Insurance company Allianz is being forced to repay hundreds of thousands of dollars, after it was found to be misleading some pet insurance customers.

Key points: ASIC found Allianz had not informed customers of changes in policy as pets aged

ASIC found Allianz had not informed customers of changes in policy as pets aged Representative from CHOICE says pet insurance 'really poor value'

Representative from CHOICE says pet insurance 'really poor value' Petplan customers will share in $231,000 compensation

Melanie Rumball has three dogs. The oldest is Tequila, an eight-year-old German shepherd-husky cross.

That places her over the age bracket at which Petplan, a pet insurance company underwritten by Allianz, will cover all her vet bills.

This is despite advertising on their website and policy documents that 100 per cent of costs would be covered.

Ms Rumball has insured all her pets from a young age, and chose Petplan because it covered the cost of vet expenses for injury, accident or illness in a pet dog or cat.

But she realised she was being ripped off as the costs grew.

"About 18 months ago when Tequila's renewal came in, it had gone from $55 a month up to $98 a month," Ms Rumball said.

The excess had also jumped from $100 to $150.

"But what was new for me was the co-payment, which meant that because Tequila was now eight years old, we also had to pay on top of the excess another 20 per cent that went towards the vet fees, when we are under the impression that 100 per cent of vet fees were covered."

Ms Rumball then reported the case to consumer group CHOICE about 18 months ago, which led to an investigation by the Australian Securities and Investments Commission (ASIC).

ASIC found Petplan was failing to inform its customers of rising costs as it increased the co-payments alongside the age of the pet.

As their pets got older, Petplan customers found rather than the 100 per cent advertised, the insurance company would only cover 65 per cent of vet bills.

Ms Rumball is one of 740 customers who will now receive their share of $231,000 in compensation.

ASIC says Allianz also agreed to remove all references to the 100 per cent rebate on veterinary bills from its website, and clarify the product disclosure statement.

Consumers better off with a savings account than pet insurance

Tom Godfrey from CHOICE said customers would be better off opening a savings account than taking out pet insurance.

After Petplan stopped covering 100 per cent of her vet bills, Melanie Rumball made a complaint with CHOICE. ( Supplied )

"The restrictions, the exclusions for pre-existing conditions for older pets, it just means that pet insurance is really poor value," Mr Godfrey said.

"So unless you're going to insure your pet from a very young age, then putting a bit of money aside in a savings account is probably a much better option."

Melanie Rumball said she was pleased her complaint led to compensation for herself and other pet owners, but said the companies got off lightly.

"They've targeted consumers," she said.

"ASIC is in charge of the insurance companies, whereas the ACCC is normally in charge of consumers, so where there might be heavy penalties such as fines and advertising to correct, those sort of things are not happening as a result of this.

"I think that's really disappointing because those kinds of actions that other companies have to do when they're dealing with consumers is really effective in terms of sending the message that it's not acceptable."