Two insurance companies that sold coverage for pets through Healthy Paws Pet Insurance LLC have been fined $950,000 and ordered to repay $4.7 million in unauthorized charges plus interest by April 15 to nearly 18,000 policyholders in Washington state.

Officials from the Washington Office of the Insurance Commissioner discovered the overcharges and a slew of other problems during a routine review of the insurers' market activities, according to a spokesperson in the regulatory office.

"We found tens of thousands of law violations among the two companies," Insurance Commissioner Mike Kreidler said in a press release issued last month. "The most egregious violations were overcharging customers through rate increases and not disclosing the increases to their customers."

The pricing violations occurred from 2013 through mid-2018. According to the press release, they included:

• Billing customers at rates not approved by the state
• Raising rates annually based on the pet's age, a factor the insurers had neither sought nor received approval to use
• Failing to provide customers the required 20-day notice of rate increases before the policy renewal date
• Incorrectly applying discounts: giving some policyholders fewer discounts than they qualified for, and giving discounts to other policyholders who didn't qualify

Kara Klotz, communications manager for the state Office of the Insurance Commissioner, said that while Healthy Paws customers will receive refunds, they can also expect to pay more in the future. That's because Healthy Paws' underwriter has since "filed for new rates that comply with the laws but are higher," she said.

"They will probably blame us," she added. "... It's not the result of our work but a result of their lack of oversight and controls."

The companies found at fault are Ace American Insurance Co. and Indemnity Insurance Co. of North America. If those names are unfamiliar to Healthy Paws policyholders, it might be because Healthy Paws failed to identify the companies and their roles as required by law, according to the state.

In the insurance regulatory realm, Healthy Paws is known as a "producer," or seller of insurance. According to the state, its role, as specified in an agreement with its underwriters, is sales and marketing; developing and maintaining a website; quoting, issuing and servicing policies; and adjudicating claims. Ace and Indemnity, as underwriters, are responsible for government filings on rates and forms, and overseeing Healthy Paws. They, like all insurers, may sell coverage using "doing business as" names but their legal name must be identified, as well, Klotz said.

The purpose is for customers and regulators alike to know whom they're dealing with, she explained. Otherwise, "if you file a complaint, how will you know who to file the complaint about?" she said. Also, "the insurance commissioner has to know who to talk to if we get complaints."

Healthy Paws was founded in 2009 and is based in Bellevue, Washington, its website shows. It sold policies underwritten exclusively by Ace from January 2013 until June 2016. At that point, it began selling policies underwritten exclusively by Indemnity, according to information from the state. Both Ace and Indemnity are part of Chubb, which describes itself as the world's largest publicly traded property and casualty insurance company.

Other problems that insurance regulators uncovered in their examination of the Healthy Paws insurance issuers included:

• Policies that were canceled without the required 10-day notification to consumers
• A cancellation policy laid out on the Healthy Paws website and in the "terms and conditions" document that was more restrictive than had been approved by the state 
• Use of an outdated declarations page

The insurance commissioner's market conduct oversight unit concluded that the underwriters' "oversight of Healthy Paws was substantially nonexistent."

Ace and Indemnity initially demanded a hearing to contest the allegations. The parties ultimately settled, and an attorney for the insurance companies signed a consent order on Jan. 15.

The refunds are due by April 15 and will range from less than $1 to more than $2,500, according to the insurance commissioner's press release.

Asked for comment about the violations and fine, Healthy Paws Pet Insurance co-founder and CEO Rob Jackson told the VIN News Service in an emailed statement: "We are working to return premiums to customers quickly and remain committed to helping customers keep their pets healthy."

Insurance Commissioner Kreidler suspended $200,000 of the $950,000 fine on Ace and Indemnity and imposed a compliance plan requiring the insurers to charge correct rates and rectify other violations. If they do not, he will impose part or all of the suspended fine.

In July 2019, Kreidler separately fined Healthy Paws $20,000 for using unappointed producers (people selling products on behalf of Healthy Paws for whom the necessary paperwork had not been filed); for identifying itself as the insurer in communications with consumers; for offering discriminatory promotions to consumers; and for allowing unlicensed people to sell insurance on its behalf.