Trupanion CEO Addresses Wall Street Concerns Following Ousting of Three Top Executives; Engages on Regulatory Environment

In an exclusive interview with The Canine Review, Trupanion founder and CEO Darryl Rawlings attempted to tamp down Wall Street concern about the challenges ahead following last week’s termination announcement of three top executives.

Quotation MarkIf there’s anything material about the company that occurred prior to us letting these three people go,” Mr. Rawlings said, “we would’ve had to report that before [the dismissals]. There’s nothing material,” he said emphatically. “What we did have is a communication challenge in that people read the information and they inferred some stuff that we did not make as clear as we should have….There is language in our [SEC filing] that actually describes that we didn’t have any material issues with any of [the three ousted executives]. There wasn’t any malfeasance. We thought that that was going to be enough. We should have been more explicit.”

On Talent

Mr. Rawlings told TCR that the company’s legal department has “approximately 15 people” without departing general counsel Gavin Friedman. “We probably have, in that department, five times more than anybody else in the category,” Mr. Rawlings said. “We’ve got plenty of horsepower,” he added, noting the same was true of the company’s pricing department, which reported to Tricia Plouf – whose departure was also announced in last Thursday’s press release.

Analysts Spooked

In an analyst report from Evercore ISI published on the day of the termination announcements, Evercore wrote:

“The biggest surprise here was CFO [Drew] Wolff’s departure. Now, we believe that Darryl Rawlings (Chairman and CEO) and Margi Tooth (President) are two of the only operational executives with meaningful history with the company, and while Darryl plans to remain the CEO through at least 2025, we believe management will need to hire and train new leadership teams, very soon.  As such we see execution, low company morale, and potentially a Q1 miss, as three big risks, in addition to macro headwinds.”

On Regulatory Environment

Mr. Rawlings, who is a founder of the pet insurance industry’s trade association, also briefly addressed several matters of policy.

In Maine, one of only two states where pet insurance legislation is now active and the only state capping waiting periods at 24-hours, many major pet insurers have limited their offerings or stopped taking new members in the state entirely. “Due to new regulations in your state, Nationwide is offering only accident pet insurance coverage at this time,” Nationwide’s pet insurance website says in a message when asked for a rate quote for a zip code in the state of Maine.

Quotation MarkI don’t think it’s a concern at all,” Mr. Rawlings said of the waiting period restrictions in Maine. “For a lot of our pets, we don’t have waiting periods because they get vet certificates..”

Worth noting, here, that Trupanion is one of few carriers which does not impose 6-12 month orthopedic waiting periods and that even before any legislation, the company’s waiting periods were among the shortest.  Trupanion is also the only pet insurance provider to offer a program exclusively to dog breeders which allows the breeders to send puppies to their new families already enrolled with active coverage and no waiting periods.

Asked if Trupanion would be negatively impacted if more state legislatures were to ban waiting periods, Mr. Rawlings said Trupanion has “lots of ways we can address it.” The “it” in that answer refers to something called “adverse selection,” which is the reason insurance companies have waiting periods: to prevent pet owners from signing up for pet insurance after a dog is involved in a major accident or becomes sick.

The way Trupanion is addressing “it” in Maine is by requiring new policy holders to get their dog a veterinary exam within 24 hours of enrollment, which would put any existing conditions inside the 24-hour waiting period window. Mr. Rawlings didn’t elaborate on the impact the vet exam requirement is having on enrollment numbers in the state.

On New York Legislation–Which Would Require Coverage of Pre-Existing Conditions

Finally, Mr. Rawlings addressed the pet insurance legislation in New York which would require carriers to cover pre-existing conditions — in essence, this legislation would constitute an extinction level event for the category. The bill, whose sponsor is Sen. James Skoufis, said through spokesperson Emma Fuentes that as of late February, there had been no lobbying against the legislation.

“I don’t think any regulator, when they look into it, would think it’s a good idea to cover preexisting conditions,” Mr. Rawlings said. “I think a regulator will only be looking to make sure that pet owners have clarity of what’s covered and what’s not covered.”

“If everyone waited until their dog got hit by a car to buy insurance, that would not make any sense. And regulators are logical people,” he added.

On Company Morale: “Optimistic”

“We’re heads down, continuing to play out our long-term mission,” he said when asked about morale. “Fluctuations in our stock price have no effect on our ability to execute in this business.”

Mr. Rawlings said a regularly scheduled, company-wide meeting was held around the time the announcements were made and “people seemed optimistic.” He declined to elaborate on what was said during the meeting, but TCR can confirm that people inside the company who are not at liberty to speak on record were expressing a positive outlook.

