My guest today is Chris Middleton, the president of pets best pet insurance company. Chris was elected president when dr Jack stevens retired about a year ago in 2000 and 14. Jack started the first successful pet insurance company in the United States veterinary pet insurance. And then after leaving V. P. I. In 2000 and four started Pet's Best in 2000 and five, chris, welcome to the podcast. And what's it been like since taking over as president of pets best? Well, dr Kenny, it's it's an interesting question. It's been a, it's been a range of emotions in part because film clean the shoes of literally the founder and captain of an industry can be pretty intimidating. Jack is obviously iconic in the pet insurance industry and any time you got involved with somebody like that, that represents a unique challenge. And so that's been part of the emotional set. It's also been really exciting. Um Jack set us up really well for the future and we've launched some really exciting products. I guess Jack is still involved with the company in some capacity. Oh yes Jackson semi retirement and it waxes and wanes in terms of his engagement depending upon what part of the world he's seen at the current time, but he's still one of the primary strategic decision makers for pets best and will be so for the foreseeable future and he's also still on our board of directors. Well, I first met chris a couple of years ago when I attended the North american Pet health insurance association summit in Scottsdale Arizona. On the first day of the summit ate breakfast on the patio right outside the conference center at a table with Katie Grant, the president at pet first and some of her staff and I ended up sitting right next to crist. I mostly listened to the conversation at the table and one topic discussed that I found very interesting was that most of the people at the table talked about coming from jobs at large corporations to work for pet insurance companies, which are really small companies by comparison. So chris tell us your story. Well, I, I worked at Hewlett Packard For about 18 years before deciding that the grass was greener on the other side and I took the opportunity to move into the pet insurance realm and to this day, I'm amazed that pets best would hire a person out of the high tech industry to lead their marketing function, which is what I initially came over to do it that fast. So thank you pets best for helping me make a transition to a much more interesting, fun and worthwhile industry versus the high tech industry. Um you know, obviously high tech has a pretty important role in the world in our economy, but you don't get the feeling that you're having much of an impact on individuals on a day to day basis like you do in the animal health industry. Um, you know, you get to come to work every day knowing that we're having a meaningful effect on pets and that we are literally saving pets from having to be put down. And so the sense of day to day reward that comes from, you know, working in an important industry and then working in a small company where you can actually be relatively nimble in terms of addressing issues and problems and opportunities um is doubly rewarding. So great industry helping pets, helping people and then being able to get things done versus dealing with the bureaucracy of the large corporation has been really quite rewarding. And not to mention, um you know, my dogs come to work with me virtually every day when I don't have kids at home during the summer. And I like that a lot. So how has pets best changed since you came on board with the company? And what led to those changes? I would say the primary change at pets best. And this is I think a change that's reflected in the broader industry as well, And it's ultimately a function of a couple of things. one the industry becoming more competitive and the industry maturing and people wanting to do good stuff, and that is the quality of our product that we are delivering has substantially improved over the past five years. Um you know, our company and across the industry, the number of exclusions and this isn't true for all companies. That is certainly true for us. The number of exclusions has dropped significantly. There's been increases in benefit coverage. And so I would say over the past five years the single biggest change has been dramatic increase in the quality of the product that we're offering to consumers with their pets. And that's been really rewarding. If you enroll your pet at a young age before that had had any pre existing conditions, ensure that before they had an incident um you're going to have a great pet health insurance experience in general, whatever happens to your pet is likely to be covered And you know, you go back 5 6 years ago, that wasn't necessarily the case. It's a breath of hereditary and congenital coverage being offered now by pets best and other players in the industry being just one small example. So let's talk a little bit about pets best policies. Um Just give us a quick overview and then I'll get into some specifics uh that may differentiate pets best from other companies. Well I would say one of the key differentiators for pets best, although there are other players in the industry that do this as well. But not all is we pay a percentage of the vet bill without regards to usual customary or any benefit schedule, which means that you as a ted owner are going to have a pretty predictable experience. It's your bet is going to charge $3000 for an A. C. L. Surgery. Um We're going to, if you pay