Last Thursday, June 22, America’s leading provider of pet health insurance, Seattle-based Trupanion, Inc. (NASDAQ: TRUP) finally seemed to have caught a break: A press release focused on updating investors on the company’s pricing efforts in its two largest markets, California and New York, was issued at about 4:15 p.m. EDT. The release said that both states had approved the company’s rate hike requests. Although California had approved a rate hike of 12%, less than half of what Trupanion had requested, the claim with respect to New York was still more dubious. In fact, TCR has now found that, according to New York regulators, Trupanion’s statements about New York seem not to be true.
Pet insurance in America is regulated by individual states, and when pet insurers wish to make changes to their products – including rate changes and policy coverage changes — such changes must be filed and are subject to review by regulators. The Trupanion press release was an apparent effort to deliver good news to investors amid the company’s worst 18-month bad news streak since going public in 2014 (more on the bad news streak later).
From last week’s press release:
“New York approved Trupanion’s requested 18% rate increase,” Trupanion exclaimed, “which in addition to its’ previously approved 6% rate increase in November of 2022, brings the total approved rate to approximately 25% in the last seven months.
Margaret “Margi” Tooth, President of Trupanion noted:
“We are very pleased with the recent rate approvals from two of our largest states, New York and California. These rate approvals, which are necessary in today’s rising cost of veterinary care environment, demonstrate a big step forward towards achieving our value proposition, which we believe to be the highest in the industry. We believe the rising cost of veterinary care will only increase the need for Trupanion in the months and years ahead and we look forward to being there for our members and their pets.” Tooth added, “We thank both the New York and California Departments of Insurance for their continued partnership and look forward to our ongoing dialogue and collaboration.”
According to a company insider, Ms. Tooth writes nearly all of the releases herself.
NYDFS: Trupanion NY ‘Approval’ Claim Not True
“The department does not technically have the authority to approve [pet insurance rates]… These rates are just submitted to us. We do not have the authority to review them prior to publishing,” an official at New York’s Department of Financial Services told TCR. When asked if Trupanion’s statement about NYDFS approving an 18% rate increase was accurate, the official said, “It’s taking a little bit of liberty. It’s a bit of an exaggeration on their part….It’s more that they just submitted these rates to us, and we are aware of them.”
By email, the official confirmed, “the Department still retains the authority to object to aspects of the rate filing,” she wrote, referring to Trupanion’s filing.
TCR has included redacted written exchanges with New York DFS et al. below.
Silence From Trupanion’s Leaders, Board of Directors
The Canine Review spent the past week seeking an explanation from Mr. Rawlings, Ms. Tooth, and Trupanion’s board about the press release and the apparent discrepancies between what Trupanion claimed and what was actually listed on the SERFF database.
We’ve not received any replies to our repeated queries. Our written efforts to seek responses from Trupanion are included after our reporting below.
The rate increases in California and New York are vitally important, not simply because they are the industry’s biggest markets. They are also where the company is losing the most money, because its products are not priced at high enough rates to offset payouts made to its members to cover their increasing veterinary costs. To Trupanion’s credit, the company keeps its word and pays claims quickly rather than trying to deny or slow walk claims the way other carriers approach the problem of high claims. I can attest to this as a Trupanion policy holder, which I was long before I began covering the company as a reporter.
In an interview in May with Trupanion CEO and founder Darryl Rawlings, we asked why he thought rate changes in New York and California were taking so long to process. Mr. Rawlings suggested the issue was staffing shortages on the regulatory side. “They’re just slower because they don’t have enough people to get through their paperwork,” Mr. Rawlings explained.
In April 2021, Mr. Rawlings unveiled his 5-year plan in his annual shareholder letter. It included the launch of pet food venture Landspath, two lower-tiered subscription pet insurance products, PHI Direct and Furkin, international expansion, and a GPS product (like Apple’s Air Tag).
It was a global vision for multi-dimensional pet health care. The person tasked with overseeing all aspects of the plan: Trupanion President Margi Tooth. More than two years later, Rawlings and the board have declined repeated requests to comment on any aspect of the food venture, including the total dollar amount spent to date.
One company insider told TCR that the amount spent to date on Landspath is north of $15 million dollars.
