Understanding Claims Leakage: The Hidden Drain In Pet Insurance

As pet insurance adoption soars, so too does the risk of undetected financial waste. Claims leakage—the gap between what should be paid on a claim and what actually gets paid—is one of the biggest cost drivers most insurers don’t see coming. And when paired with rising fraud, it becomes a silent drain on profitability and customer trust.

What Is Claims Leakage?

Claims leakage refers to avoidable overpayments made during the claims process due to inefficiencies, poor oversight, or outright fraud. It isn’t just about human error—it’s about systems not catching what they should.

What’s Driving the Leakage?

1. Adjuster errors
   Relying heavily on manual inputs and overburdened adjusters increases the risk of mistakes. Limited training, high turnover, and inconsistent judgment between reviewers all open the door to inaccurate payouts.
2. ‍Inefficient processes
   When claims processes lack standardization, digital documentation, or timely validation, key errors go unnoticed. Many teams still struggle to consistently track red flags or identify anomalies, particularly in fast-paced, high-volume environments like pet insurance.‍
3. Legacy systems
   Many insurers still depend on legacy systems not built for real-time fraud detection or advanced analytics. Without integrated tools that flag suspicious behavior or calculate risk dynamically, leakage and fraud become harder to detect—and more costly to fix.

Because many insurers rely on trust-based validation with clinics and limited automated screening, these behaviors are often hard to catch — especially when disguised within otherwise legitimate claims.

Where Leakage Happens Most

Some of the most common leakage points include:

• Reimbursing duplicate submissions from the same event or bill
• Failure to flag preexisting conditions that should be excluded
• Lack of treatment cost benchmarks to detect inflated pricing from clinics
• Different interpretations of inclusions and exclusions

And when leakage is only discovered months later, it’s nearly impossible to recover — especially if the policyholder or provider has moved on.

Fixing the Leak: What Modern Insurers Do Differently

Leading insurers are shifting from reactive audits to proactive prevention. The shift starts with technology that doesn’t just support workflows—it enhances them.

• AI-powered document parsing to extract and structure unstructured vet data
• Behavioral pattern recognition to flag fraud signals early
• Smart triage models that route edge cases to humans while automating straightforward claims
• Real-time anomaly detection based on historical pricing, frequency, and pet profile data

The result? Faster claims, fewer errors, and dramatically reduced leakage and fraud.

Final Word

Pet insurance is growing fast. But without tighter control over leakage and fraud, that growth comes at a cost. It’s time for insurers to move beyond spreadsheets and manual spot checks—and toward an intelligent claims system that flags what matters, when it matters.

Because leakage doesn’t fix itself. And the sooner you see it, the sooner you stop it.