your deductible um reimburse you whatever percentage that you selected at the point you purchased. We also make it a point of pride to offer consumers a lot of choices. We very much don't believe in a one size fits all approach. And so we offer a great deal of flexibility to customers to get the coverage they want at a price that they can afford. And so we offer plans with a variety of annual limits, a variety of annual deductibles and reimbursement levels to let you really customize that plan. And then back in june we introduced even more flexibility in our products. In terms of customization, the consumer can take either when they purchase or after they purchase them. They need to adjust their premium. And we started to sell policies where a consumer might look at it and say I know I can afford to cover the veterinarians fee out of my pocket. I'm really concerned about the big things. Well we offer policies now where the consumer's choice, they can choose to cover the veterinarian feed themselves. And it would be the other procedures that are covered. And we'll let them make that same choice about take home prescription medications about alternative holistic care, rehabilitative care to really allow them to build the plan that matches their particular risk and concern area. And that has been very well received because consumers are extremely price conscious as it relates to pet insurance. And so offering a variety of choices is very important in getting them to feel comfortable about making that pet insurance purchase. When you say give the pet owner of the option to cover veterinary fees out of pocket, you're referring to like exam fees. Yes. The example might be anywhere from 50 to $100 per visit and a consumer might look at that and say, I can always afford that. I can't afford the $4,000 surgery. And so we allow customers to purchase plans where they'll pick up that portion of the costs themselves. Okay, of course. You mentioned the you cover hereditary and congenital conditions, Correent? Yes. If we offered that coverage beginning in 2013 and chronic conditions recovered, correct. And there's no upper age limit that someone can start a policy, is that correct? Correct? No upper age limits. One thing that's kind of unique I think with pets best is y'all cover pregnancy in most breeds. There are a few breeds. I see that you have a list that you don't cover it, but I know that's an exclusion under a lot of policies wrecked. Yeah, we don't see a lot of claims in that area to be perfectly frank. Okay. Own your wellness coverage. How popular is that wellness in the industry is actually quite popular and it's a very popular offering that we have as well as you undoubtedly know, not all insurers in the industry offer wellness, but we feel like it's something that consumers most definitely want, particularly when they just purchased a new puppy or not purchased necessarily, but just gotten a new puppy or kitten and you know, the upfront costs when you get a new pet can be pretty significant and having some help with that can be important. So yeah, it's uh, it's very important in the industry and it's a significant portion of the industry's overall revenue picture as well as it is for us and policyholders can file claims electronically and also receive reimbursements electronically. Yes, we are a leader in terms of our customer portal. In fact, I just got an email yesterday that customers logging into the portal and uploading their claims is now our most popular form of claim submission beating even facts and that's definitely good news. I know a couple of companies have come out with apps where pet owners can take a picture of the invoice or whatever and upload it directly to the pet insurance company. Do you all have anything like that in the works? For one Thing? Our portal effectively allows that okay, we are, we are working on and half as well just to make the process a little more seamless than it is today. But logging into the portal and taking care of all of this on your iphone and pulling in a picture of the invoice is something that the portal allows today. But we'd like to make that process a little more stream life and people like applications. Right. And we do offer direct deposit reimbursement were I believe the first to offer automated direct deposit back to consumers bank accounts and that proved to be extremely popular among our customers. So what's the typical turnaround time from filing a claim to getting reimbursed? We are striving to have that done in under five days from receipt of claim to customer having money. You also offer what a lot of people call pre certification or pre approval on claims over $500. Can you talk about that? So and this is just a customer service. If you want to ensure that procedure that your veterinarian is recommending is going to be covered. Um work with us and your veterinarian to provide us information and in fairly short order will give you perspective on what is going to be covered. Stand behind that decision. Okay. And y'all also offer a discount. Call my vet knows best or something like that discount. Can you talk about that? That's for customers who would like to essentially certify the health of their pet prior to enrolling for coverage. So if you are certificate, if you take Your pet to the veterinarian in advance of registering for coverage and get a health certification will reduce the waiting periods as well as give you a 10% discount for your patent. That may be a little bit different from, say if a person request a medical record