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In an exclusive interview with The Canine Review, Trupanion founder and CEO Darryl Rawlings attempted to tamp down Wall Street concern about the challenges ahead following last week’s termination announcement of three top executives. 

If there’s anything material about the company that occurred prior to us letting these three people go,” Mr. Rawlings said, “we would’ve had to report that before [the dismissals]. There’s nothing material,” he said emphatically. “What we did have is a communication challenge in that people read the information and they inferred some stuff that we did not make as clear as we should have….There is language in our [SEC filing] that actually describes that we didn’t have any material issues with any of [the three ousted executives]. There wasn’t any malfeasance. We thought that that was going to be enough. We should have been more explicit.”

On Talent

Mr. Rawlings told TCR that the company’s legal department has “approximately 15 people” without departing general counsel Gavin Friedman. “We probably have, in that department, five times more than anybody else in the category,” Mr. Rawlings said. “We’ve got plenty of horsepower,” he added, noting the same was true of the company’s pricing department, which reported to Tricia Plouf – whose departure was also announced in last Thursday’s press release.

Analysts Spooked

In an analyst report from Evercore ISI published on the day of the termination announcements, Evercore wrote:

“The biggest surprise here was CFO [Drew] Wolff’s departure. Now, we believe that Darryl Rawlings (Chairman and CEO) and Margi Tooth (President) are two of the only operational executives with meaningful history with the company, and while Darryl plans to remain the CEO through at least 2025, we believe management will need to hire and train new leadership teams, very soon.  As such we see execution, low company morale, and potentially a Q1 miss, as three big risks, in addition to macro headwinds.”

On Regulatory Environment

Mr. Rawlings, who is a founder of the pet insurance industry’s trade association, also briefly addressed several matters of policy.

In Maine, one of only two states where pet insurance legislation is now active and the only state capping waiting periods at 24-hours, many major pet insurers have limited their offerings or stopped taking new members in the state entirely. “Due to new regulations in your state, Nationwide is offering only accident pet insurance coverage at this time,” Nationwide’s pet insurance website says in a message when asked for a rate quote for a zip code in the state of Maine.

Quotation MarkI don’t think it’s a concern at all,” Mr. Rawlings said of the waiting period restrictions in Maine. “For a lot of our pets, we don’t have waiting periods because they get vet certificates..”

Worth noting, here, that Trupanion is one of few carriers which does not impose 6-12 month orthopedic waiting periods and that even before any legislation, the company’s waiting periods were among the shortest.  Trupanion is also the only pet insurance provider to offer a program exclusively to dog breeders which allows the breeders to send puppies to their new families already enrolled with active coverage and no waiting periods.

Asked if Trupanion would be negatively impacted if more state legislatures were to ban waiting periods, Mr. Rawlings said Trupanion has “lots of ways we can address it.” The “it” in that answer refers to something called “adverse selection,” which is the reason insurance companies have waiting periods: to prevent pet owners from signing up for pet insurance after a dog is involved in a major accident or becomes sick.

The way Trupanion is addressing “it” in Maine is by requiring new policy holders to get their dog a veterinary exam within 24 hours of enrollment, which would put any existing conditions inside the 24-hour waiting period window. Mr. Rawlings didn’t elaborate on the impact the vet exam requirement is having on enrollment numbers in the state.

On New York Legislation–Which Would Require Coverage of Pre-Existing Conditions

Finally, Mr. Rawlings addressed the pet insurance legislation in New York which would require carriers to cover pre-existing conditions — in essence, this legislation would constitute an extinction level event for the category. The bill, whose sponsor is Sen. James Skoufis, said through spokesperson Emma Fuentes that as of late February, there had been no lobbying against the legislation.

“I don’t think any regulator, when they look into it, would think it’s a good idea to cover preexisting conditions,” Mr. Rawlings said. “I think a regulator will only be looking to make sure that pet owners have clarity of what’s covered and what’s not covered.”

“If everyone waited until their dog got hit by a car to buy insurance, that would not make any sense. And regulators are logical people,” he added.

On Company Morale: “Optimistic”

“We’re heads down, continuing to play out our long-term mission,” he said when asked about morale. “Fluctuations in our stock price have no effect on our ability to execute in this business.”

Mr. Rawlings said a regularly scheduled, company-wide meeting was held around the time the announcements were made and “people seemed optimistic.” He declined to elaborate on what was said during the meeting, but TCR can confirm that people inside the company who are not at liberty to speak on record were expressing a positive outlook.