Grand pet project: Insure all those puppies, kittens

By JOHN COOK
P-I REPORTER

Americans love their pets. They just don’t like insuring them.

Trupanion, a Mountlake Terrace pet insurance company that is launching service Friday in five states and announcing a major venture capital round, wants to reverse that trend with a consumer-friendly approach for insuring Max, Duke or Ginger.

The 24-person startup, an offshoot of Vancouver-based Vetinsurance, a fast-growing and profitable nine-year-old Canadian pet insurer, plans to offer $20,000 lifetime policies for dogs and cats. Ninety percent of the cost of surgeries, diagnostic tests and treatment for conditions not previously diagnosed by a veterinarian will be covered, though initial examinations are not included.

Pet owners will have their choice of veterinarians and the fees will not change based on the age of the pet or its medical conditions. The average monthly cost is $20 for a cat and $34 for a dog, though some breeds such as bulldogs, bull mastiffs and Shar-Peis have higher rates.

The big catch is that Trupanion enrolls only puppies and kittens under the age of one, though it will continue to provide coverage as those animals grow older.

Some big backers have joined the pack to help make the idea a reality. Maveron, the Seattle venture capital firm co-founded by Starbucks Chief Executive Howard Schultz, led a $22 million financing round in the company.

“We saw this very, very large market, and we were asking ourselves for a while, ‘How do we attack it?’ ” said Dan Levitan, a co-founder of Maveron who has joined Trupanion’s board.

The capital infusion, which closed last year as a mix of equity and debt, was used to buy a New York insurance company that provided licensing in about 27 states. The rest of the money will be used to build the service in the U.S., a big opportunity since only about 2 percent of pets in the U.S. are insured, according to The Associated Press.

Currently licensed in Oregon, Illinois, Pennsylvania, Colorado and Utah, Trupanion hopes to be operating in Washington in the next two months. By early next year, it plans to be in all 50 states.

In addition to facing more established competitors, Trupanion must overcome many pet owners’ negative perceptions of the industry.

An informal survey of 15 dog owners at Green Lake earlier this week found just two people who had bought insurance. Several said they had considered it, but were turned off by the cost or the loopholes.

“It just seems a little too much and going a little too far for your dog,” said Barb Weismantel, owner of a 2 1/2-year-old Scottish terrier named Finney.

But with veterinarian bills rising and pets playing a larger role in the family unit, Trupanion is hoping that it can make inroads in the $40 billion pet industry.

Darryl Rawlings, the 38-year-old founder and chief executive, has big ambitions. By 2010, he expects to employ 100 people and generate revenue of $50 million to $80 million. If all goes as planned this year, Rawlings — who founded Canada’s Vetinsurance after running a cigar business and working in high-tech sales — plans to have 50,000 to 100,000 pets signed up in the U.S.

To reach those goals, Rawlings said he is taking a different approach from larger competitors such as VPI Pet Insurance. Founded in 1982, Brea, Calif.-based VPI offers pet insurance policies in 50 states covering more than 450,000 animals.

The big differentiator is the exclusive focus on puppies and kittens, a strategy that at first blush would appear to exclude a large percentage of the market. But Rawlings said there are more than 15 million puppies and kittens born in the U.S. each year. Furthermore, he learned from the business in Canada — which accepts pets until the age of 13 — that about 80 percent of new enrollees were less than a year old.

By focusing on young pets, Rawlings also said that the company can pay out a higher percentage of claims. Typically, he said, pet insurance companies deny 25 percent of claims because of pre-existing conditions. At Trupanion, the goal is to cover 19 of 20 claims, including hereditary problems that were not previously diagnosed by a veterinarian.

“One of the biggest reasons that I think pet insurance has not taken off in the U.S. is that the value proposition to the pet owner has not been there,” Rawlings said. “Veterinarians have not been able to recommend or endorse a product with such a high denial rate.”

Since younger pets are less likely to have a pre-existing condition, Rawlings said, the economic model is more attractive. Trupanion also could benefit by signing up pets early in their lives, collecting a steady stream of monthly revenue.

In order to attract pet owners, Trupanion plans to sign up more than 100 “territory partners” to develop relationships with veterinarian offices across the country. Though not employees, the “partners” will ensure that claims are processed on time and will address any problems that arise. They will collect a small percentage of the revenue from each pet that is signed up in their respective regions.

Trupanion also is in discussions with retailers about reselling the product and is working with corporations who want to add pet insurance as a perk.

But the big marketing effort will be forming relationships with veterinarians, who Rawlings calls the “biggest influencers” in making sure that pets are properly covered.

John Kelly, who has operated Elliott Bay Animal Hospital in Seattle since 1975, said he encourages clients to consider insurance in order to “soften the blow” associated with medical costs.

“We want people to be realistic and understand it is not a complete silver bullet, but it will help,” said Kelly, who estimates that 5 percent to 7 percent of his clients have insurance.

Kelly called Trupanion’s puppy and kitten approach unique, adding that it is to a person’s benefit “to get on board early” before skin conditions, injuries or other health problems arise with their pets.

In the past, Rawlings said, it has been difficult for veterinarians to recommend insurance because some policies have loopholes that lead to claims being denied. That creates upset pet owners, though Kelly said the policies his practice promotes are pretty straightforward. He was aware of only one service issue during his 35 years of practice.

But Rawlings, who moved to Seattle last fall to oversee the U.S. expansion, thinks some veterinarians are reluctant to recommend insurance because the policies might not end up covering procedures.

“We believe that we need to change that contract … and we are going to do that the old-fashioned way by walking through the doors and meeting people.”

About Stacy @Trupanion

Stacy Kowalchuk is a dog mom to her rescued Whippet-mix, Ellie. During the week, you can find Stacy surfing (the internet, that is) and managing Trupanion's presence in the social media world. In her free time, Stacy likes to bake, especially cupcakes! To balance her culinary affinity, she also likes to stay active, especially with activities that include her dog such as hiking and going to dog parks.

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