review. Uh is that right? Very, very different. And with that certificate program, we don't require medical records to be submitted on that point of enrollment. In fact, we're unique in that fashion in terms of the ease of getting a pet insurance policy with us. Some companies require either complete medical records and enrollment or that exam and enrollment or records with that first claim. And we take a more nuanced approach to dealing with customers. So when you sign up with us, you don't have to supply complete medical records or get an examination and we don't necessarily require medical records upon that first claim. That just depends on the nature of the claim. If a pet owner knows that their pet has some pre existing conditions and wants to know if they will be excluded as such. Uh, if they request a medical record review, will pets best do that? Let's say it's the first time they fought insurance or they switch pet insurance companies or whatever. But I've recommended just from a veterinary standpoint when people sign up for pet insurance, you know, if there's any question that there may be something pre existing to go ahead and request medical record review so that if they file a claim down the road, there won't be any surprises as far as what may be considered pre existing. I mean, do you all do that? We don't have an official process in that regards. And that's not something that is frequently asked, consumers will tell our sales agents my pet has had this situation. Um And then our sales agents will make a note of that. Talk to the claims uh personnel and get back to the customer as to whether or not we would consider that to be pre existing. But in terms of doing a full blown advance medical record review, that's just not a service that's been frequently asked. So doug I can't specifically tell you what are stands on. It is, I certainly am not supposed to do it, but it doesn't happen often enough that it's ever reached my my radar screen. Okay, so um how does your underwriting department go about determining uh if a pet may have something that's pre existing in the past, We obviously asked a point of enrollment whether or not pet has had any pre existing medical conditions. And so we rely on the consumer at a station pretty heavily. And then secondly, every one of our claims adjusters are former experienced veterinary technicians and they have a really good sense given a medical background depending upon how long a customer has been enrolled, what does and their claims history. What are the chances of something being pre existing? So customers been with this for 13 months and submits a claim for diabetes. The chances of that being preexisting and not having claimed in the past year? Pretty limited. Now, if That person on day 32 weeks after the waiting period has expired, submits a claim for diabetes, an experience that technician is going to look at that and say it's really unusual that would have manifested in just the last couple of weeks. I'm going to go back and look at the medical records for that pet and make an individual determination. And Jack, when he set up our claims department and system actually built in some, let's call it almost artificial intelligence into the system to flag certain claims and the timing of those claims to make a determination as to whether or not they need deeper looking at and so between system and the deep medical experience of our claims processors. That's going to dictate whether or not we're going to go back and look for medical records, which is really a much lower touch process than other companies have. I think on average we probably request medical records for about 10% of all claims vs a number of companies is 100%. And of course requesting medical records as a process that often leads to a veterinarian and consumer dissatisfaction and we want to avoid that. Okay. Are there any changes on the horizon that we might expect from pets best that you are at liberty to mention? Oh, that's a great question. Well, there are, there are a number of big changes coming in 2016 and I cannot even though it pains me to pass up an opportunity to toot our horn for 2016, I can't speak in any tests about them. But we've got a number of uh, product innovations coming down the down the road for 2016 that we're really excited about. We'll be sure and let me know about it when it, when it comes to, I don't mean to t shirt but uh, okay, nor am I sitting about it. There are some good stuff coming okay in my book, I quoted Craig Groeschel, the pastor of the second largest church in the United States when he said to reach people, nobody else is reaching. We must do something, nobody else is doing. And pet insurance has been around for about 33 years now and still only about 2% of the pets in the United States are insured. And as you mentioned early, virtually all the companies have made improvements to their policies over the last five or six years, but in many instances they've just been tweaks, so to speak. Uh, so what do you believe must happen that will lead to more pets being insured? That's a question we wrestle with all of the time and general consensus in the industry, unfortunately is there's no one silver bullet that's going to change the dynamic one. Potential change that could drive widespread adoption is that a very major player gets into the space and literally drops millions into consumer awareness and increased legitimization of the category. That would have a positive effect. The chances of a major player doing that in my opinion are pretty