. And right now, the scales are tipping in the consumer's favor. Luna: Alright, so if someone wants to get a new policy, what's the one piece of advice you'd give them? Lucas: Read the fine print on the reimbursement rate. Most policies reimburse 70, 80, or 90 percent, and that can be the difference between a 500 dollar bill and a 1,500 dollar bill. Make sure you know what you're signing up for, and don't just look at the monthly premium. Luna: That's solid. And maybe call your vet's office and ask what they typically charge for common procedures. That way you can estimate whether the policy is worth it. Lucas: Good point. And that's the kind of homework that pays off. Alright, that's it for today. Next time we'll look at another line item that's finally falling behind your raise. Until then, keep an eye on your own numbers.