Pet insurance company Trupanion hit with a $100,000 fine

Jun. 26--Seattle-based pet insurance company Trupanion was hit with a $100,000 fine by Insurance Commissioner Mike Kreidler's office, the third time in four years it has been sanctioned by the regulator.

Trupanion Managers USA, a unit of the publicly traded company, was fined for several marketing tactics: Exceeding the $100 limit in gifts in exchange for referrals, paying an unlicensed website to market pet insurance and generate leads, and paying $245,000 to five unlicensed representatives to sell pet insurance policies to veterinary clinics and animal shelters.

Kara Klotz, a spokeswoman for the insurance commissioner, said the regulations require insurers to work with licensed agents.

"If you're working with an unlicensed professional and they do something bad that harms you, we don't have recourse," she said. "If your (licensed) producer has violated state laws, you can go on our website and see exactly what they did."

It's not the company's first violation. In 2016, Trupanion Managers was fined $150,000 for obtaining $3.3 million in premiums through unlicensed producers. That same year, its sister company, American Pet Insurance Co., was fined $250,000 for charging inconsistent rates and mishandling consumer complaints.

"I would say it's not incredibly common for us to have follow-up actions," Klotz said. "We don't want to have to keep fining them."

Trupanion agreed with the insurance commissioner's claims, calling the errors clerical mistakes.

Trupanion CEO Darryl Rawlings said the company paid a veterinary clinic $133 in gifts, which went over the maximum $100 allowed by the commissioner's office.

"That was a mistake on our part," Rawlings said. "We totally knew the rules."

The company paid Reviews.com, a website which the commissioner called an unlicensed producer. In a statement, Reviews.com said it supplies independently researched information on various topics and earns commissions when consumers click through to affiliated vendor sites.

"This one website was providing a level of detailed information that requires a license," Rawlings said. "We were not aware of that. We would have told them they're not allowed to do it. In that case it was an oversight on our side."

Trupanion is also working to license some of the unlicensed marketing representatives.

The fines won't make a huge dent in Trupanion's bottom line. The company's total revenue in 2018 was $304 million, a 24.7% increase from the previous year. And while the company still didn't break even last year, market analyst Kevin Kim Ellich said the company is still in a healthy spot.

"As they make more money, they're spending more money on pet acquisition cost," Ellich said. "A lot of that is just building brand awareness, helping educate pet owners about pet insurance and the benefits...given the low penetration rate of the pet market, I think Trupanion should be able to grow their top line."

The insurance commissioner's spokeswoman said these aren't the sorts of infractions that could cause a company to lose its license.

"We typically don't take that kind of action unless something really egregious is going on," Klotz said. "We want consumers to be able to be able to find insurance and for the market to thrive."

This story has been updated to clarify Review.com's role.

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