Pet insurance growing into workplace perk

If Lassie were to trot into a veterinary hospital today, the Hollywood collie who stole America’s heart in the TV show of the ‘50s-‘70s would probably fall over in shock, no command necessary. The medical field for her furry friends has reached such a high level of care, even unsuspecting owners rushing Fluffy and Fido through the doors might wonder if they took a wrong turn and entered a human hospital.

But along with this specialized medicine, which includes everything from PET scans and CT scans to physical therapy and chemotherapy, comes a growing price tag. Something as seemingly small as a swallowed sock can set a dog owner back $4,000.The inflation has led to an uptick in what was once a highly niche market, with more Americans buying pet insurance, and more employers offering it.

“The sophistication of veterinary medicine has been amazing over the past 10 years,” said Curtis Steinhoff, director of corporate communications for VPI Pet Insurance, the company that issued its first policy to Lassie in 1982, when the famous canine was still making movies. “Pretty much anything you can do for a human medically you can do for a pet medically,” Steinhoff said. More than $20 billion was spent on U.S. veterinary services in 2011, with one in five owners seeking emergency care for their four-legged pals, according to the marketing firm Packaged Facts.

EMPLOYERS TAKE NOTE

In response to the growing market and a move toward voluntary employee benefits, more companies are offering pet insurance as part of their benefits packages. “One in three Fortune 500 companies now offers VPI pet insurance,” said Steinhoff, adding that his company works with nearly 3,000 organizations, 80 of those based in Colorado.

Today’s employers, faced with skyrocketing benefits costs, are always on the hunt for inexpensive perks for luring and retaining quality workers, according to JoAnne Novak, vice president for new business development for the Hartville Group, which entered the U.S. pet-insurance market in 1997, which was until then cornered by VPI.

“Employers love the ability to be able to say to their employees: We care about your health, and we also care about the health of your pet,” Novak said. It’s that strengthening bond between pet and owner today that has combined with high costs to jumpstart his industry, Steinhoff said. “Pets have gone from the backyard to the living room to the bedroom to sleeping on the bed.”

Most insurers allow any veterinarian of choice, and pet owners pay the bill and then file a claim for reimbursement. Offering pet insurance as a voluntary benefit generally comes at no cost to an employer and includes a discounted rate for employees.

Dr. Rebecca Ruch-Gallie, a veterinarian with Colorado State University, applauds the employer-pet insurance trend, adding that veterinarians and animal hospitals jumped on offering pet insurance to employees more quickly than other companies because it made good business sense. “Veterinarians are notoriously bad for not charging what they are worth. We get these sob stories, and we give in.”

Couple that love of animals with running a business, and employee insurance really makes sense, Ruch-Gallie said. “Our technicians and nurses are pretty underpaid, so it’s really important for us to help them out in any way we can.” In the past, vets would sometimes care for employees’ animals for free. “Offering insurance is a better way to do that, because you aren’t losing money. And if your business isn’t suffering, your employees are better off.”

WEIGHING THE OPTIONS

Although her colleagues try to keep preventive medicine prices as low as they can, increased costs of medical advancements and prescription drugs will continue to inflate veterinary-care prices, just like in the human medical field, said Ruch-Gallie, who insures her own pets. “I have a large-breed dog, and she’s had two knee surgeries, and the majority has been paid through insurance. And I live in an area that has rattlesnakes,” explaining why she opted for insurance. But she emphasized that pet insurance is not financially sensible for many people, and that the CSU veterinary hospital offers information on it, but never pushes it. “It’s not inexpensive,” she said, adding that she pays $500 each a year for two dogs older than 10.

Ruch-Gallie urges employers or individuals seeking pet insurance to ensure companies offer many coverage choices and don’t have so many fine-print exclusions that the coverage isn’t worthwhile. For instance, just as with human insurance, pet insurers often exclude pre-existing conditions. They also often exclude hereditary conditions and charge more for certain breeds. And as she found out recently when calling around for quotes on her own dogs, age does matter. “Your best bet if you are going to get insurance is to get it right away when you get your young, apparently healthy pet. Young animals aren’t at any less risk of doing stupid things, like getting bit by a rattlesnake,” she said, but they are often less costly to insure, and insurance companies generally don’t raise premiums substantially once a pet has coverage.

GROWTH OUTLOOK POSITIVE

With the relatively recent success of the pet-insurance market ($302 million in revenues in the United States in 2009), Lassie had to move over long ago. Her once lone insurer, VPI, now shares the market with Hartville Group and a dozen other companies, claiming about 60 percent of sales with its 485,000-plus covered pet lives. After a slight slowdown with the economic downturn, Steinhoff said, business is back to growing at about 20 percent a year.

Partly because of its more recent focus on employers, the Hartville Group has experienced a bump in the past few years, Novak said. “We actually have increased our premiums over 446 percent since 2006.” The Hartville Group protects about 100,000 pets today and offers insurance through a number of strategic partnerships, including the American Society for the Prevention of Cruelty to Animals.

And if predictions hold true, Lassie’s insured four-legged pals will have to continue to make room for more. In a 2010 report, Packaged Facts forecasted double-digit increases to continue for the pet-insurance industry for the next few years, predicting 2009 revenues will more than double to $753 million in 2014.

“But we still have only between 1 and 5 percent of U.S. pets insured, compared with between 25 and 30 percent in the United Kingdom,” Steinhoff said. Education, both he and Novak said, remains a big part of their business mission. “I’m a dog mom,” Novak said. “My pets are my kids. They are part of my family. With pet insurance, when something happens, I can focus on the health of my pet and not on the bills.”

Sample of companies offering VPI Pet Insurance

Chipotle Mexican Grill*

DISH Network*

Sports Authority*

Quiznos*

Newmont Mining Corp.*

Delta Airlines

Deloitte LLP

Hot Topic

T-Mobile

Wells Fargo

Zynga Inc

*Headquartered in Colorado