The recent launch of three insurers into the US pet insurance market suggests that there may be plenty of room for growth in the industry.
VetCare Health, based in Durham, North Carolina, is headed by Sandy Boucher and underwritten by Lyndon Southern Insurance Company. Sandy was previously associated with the AKC and PetPremium pet insurance companies.
Happi Pets, based in Jeffersonville, Indiana, is the US offering of the UK-based Healthy Pets Insurance Company. Happi Pets is underwritten by AAIC and its policies will be administered by Petfirst Pet Insurance.
Figo Pet Insurance, based in Chicago, is underwritten by Markel Insurance, a large insurer that provides coverage for a variety of niche markets. Figo has received several million dollars in startup funding.
Petsecure announced that it has insured one million pets throughout its 25-year history.
No word on how many pets are currently insured, but our estimate is approximately 100,000. This number makes Petsecure the largest pet insurer in Canada.
PetPartners Insurance is giving away $5,000 to a person or organization who seeks to support animal welfare – an Animaltarian. Examples would be a veterinarian who donates her services, a rescue group, a service dog training facility, etc.
This looks like a great cause! Applicants can submit a video application here.
The rumors about Trupanion going public have been confirmed in SEC filings. The company will be listed on the NYSE under the ticker TRUP and plans to raise up to $75 million.
Interesting details from the filings:
1. $83.8 million in revenue in 2013.
2. 181,634 pets enrolled on March 31, 2014.
3. They are growing very quickly (over 50% annually), but have posted a loss in each of the last three years.
4. Lifetime value of an insured pet is $610 and average acquisition cost of a pet customer is $111
The North American pet insurance industry grew 15% last year. Total premiums were $618 million in 2013, compared to $539 in 2012.
The US accounted for $536 million in premiums, while Canada accounted for $82 million.
VPI is still the largest pet insurer with 41% of the North American market ($253 in gross written premiums.)
Total premiums are expected to pass a billion dollars a year by the end of the decade.
More info in the Packaged Facts report.
PetFirst announced that 58,700 claims were filed in 2013 for which $5.6 million was reimbursed to pet parents.
For a comparison, Pets Best stated that 237,500 claims were filed in 2012. However, Pets Best offers a wellness plan and PetFirst does not. Also, its not clear if both of the insurers are excluding denied claims in these totals.
We estimate that PetFirst has about 40,000 active policies and Pets Best has about 100,000 active policies.
Last week, a friend of a friend noticed that one of her dogs seemed to be in discomfort, so she gave him three Motrin. Big mistake. Within a few hours she was at the emergency vet clinic where she was asked if she was willing to pay for surgery to try and save her dog’s life. Two days and another surgery later, the dog passed away. The owner had run up over $6,000 in vet bills.
The very next day, the owner bought VPI pet insurance for her second dog.
She mentioned that before her first dog got sick, she had no idea that vet care could be so expensive.
This is an example of the “Second Pet” theory of pet insurance marketing. This theory (which I just made up, but is backed by anecdotal evidence) predicts that most pet parents won’t get pet insurance until an uninsured pet runs up a very large vet bill, thereby prompting the owner to “discover” pet insurance and then buy it for the second (and any other) pet in the family.
The Second Pet theory is good news for pet insurance companies. As vet costs continue to rise, more pet parents will encounter steep vet bills and ultimately stumble upon pet insurance as a useful tool to help them manage their costs.
Pethealth Inc, the company behind 24PetWatch insurance (US & Canada) and PetProtect insurance (UK), announced double digit growth for the 3rd quarter of 2013. Insurance revenue increased 15% to $6.5 million.
The company website notes that it insures over 200,500 pets. Based on that number, I would expect the insurance revenue to be higher. Using an average premium price of $25 per month, I would expect about $15 million in insurance revenue for the quarter (200,500 x $25 x 3 months.)
Perhaps the lower revenue per customer is due to the free 30-day trial insurance policies the company gives away. Assuming those free policies are included in the 200,500 total, a high number of freebies would certainly change the math.
Pets Best released some interesting 2012 data:
- claims were filed on nearly 50% of pets they insure
- among these pets, an average of 4.75 claims were filed
- pet owners who filed claims requested any average of $1,717 throughout the year
So if we take our estimate of 100,000 active policies for Pets Best, that means:
- claims were filed on about 50,000 pets
- about 237,500 claims were filed last year (50,000 x 4.74)
That’s a whole lot of claims to process. Pets Best has a wellness plan and those types of claims should be simple to process, but that still leaves a lot of forms to be reviewed.
Every week I get a few emails from people with sick pets asking which insurance companies cover pre-existing conditions. I have to tell them that none of the companies do and then explain that insurers would go bankrupt if they provided coverage for pre-existing conditions. This is because people would just wait until their pet got sick and then sign up for insurance. Very quickly, the pet insurance companies would be paying out much more than they took in and go out of business.
The new Obamacare law mandates that human health insurance companies can’t turn down a customer because of a pre-existing condition. But won’t these companies suffer from the same problem, with people waiting until they get sick and then signing up for Obamacare?
No, because Obamacare requires everyone to have health insurance or pay a penalty. This guarantees that there will be a large pool of people, including the young and healthy, who will help pay for the care of those with pre-existing conditions.
So the only realistic way to cover pre-existing conditions for pets would be to institute an individual pet mandate, where healthy puppies subsidize old sick cats. And this will never happen anywhere, not even in Sweden.