limited because in many instances they would be developing demand for other insurance companies. So I really don't know. We can expect to see a big player coming in with really, really deep pockets that's going to work altruistically way to help the rest of the market. Um, our ceo would really like to see one of these days pet insurance being something that's just simply uh, an endorsement to a homeowner's policy as a way to get a broader view of pet insurance and to get more big players involved in the market. So when people are buying homeowners insurance and you have to ask generally speaking about whether or not you have a pet making it a simple yes. No decision at that point. I claim that an intriguing idea. I don't know if they were going to see that at any time soon. So there are a couple of potentials with varying levels of likelihood. The biggest issue is big improvements to product come with changes in price and consumers are absolutely load To pay $35 a month for pet insurance. I would estimate across the industry that 10 people get a quote and you see an average price of $35 a month for pet insurance. nine out of 10 of them walk away and decided not to make that purchase for a variety of reasons, some of which, you know, they just don't understand the category, but a lot of it is priced based. So consumers who are willing to spend $4 on a latte every day, wrapped up $82,000 a month for their coffee bill. Um look at a $35 bill and insurance and say, Gosh, that's too much. And I think that perception has to change and I think that's, I think that's probably going to be a slow change, that going to be a function of The evolving human animal bond as people feel like their pets are more and more part of their family and more consumers experiencing really large vet bills that they chose to pay, whereas 10 years ago, they may have chosen to euthanize their pet in today's world they may choose to pay and it's going to be very painful and on that second ted they're going to be much more amenable to considering pet insurance and that's my personal experiences before I really understood pet insurance as a category. You know, I had a 38 $100 veterinarian bill about 89 years ago, um, which unfortunately my, my dog, we ultimately died, but having to face into a 38 $100 bill at four o'clock in the morning and make those trade off decisions. That was very tough and for some trade offs in the family and you know, with pet insurance, I don't have to make those trade offs. And I think it's more and more people actually pay that big bill because they love that pet like kid over time they will view pet insurance as a really good option. And so you know, I'd love to tell you dr Kenny that there's going to be one big thing, but I think it's going to be a multitude of things. So like I said, there's a lot of folks that investigate pet insurance today and just don't pull the trigger. And that's despite the fact that on the whole, I think the industry is delivering a really high level of value back to consumers. None of the pet insurance agencies out here are getting rich. Um, you know, it's, it's a tough business and we're delivering a lot of value back to consumers. And I think as consumers start to recognize that and increasingly view that that is a family member, but in general, just good things are going to happen. But you know, one big change, I don't know that I see that happening. You may have pretty much answered this question, but what are the big challenges facing the industry in the future? Well, so yeah, obviously I talked about consumer perception of price and value and there's undoubtedly more involved in consumers deciding not to pull the trigger. In part, there's so many predators in the market right now that they can just essentially vapor lock on a decision And that's unfortunate. Um, you know, there's some other challenges. Um, and I don't know that others in the industry would necessarily view it this way, But you know, I think older pets represent a real challenge for the industry in that, you know, if you overlay the medical costs for a pet and the medical cost curve for an individual, uh, those curves look surprisingly similar and get really, really steep as, for example, individuals age, right? I mean medical costs rise dramatically well in the case of a pet that that happens as well. But it happens in a very compressed time frame and you know, you can speak to this far better than I can. But by the time a large breed dog has got to be five years old, you're dealing with perhaps kind of a later middle aged individual, right? And cost just as a function of medical care go up, consumers don't understand that. And it's very frustrating to them. You know, for example, a pet that comes on to touch best, let's say age, let's say age seven or so. You know, the premiums will be considerably more expensive than a pet that came on at a puppy stage for example. But we will never make money on that pet. We lose money on a pet that enrolls at age six, Despite the fact that the premiums are pretty healthy and healthy enough that consumers are not real happy about it, but we're not making money and that's a challenge, right? Because the only way to stay in business and offer this service is to make money on the whole, um that people just look at the a $60 premium, and say, Gosh, that's that's terrible and it's out of control and you know, we're sitting here looking at it saying it's not really enough just based on the fact that a six year old pet is getting to be an old pet. And I think