The Evolution Of Pet Health Insurance

The United States now boasts 12 pet health insurance companies that are strong and growing.

Starting with one company that could barely keep its head above water for years, pet health insurance in the United States now boasts 12 companies that are strong and growing. Industry leaders talked about the secrets of their success and visions of the future.

VPI Pet Insurance

With half a million policyholders and a 60 percent market share, VPI Pet Insurance of Brea, Calif., is the granddaddy of them all. Its first policy was issued in 1982 to TV’s Lassie.

“We have doubled the number of policyholders every five years since 1982,” said Scott Liles, the company’s executive leader. “Our nearest competitor has a little less than 10 percent market share.”

With a second office in Denver, VPI has 500 employees, 110 of whom have veterinary experience, said Carol McConnell, DVM, the chief veterinary officer.


“We go out of our way to minimize the impact on the vet,” she said. “Our staff can read the invoices and understand them, and we process 97 percent of claims without having to call the veterinary hospital for the medical records. This is important, since we are processing about 80,000 claims per month, or from 1.1 million to 1.2 million per year.”

VPI is wholly owned by Nationwide Insurance, a mutual company.

“Our policyholders are owners rather than shareholders or venture capitalists,” Dr. McConnell said. “That compares with our competition, many of which are funded by venture capitalists or owned by shareholders, who may be more focused on short-term revenue and profit than long-term customer service and company stability.”

VPI’s actuarial data show that 66 percent of claims are for such common ailments as ear infections, bladder infections and skin rashes, and 30 percent are for preventive care. The company’s products are focused on coverage for the 96 percent most likely reasons for a veterinary visit, she said.

“To be clear, our products provide comprehensive coverage, but we believe most people want help covering the cost of the most common things they can expect their pet to experience,” McConnell said. “We provide a benefit schedule, which is a full list of everything we cover, so it’s very transparent to the pet owner. We also use an annual deductible, so clients receive reimbursements sooner for the most common reasons they go to the veterinary hospital.”

While clinicians may associate pet insurance with large veterinary bills, McConnell noted that only 4 percent of clients face the extreme expenses of advanced internal medical cases, surgeries and catastrophic illnesses.

One of every three Fortune 500 companies offers VPI pet insurance as a voluntary benefit to employees, Liles said.

“That’s one of the reasons we expect the double-digit growth to continue,” he said.


From its birth in 1998 in Canada, Seattle-based Trupanion in 2007 expanded to the United States and Puerto Rico. The company employs more than 254 people and has added 78 during the past 61/2 months.

“The biggest driver of the number of employees we have is based on elevating the customer experience and the number and speed of paying claims,” CEO Darryl Rawlings said. “Today, nearly 90 percent of our claims are fully paid within a week of their receipt.”

When Trupanion entered the U.S. market, “For over 30 years, companies had been trying and over 40 companies attempted to provide pet insurance but failed and left the market,” Rawlings said. “Market penetration was less than 1 percent. Pet health insurance in the U.S. is now growing at the rate of 10 percent to 15 percent year over year. But the companies who drove that are still not growing the market.

“The new companies that are coming in with different approaches are driving market change.

Formerly, Rawlings said, the business philosophy of pet insurance seemed to be “let’s sell a product for a price point, put limits or caps on coverage, and make veterinarians look bad in front of their clients because of the low reimbursement rate.”

Simplicity is the key to Trupanion’s philosophy, he said. “We pay 90 percent of the actual veterinarian’s bill—minus exam fees, wellness care and the policyholder’s chosen deductible—for sickness and injury. We also give pet owners the flexibility to pick any deductible from zero to $1,000, so they can meet their own financial needs.”

Trupanion reimburses at a flat rate, taking into consideration that veterinary charges vary widely by region, Rawlings said.

“The cost of an anterior cruciate ligament repair surgery in Boise, Idaho, might be $3,000, while in New York City it might be $5,000,” he said. “We pay 90 percent on either one. We’re not here to dictate costs or fees.”

The “magic sauce” that makes the company work is self-ownership, he said.

