PHILADELPHIA -- Money's a little tight right now for Fred Cratil as he and some relatives put the finishing touches on their new Italian restaurant.
The last thing he wants to do is worry about Bruno, his 6-year-old Cairn terrier.
So when Cratil, who's working as a courier until the restaurant opens, made a delivery to the offices of Petplan in Philadelphia, he was an easy sell.
He became one of the first to buy pet health insurance from Fetch Inc., which sells policies under the name Petplan. Fetch, which started selling policies in July, was founded by Chris and Natasha Ashton, an English couple who discovered, while getting their MBAs at the University of Pennsylvania's Wharton School, how expensive a pet's illness can be.
Cratil now pays them about $270 a year so that any medical decision he makes about Bruno will be about the dog's health, not money.
Not that long ago, dogs lived in the backyard and owners considered it normal to put a pet to sleep if the vet bill was getting too high. Plus, vets could only do so much to help.
Nowadays, dogs and cats are part of the family, and vets can do orthopedic surgery, chemotherapy, and kidney transplants. The change -- and the dramatic increase in bills that goes with it -- is driving interest in pet health insurance.
So far, only a tiny percentage of pet owners have such insurance, but the number is growing. According to the American Pet Products Manufacturers Association, 3 percent of dogs and 1 percent of cats are insured, up from 2 percent of dogs and less than 1 percent of cats in 2002.
Veterinary specialty centers -- which deal with the most expensive animal problems -- are seeing rapid growth in insurance. Barry Stupine, director of the University of Pennsylvania's Matthew J. Ryan Veterinary Hospital, said the portion of clients with insurance has grown to 4 percent.
Ken Drobatz, director of emergency service at Ryan, said it was not unusual to give families a quote of $6,000 to $10,000 for treatment of their pets. Some people can't pay that, no matter how much they love their animals. "It's just prohibitive," said Drobatz, who is on Petplan's veterinary advisory board. "We end up euthanizing a lot of animals because of the cost."
All of this spells opportunity to the Ashtons, who learned about vet bills the hard way, went on to win the Wharton Business Plan Competition with their idea for a pet insurance company, and then followed through.
Fetch, the Ashtons' company, holds the exclusive rights in the United States to use the Petplan logo and name through a licensing agreement with Petplan U.K., Chris Ashton said. Pet insurance is more widely accepted in England, he said, and Petplan is the largest company there.
The couple, who met while students at Oxford University, began thinking about pet insurance when their cat Bodey stopped eating in October 2001. Her extensive treatment cost more than $5,000. "We were willing to do whatever it takes," he said. "We moved apartments to pay the bills."
Bodey survived, and a business was born.
The Ashtons were part of a group that won the business plan competition in 2003. Two other members of the team, Laura Bennett and Alex Krooglik, have started Embrace Pet Insurance near Cleveland.
Fetch, which has nine employees, is funded with venture capital. Policies are underwritten by American National Property & Casualty Co.
Chris Ashton declined to say how many policies the company has sold.
While pet insurance technically is property insurance, it uses the lexicon of health insurance. Companies offer policies with deductibles, copayments, and benefit limits. Some base their payments on a fee schedule they set rather than what veterinarians actually charge. Some include preventive care. Consumers need to pay attention to how plans cover congenital and preexisting conditions.
Petplan insurance is designed to help pet owners with major medical bills, not routine care. It doesn't accept new pets older than 7. Its rates -- designed with the help of data from Petplan U.K. -- are based on where the owner lives and the age, species, and breed of pet. Cats are cheaper than dogs. As a general rule, small dogs live longer than big ones, so owners of small dogs pay lower premiums. Insurance in the cheapest plan for a 6-year-old Doberman, for example, costs $491.12 a year. The policy for a small, mixed-breed dog -- they're the healthiest -- is $202.67.
The fee schedule takes into account congenital problems, such as hip dysplasia, that plague certain breeds.
The biggest pet insurer in the United States is Veterinary Pet Insurance Co., which claims about 80 percent of the market and 400,000 policies. It wrote $110 million in premiums in 2005, up from $85 million in 2003. VPI customers can buy a rider for routine-care coverage. VPI does not cover congenital problems and charges the same for all members of a species. "We don't discriminate by breed," spokesman Brian Iannessa said.
Jim Wilson, a veterinarian and management consultant in Yardley, Pa., who was one of the initial investors in VPI, said entering the US pet insurance market is tough because a company needs separate approval in each state and lots of marketing money. "The opportunities are there," he said, "but the obstacles are huge."