Blue Cross plan adds pet insurance from Philly firm

Close to 50 million Americans lack health insurance. Obama's health reform law is supposed to reduce that number, if Republicans don't sink it first.

Meanwhile Capital Blue Cross, based in Harrisburg, has started insuring pets, under a program managed by a Philadelphia company Petplan, founded by two Wharton School graduates from dog-crazy England.

"We're excited. We think we're the first" Blue to offer pet insurance, Stacy Balaban, Capital's senior director for strategic development, told me. Employers welcomed the "voluntary benefit" because it cost them nothing - premiums for varying schedules of pets, deductibles and coverage levels are paid by plan members, and the policies are administered electronically by Petplan. Capital gets paid a commission on each policy. "It helps diversify our revenue stream," Balaban said. "Our board's been very supportive."

For a lot of Americans, "pets are family members," Balaban added. Some 500 Harrisburg-area residents jammed the company's "pet/people health fair" last weekend collecting information on Petplan and other services.

Petplan is the project of a married couple, Chris and Natasha Ashton, who moved to Philadelphia to attend Penn's Wharton graduate business school in 2001. They were investigating security business opportunities (Chris is a former Royal Marine officer) when their cat, Bodey, got sick and needed a kidney. "It cost us $5,000 and our apartment," Chris told me at his pet-occupied (but also spanking-clean) office in the former Scott Paper Co. headquarters near Philadelphia International Airport.

In Britain and Scandinavia, the Ashtons knew, millions of cats and dogs were insured. The Ashtons figured similar penetration in the US was possible. It was a mostly untapped market. They reviewed pet insurance data from the UK (since similar data didn't exist here.) They licensed the PetPlan brand from a British company owned by Allianz, the giant German insurer. In 2006, through Penn, they met Vernon and Shirley Hill, the Commerce Bank founders (they now operate Metro Bank UK), pet owners and major donors to Penn's vet school, and Brian Tierney, the ad agency owner (and former Inquirer publisher) who was an entrepreneur-in-residence at Wharton that year.

Hill added Petplan as an employee benefit at Commerce. Tierney offered marketing advice. Natasha says Travelocity, SC Johnson and other employers followed Commerce, boosting Petplan's sales.  

Veterinarians at first resisted pet insurance, Chris Ashton says, "because they were afraid it would destroy their profession, as human health insurers have degraded the medical profession. But they have also realized with the current economic climate people wouldn't be able to afford their services." Industry groups have become supportive, he says. 

Chris cites industry estimates that over 1 million Americans now insure their pets, with written premiums approaching $350 million. He says his company accounts for about one-tenth of the total business, in competition with small firms in California and elsewhere. The company publishes a magazine - they call it fetch! with a small "f" - that is thick with pet-supply advertising, and plans further merchandising.

Petplan's backers, besides local investors, include an arm of Holland's van Lanschot banking family. Allianz is Petplan's underwriter. Nationwide and Aetna are also underwriting pet insurers. The industry seems ripe for consolidation. Will Petplan be sold at a tidy price, or will it become a major Philadelphia employer (beyond its current 50 workers?) "This could be a billion-dollar company," says Hill.