“We’re structurally the same as Geico and Progressive,” he said. “Because we own our insurance company, there is no middle man we need to pay to operate. The result is, we can bring more resources to the pet owner through a product that has a value proposition that gives them the best return on premiums: specifically, paying back over 70 cents of every premium dollar we receive in claims.”

Trupanion has six actuaries working on product pricing, Rawlings said.

“We make sure the product is priced appropriately according to where they live and the type of pet they have,” he noted. “We have well over 100,000 categories of risk, or pricing, so we don’t get in a position to dictate fees or costs. We have a pricing structure that is very complicated in order to keep our product very simple.”

ASPCA Pet Health Insurance

Founded in 1997 in Canton, Ohio, The Hartville Group Inc. provides ASPCA Pet Health Insurance and is the second-largest U.S. pet insurance provider, said Dennis Rushovich, the CEO for seven years.

“From 1996 to present, we’ve added so many new customers that the company’s total earned premium has grown more than 500 percent in that time,” he said. “Our employee numbers have grown from 30 to 130, as well, so we’ve grown fairly rapidly in the past six years.”

Rather than following a list of benefit amounts paid for certain conditions, Hartville managers "found that process was too rigid, so we decided to base our reimbursement on ‘usual and customary charges’—typical costs for treatments in specific regions of the country," Rushovich said. "This helps keep premiums more affordable."

Hartville was a pioneer in providing wellness benefits and this year updated its policies to include hereditary and congenital conditions; alternative therapies such as acupuncture, chiropractic care and hydrotherapy; chronic conditions; and behavioral consultations and therapy, he said.

"As veterinary medicine is evolving and more treatments are being prescribed by veterinarians, more pet insurance providers are adjusting their coverage to follow suit,” Rushovich said. “Pet insurance plans are all a balance of coverage and cost. A plan could conceivably cover everything, but it would be so expensive that no one would be able to afford it."

Pets Best Insurance

The introduction of veterinary specialists, advanced diagnostics and a rise in pet owner acceptance of higher-cost sophisticated veterinary care widened the scope of care and cost, noted Jack Stephens, DVM, founder of Pets Best Insurance in Boise, Idaho. As a result, he found the fixed-benefit schedule model to be unwieldy.

"The schedule also did not provide adequately for complications, severity or simply the quality of care that was available," he said. "This is why Pets Best introduced the flat percentage payment that now offers 70, 80, 90 or even 100 percent coverage for pet owners."

Stephens foresees U.S. pet insurance market penetration reaching the 20 percent level, as it now stands in the United Kingdom.

"We have the same factors in place to grow the market substantially in the next 20 years," he said. "In the U.K., where the market size is considerably smaller, they have over 60 plans available."

Petplan Pet Insurance

What worked in the U.K. ought to work in the U.S., figured Chris and Natasha Ashton, co-founders and co-CEOs of Philadelphia-based Petplan Pet Insurance. Begun in 1976 in the U.K., Petplan as a brand also is in Australia, the Netherlands and New Zealand.

“Natasha and I started our company in the U.S. in 2006,” Chris Ashton said. “We had a $5,000 vet bill for our cat shortly after moving to the U.S. We paid for it out of our student loans, and that’s what inspired us to start our company.”

In the past three years, Petplan has grown an astonishing 2,300 percent in annual revenue, said Natasha Ashton.

“The growth was staggering, and Petplan made the Inc. 500 list of fastest-growing private U.S. companies (compiled by Inc. magazine) for 2011,” she said. “Petplan was No. 123 on the list.”

The Ashtons launched their product in Canada this year.

“The main differences that set Petplan apart are the simplicity of our product, the annual benefit limit and our coverage of congenital and hereditary conditions,” she continued. “We have three simple policies: annual limit of $8,000, $12,000 or $20,000. These renew each year. We reimburse what the veterinarian charges. We adapt our premiums based on age, breed and ZIP code.”

“Pet insurance is not going away; it’s going to become more and more commonplace,” predicted Chris Ashton. “As pet care becomes more affordable, this is good for veterinarians as well. It’s an overall improvement in the veterinary industry as a whole.”

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