In 2001, the cost of a new kidney for a cat was $5,000. No doubt the price today is much higher. And with many Americans facing uncertainty in their finances and unable to pay for their own health care, one would imagine that kidney surgery for cats might be much lower on the priority list.
But an article in today’s Philadelphia Inquirer shows that — at least from an insurer’s perspective — Americans still consider their pets to be family members. According to the article, Harrisburg, Pa.-based Capital Blue Cross has become the first Blue Cross affiliate to offer pet health insurance.
The program is an optional benefit offered in conjunction with other health plans, and at no cost to employers. Participants pay premiums based on the type of pet and desired coverage levels, and the plan is managed by Philadelphia, Pa.-based Petplan, a company started by two Wharton graduates — Chris and Natasha Ashton — who first came up with the idea when their cat required a new kidney more than a decade ago.
In fact, in 2003, the Ashtons — along with then-MBA candidates Laura Bennett and Alex Krooglik — won the Wharton Business Plan Competition with their original pet insurance concept called PAWS. At the time of the competition, the U.S. had 130 million cats and dogs, with only $100 million worth of insurance policies written. According to the Inquirer article, the number of pet insurance policies in the U.S. now totals $350 million, and Petplan accounts for about one-tenth of that business.
Clearly, other insurance companies see some potential. Petplan’s policies are underwritten by German insurer Allianz, and the Inquirer article notes that Aetna and Nationwide are among other firms offering policies for pet owners.
Veterinarians are opening up to the idea of accepting insurance, too. In his interview with the Inquirer, Chris Ashton noted that although veterinarians have traditionally shied away from insurance, wary of the effects it has had on the medical industry, “they have also realized [that in] the current economic climate, people wouldn’t be able to afford their services.”
Still, people have shown no slowdown when it comes to spending on their pets. The American Pet Products Association predicts that in 2011, U.S. citizens will spend almost $51 billion on pet-related products, services and medical care. In that light, a $460 Swarovski Crystal dog collar sounds like a bargain.
Culture and Marketplace Effects on Perceived Price Fairness: China and the USA
