The insurance industry is going to the dogs, literally. Since December, Progressive, Chubb and The Hartford have all updated their coverage options for pet owners.

This may be more than a coincidence, according to insurers.

"As an industry, we need to look at what matters most to customers and what they are passionate about and how can we help those protections," said Christie Alderman, vice president at Chubb and new products and services manager.

Chubb answered the call from insureds by adding pet injury coverage to its personal auto policies.

Alderman says over 700,000 animals are injured in car accidents every year and this is an important topic with consumers because they cherish their pets. Adding pet injury coverage was a good opportunity for the insurer as well because even with the economic slump, there was still an increase in consumer spending when it comes to animals.

"There is a strong segment of customers for whom this resonates," said Alderman. "This is how we can differentiate ourselves from the competition."

Chubb's policy includes $2,000 in coverage for pets injured or killed in a crash or other covered loss. It covers all types of pets and extends to animals pulled in a trailer. The coverage is automatically included on Chubb personal auto policies so there is no additional premium.

"We do generally try to get across to people that auto insurance is not a commodity," said Alderman. "You didn't choose your car on price alone and the same should be true for insurance for your car."

Progressive has always included coverage for pets under its auto policy, but recently added $1,000 of coverage for pets traveling in commercial vehicles.

Judy Davis, owner of Judy Davis Insurance in Mckinleyville and Fortuna, Calif., says the pet coverage that is included on Progressive's auto policies is a huge selling point for her.

"The fact that there is the coverage for the pets makes a difference for customers," she said. "It has also increased our persistency with customers – they don't cancel their policies upon renewal and stay with Progressive."

She also enjoys being able to offer the coverage.

"It's a fun inclusion in the policy, is all I can say, and it's fun to market."

The Hartford launched a program in December that offers auto and home insurance to American Kennel Club (AKC) dog owners and will provide the coverage to AKC registered dogs. The coverage may also be available to owners of dogs that are historically ineligible for coverage, provided they meet specific conditions.

AAIS Offers Canine Exclusion on Homeowner Policies

Not everyone in the insurance industry is in on the furry friend love fest, however. The American Association of Insurance Services (AAIS) has filed three endorsements to allow insurers to exclude personal and umbrella liability coverage for injury or damage arising from dogs.

Joe Harrington, director of corporate communications for AAIS, says the exclusions were designed to give insurers the option of still writing a homeowner policy for an insured that may have an animal that the insurance company does not want to be responsible for covering.

"What one has to realize is that there can be in homeowners insurance a certain type of hazard that is not acceptable to the insurance company," he said. "In this case, the insurance company may have no other alternative than to turn it down entirely."

The exclusion is designed to be attached to an AAIS based homeowner policy and excludes coverage for bodily injury, property damage and medical payments that could arise from the described canine in the endorsement. It does not incorporate any type of breed underwriting because the AAIS does not have a position on that.

"It is pretty narrowly focused to a described animal and it is signed by the individual so they are aware that they would not be getting coverage for that particular canine," said Harrington. "It gives some companies the ability to write a policy and extend coverage where they felt they couldn't do it at all."

Harrington says this situation can arise with certain canines because of previous incidents, such as if the dog has bitten someone or has demonstrated aggressive tendencies. The exclusion does not extend to other dogs in the home unless they are also identified in the policy.

AAIS is also filing two other exclusions for personal umbrella coverage: one that would follow the form of the homeowners' exclusion and may exclude that animal but still provide coverage for other animals, and one that excludes canines altogether.

The exclusions are being filed in most states and will be effective August 1, 2011.

Harrington says the exclusions can be a benefit to both carriers and homeowners because it helps them avoid the all or nothing dilemma when it comes to securing coverage.

"Right now [carriers] are stuck with 'accept the dog or don't write the policy,'" he said. "Now there is a possibility for some people who have a dog that makes it difficult to find insurance."