Focus on People Insurance Before Pet Insurance?
Please do not get me wrong, I am a huge pet lover and have been my entire life – I currently have two Schnauzers named Beau and Aero (yes, like Bow and Arrow!). But that being said, let’s get into the meat of this article…
Time to head back down memory road, back to the extremely tight labour market of 2007. At that time, the local economy had effectively reached full employment (less than 4.5% unemployment rate) and companies were looking to differentiate themselves when trying to attract new talent. Some companies looked south of the border and saw that some companies were adding Pet Insurance to their total rewards offering and thought they might try it in our local market. And then came 2008 and the “Great Recession” and companies reverted to cutting their pay packages and that was the end of pet insurance.
However, we have recently heard the topic coming up again more broadly in the benefits industry, notably within some of the disruptors in the employee benefits industry (see the ZLC blog for past articles around these disruptors). Arguably some of the conditions are the same as the local labour market continues to tighten up. Just recently B.C. added another 7,900 jobs in March 2019 (according to data from Statistics Canada Apr 5/19) and the unemployment rate sat at 4.7% (versus 5.8% nationally). Most retail organizations have “Help Wanted” ads hanging in full sight and it is not uncommon to see some positions, particularly around key skills, sit vacant for several months. But should we really be talking about Pet Insurance again?
Some might argue that an organization is simply responding to different demographics in the workforce – those that may choose to get a puppy instead of perhaps getting married and having children. And most pet owners would agree that medical bills for pets are expensive and insurance might well be a way to diffuse the financial adversity when the puppy gets sick. And if an employer offers pet insurance, that scarce employee talent might be swayed to come and take a job. Hard to argue with that! Actually, it is, for the following reasons:
- Almost universally, employee benefits plans have provided Extended Health coverage and it has always ranked as the most valued part of the plan. It also ranks as the most expensive part of the plan (usually 40-50% of the total benefits costs) and is subject to the highest rate of annual inflation (8-12% annually over the last decade). Based thereon, it is hard to simply maintain the current coverage for insurance for humans, our employees and their dependent spouses and children.
- Company-paid Extended Health benefits are one of the last true tax shelters in Canada. When employers pay for the cost of these benefits, there is no taxable benefit to employees. On the other hand, any form of direct financial support (i.e., company-paid premiums) or indirect financial support (i.e., lifestyle spending account with pet insurance as an eligible expense) results in a taxable benefit to employees.
- With many younger demographics in the workforce, it is already hard enough to convince them of the value of a benefit that they hope to never need (i.e., life, disability and health insurance). However, for the same reason, we should all carry catastrophic insurance on our homes (i.e., fire) and our vehicles (i.e., third party liability), there is substantial value in the Extended Health benefits offering. Distracting employees with another “prerequisite” detracts from the value of the current traditional “benefits” that they may ultimately need and not be able to secure in the time of need.
- Could we be looking at a slippery slope? Could the introduction of pet insurance start to set expectations around, perhaps, pet sickness and bereavement leaves, or “paw-ternity” leaves around the arrival of the new puppy. And let’s not forget about the cats, hamsters, or fish that others may prefer to consider as a pet.
The costs of our current “people-oriented” benefits plans are difficult enough to manage and sustain. Inflation for these benefits has run between 7% and 9%, in aggregate, over the past decade, which is well above normal inflation and is well above the inflation for almost all other business costs and often above the rate at which organizations can grow their revenue base. As well, there are other valuable ideas for employee benefits that could be better utilized to help attract and retain key talent, particularly around Health Care Spending Accounts and Critical Illness.
As I mentioned, I’m a big pet guy myself. However, when we added Beau and Aero to our family we did so knowingly accepting the potential costs (and love and affection) that come with pets. I don’t think it is reasonable for me, or any other employee, to expect an employer to be responsible for those costs. But please do make every effort to maintain my current drugs, paramedical and vision care coverage!
Each organization’s needs are unique and warrant a customized solution. We would be pleased to discuss your specific situation with you to identify the best strategy with respect to your employee benefits program. Should you have any questions on the above, please don’t hesitate to contact me or a member of our team.
At ZLC Financial we are one of the fastest growing employee benefits advisors in Western Canada and we are fortunate to have the best people, resources and clients. We provide value to you by leveraging one of the most skilled benefits teams – collectively over 300 years of experience within our team of 15 employee benefits specialists. We have been working with businesses ranging from 3 to over 65,000 plan members for over 30 years. Visit our Employee Benefits Page to learn more about our benefits plans.
By Dan Eisner
This information is designed to educate and inform you of strategies and products currently available. As each individual’s circumstances differ, it is important to review the suitability of these concepts for your particular needs with a qualified advisor.