In June 2021, the company ‘soft launched’ the food at the shareholder meeting in June 2021. As this story was being reported, and immediately following another round of inquiries about the ambitious Landspath food venture, Trupanion pulled down Landspath’s website completely.
The company also declined our repeated requests to explain that.
As for PHI and Furkin, those products still have not launched in the U.S.
Leadership Exodus, Talent Drain
There has also been an exodus of key executives in the past year: Dusty Bonner, EVP of Growth and Distribution; Randy Valpy, SVP of Distribution; Gavin Freedman, General Counsel; Drew Wolf, CFO; and Tricia Plouff, EVP of Pricing. In the latest in a series of layoffs this past week, we learned that Trupanion dismissed its head spokesperson, Michael Nank, too.
On Glassdoor, the job review site, the reviews for Trupanion are scathing but nearly all of the negative reviews note that working at the company used to be good, when Mr. Rawlings was running things.
Mr. Rawlings has declined repeated requests to comment on reports of low morale. But Trupanion’s mission-driven, vet-centric ethos appears to have been uprooted by a new regime of career insurance industry “bean counters” – exactly the construct Mr. Rawlings said he founded Trupanion to disrupt.
Just the latest setback
If Trupanion’s enormous pricing challenges were in a vacuum and without an accompanying parade of other problems, what The Canine Review is reporting today about the unclear status of the New York rates would still be high impact. In the context of Trupanion’s other woes, the implications are larger.
“Starting last year, I have rarely shown up to a management meeting,” Rawlings told an audience of investors in Europe on June 9, 2022. About 12 months before Mr. Rawlings made that statement, on December 7, 2021, Trupanion’s stock price was at its peak value of 155.41 on Dec. 7, 2021. That was the day Trupanion announced a deal with Chewy to co-sell insurance to its customers.
A few weeks later, in January 2022, Mr. Rawlings promoted Ms. Tooth from Co-President to President.
Thus, Mr. Rawlings, who was then 52, confidently explained his decision to step back this way: “And last year, we created more intrinsic value per share than we’ve ever done in the company’s past. So, I mean, if I just took a look at the math, the math says, ‘Darryl Rawlings, don’t show up to work.’”
Mr. Rawlings did not respond when TCR asked him last week if he stood by his assessment.
Working in a ‘Free-For-All’
In a telephone interview with one of the newly fired sales employees who asked not to be identified – so we’re calling her “Susan,” Susan told TCR she felt like she was working in a “free for all.” That despite being told when she was hired that there were no sales goals or KPI’s (key performance indicators), her manager began threatening to fire her if she didn’t sell “120 policies in June.”
When asked for her assessment of Rawlings and Tooth, Susan said:
“I think Darryl has stepped back enough that he has no idea that a company he built is being destroyed.” Like most Trupanion stakeholders, employees, and former employees, Susan still projected confidence and faith in Rawlings. “I guess it’s personal opinion from when we talked to Darryl in training. It’s also knowledge. Trupanion has always been a pretty good little company. And, like, suddenly it just explodes into this inferno of hell. And I just, I can’t imagine that Darryl–I can’t imagine somebody like that–people like that don’t willingly destroy their businesses even for money because they’ve, they’ve got that ego of like, look what I built. I just, I can’t imagine he would destroy his business he worked so hard to build up.”
“I think Margi’s at the helm of it,” “Susan” asserted when asked what or whom she sees as the cause of the company’s troubles.
“I think if Darryl wants to save his company, he needs to get rid of everyone in management.”
One day following publication, although no person at Trupanion has commented on this story or contacted TCR directly with a request for clarification or correction, Trupanion, Inc. issued another statement on its website:
June, 30, 2023
SEATTLE, June 30, 2023 (GLOBE NEWSWIRE) — Trupanion, Inc. (Nasdaq: TRUP) today issued the following statement on its New York rate filing status:
On June 22, 2023, under normal course of business, Trupanion’s requested rate filing with the New York Department of Financial Services was acknowledged on the System for Electronic Rate and Form Filings (SERFF). The New York Department of Financial Services confirmed that with this acknowledgement, Trupanion is authorized to use its requested rate increase in market.
With this acknowledgement, the Company continues to expect to have 19.7% pricing action flowing through its book by the end of August 2023, and 21.6% pricing action flowing through its book by the end of September 2023.