that's a real challenge because we need people to ensure their pet and keep that ensured for the long term. And so we spent quite a bit of time wrestling with that particular issue. You know, I think one of the innovations that many insurance companies have come up with and this may be one of the motivations for coming up with it is making their policies so customizable in that, as you mentioned, the premiums are going to go up as the pet ages or you know, as inflation takes place and so forth. And you know, downgrading the policy is a way to keep the coverage and still keep their premium affordable. Yeah, and that is, that is one of the reasons why we recently introduced are our policy changes. Somebody's got an eight year old labrador and you know, they don't think that their pets ever going to need rehabilitative services, They can drop that particular component of care from their insurance package and reduce their premium. They can increase their deductible or decrease their reimbursement. So, your point is exactly on target. You know, the other side of the equation is, I think we have to educate consumers really about the medical costs associated with aging paths. I think you're right that by and large, most pet owners are aware that pet insurance exists and it's available. I'm not sure pan owners are very informed as far as the quality of coverage today versus say five or six years ago. Uh you know, I read all the time or I hear from people that, you know, saying, well, I looked independent insurance five years ago and it just didn't seem like it was worth it. Well, you know, things have changed a lot in five years and uh maybe they just need to take another look at it and realize that things have gotten a lot better, a lot better. The industry is delivering a lot more value Than five or 6 years ago. I won't speak too long. But another substantial challenge. The industry has to deal with this on, on the legislative front, I don't think most consumers understand that pet insurance, the product structure and the pricing is ultimately regulated in 51 different jurisdictions, All 50 states and the district of Columbia. And so we are beholden to rules and regulations that are just a hodgepodge across the country. And California recently implemented really substantial legislative requirements on the pet insurance industry. And at one point, the legislation prior to being approved had some requirements for predators covering pre existing conditions. And I'm here to tell you that if the industry for a voluntary product, people don't have to have it. If we've been required to cover pre existing conditions, we could have stayed in business in that state because nobody would buy pet insurance until they had an issue and you know, so staying abreast of those type of legislation, legislative issues. Um, and making sure that something that has an unintended consequence doesn't occur is very important as well. You know, you've mentioned, uh, several challenges that face the industry. Is there one problem that just really bothers you and you believe that if it could be solved would fundamentally change the industry? Well, you know, short of the government mandating pet insurance, which I don't think any of us want to see. I don't think there's any one change. I will tell you that. I think it's going to be an evolution and hitting some of the previous points. People understanding the value of pet insurance, understanding Their own psychology and knowing that they will in fact pay that $5,000 bill when they get into the vet, even though they don't think, they will, making sure that we are delivering a service to people that they value and understand is equitable over the life of their pet is important so that when they get that second pet, they say boy I just had a great experience with pet insurance and pets fast um and and that's going to take some education and time and perhaps some product changes. But I'd love to tell you there's just one big thing but as with so many things it's just going to be a multitude of efforts on numerous fronts. You know, I think it's like with anything else, pet owners just don't think it's going to happen to them. Looking at it from a veterinarian's perspective, we see cases every day that tell us yes it can happen to anybody. And you know I had dr barry Cooperman internist from California on a podcast 23 years ago and uh I had him on because I had read an article that he wrote in one of the journalists that I received every month and he was speaking at a conference making the 10.2 veterinarians that it's our responsibility to let pet owners know what can happen and the cost of those things that can happen, especially if they end up having to go to an emergency room or especially hospital. I thought that was rather interesting but somehow pet owners need to get the message that they may have to one day face the choice of having to pay thousands of dollars or unfortunately put their pet to sleep mm And I know many veterinarians are loathe to talk about pet insurance and really loathe to advocate for it, which I think personally of course I'm biased is unfortunate because insured pets get better quality of care and have a better outcome than non insured pets. And I think the attitude veterinarians for pet insurance is changing slowly. Mhm. But there's still a lot of resistance taking time out of what is obviously a very hectic practice to advocate for pet insurance. Love to see that happens. I think it's good for the pet and I think it's ultimately good for the veterans.