Trupanion, Riding the Wave of Fast-Growing Industry, Seeks to Lead in Pet Medical Insurance
[Corrected: 11:30 am] Little known fact: more than half of American pet owners now buy holiday presents for their pets. But even in a country where buying stocking stuffers for your four-legged pal is more than commonplace, the sale of medical insurance plans to protect pets—and their owners’ pocketbooks—from medical emergencies and other health related costs is surprisingly low, according to Seattle-based Trupanion founder and chief executive Darryl Rawlings. This is something he is hoping to change.
“For a lot of people, their pets really become part of the family,” he says. “So what do you do when that pet gets hurt, and you can’t afford to pay the medical costs?” Deciding between paying for your pet’s health needs, or paying your power bill, is one choice Rawlings says pet owners should never have to make.
That’s where Trupanion comes in. Founded in British Columbia in 1998 (under the name VetInsurance), Trupanion offers health insurance for dogs and cats, between eight weeks and 14yearsold. Each policy covers 90 percent of all veterinary costs beyond the basic examination fee, including diagnostic tests, surgeries, and medications, for the life of the pet.
Trupanion was doing well in Canada, where Rawlings says between three and four percent of pets are medically insured. “Pet health insurance is normal in many other countries,” he says. “In parts of Europe, over 50 percent of pets have insurance.” This isn’t so in the United States, however, where less than one percent of pet owners take out medical insurance policies for their pets—a market, he says, that has an obvious need.
“One in two households has a pet—that’s 176 million cats and dogs in North America. There are more cats and dogs in North America than there are people under 20,” he says. “The pet industry is larger than the music industry, the movie industry, and video game industry combined.”
Rawlings hopes to tap that need, and drive the number of people medically insuring their pets in the U.S. to 20 to 40 percent. And he’s off to a strong start.
Though Rawlings would not disclose the number of policies the company has sold to date, he did say that Trupanion is the “fastest growing [pet insurance company] in North America.”
The company issued its first policy in 2000. Four years later, Trupanion had already passed the profitability mark. Then, as the pet industry continued to grow, Trupanion started to think more about a serious U.S. expansion. In 2007, it snagged a $22 million financing round from local venture firm Maveron (followed up by an additional round in 2008), which coincided with the company’s relocation to Seattle. In the last year the company has grown from fewer than 50 employees, to 120. Rawlings expects that number to increase to between 180 and 200 by next year. The key to Trupanion’s success, he says, is not operating like a typical insurance company.
“You have car insurance because someone told you you had to. You don’t have to have pet insurance, so we have to be better than Gieco, we have to be better than Progressive,” he says. “And to do that, you have to have a commitment to the space.”
One of the ways Trupanion has broken the typical insurance company model is by handling claim payments directly, without going through the policy holder. Rather than having to dish out the initial cost and wait for a reimbursement from the insurance company, Trupanion pays 90 percent of the costs up front so the policy holder will only ever have to foot its 10 percent of the bill.
Other perks: Premiums will not increase based on the age of a pet. There are no limits on the number of claims-or the equivalent costs—you can make, and premiums will not rise because claims are made. And, using an online estimator, pet owners can select the deductible amount that fits their budget—whether it’s $0, between $50 and $1,000 (in $5 increments), or on a per-incident basis—giving them a monthly cost tailored to their needs.
There are “No limits. Period,” Rawlings says. “It’s one plan that people can customize their own rates.” (Just for fun, I got a quote for insuring my 12-week-old Tabby, Gus, with a $50 deductable. The monthly premium came to $19.72 a month).
It is important to note that there are two exceptions to this rule. While Trupanion will insure pets with pre-existing conditions, the costs of those conditions are not covered, though Rawlings says the company is working on this. Pets with hip dysplasia, an abnormal formation of the hip socket that can affect dogs and many other animals, is the only condition that the plan doesn’t cover (though for pets under one year of age, coverage can be added for a couple extra dollars).
[Corrected: An earlier version of this story stated that Trupanion does not insure pets with pre-existing conditions].
While Trupanion has been gaining market share in the U.S. pet medical insurance market in the last few years, Rawlings says the sector has really been heating up. “If you look back five years ago there might have been six companies [in the space],” he says. “Today there are about a dozen in North America alone.”
As the U.S. market for pet health insurance grows, Trupanion envisions becoming one of the leaders, Rawlings says. This means looking at new geographies (Trupanion was recently licensed in Puerto Rico), and exploring potential acquisition opportunities, he says.