Pet Insurer May Be Put in Hands of Conservator

When John Garamendi, the state’s insurance commissioner, vowed to put the heat on big insurance companies, it wasn’t clear that puppies and kittens might feel the bite.

The state has filed a motion to have a third party take over operation of Veterinary Pet Insurance Inc. of Anaheim, which is believed to be one of only two companies in the nation that sells health insurance for dogs and cats.

Company President Jack Stephens hopes to head off the state action by showing that he has an outside investor--American Livestock Insurance Co. of Geneva, Ill.--ready to pledge $2 million to bolster the company’s balance sheet.

Stephens said in an interview Tuesday that he did not want to criticize the state’s methods, but he said the insurance business has changed since Garamendi took over in January.

“We’ve been diligently pursuing this investment,” he said. “I never received any official deadline when I had to have it or else.”

Mary Sue Maurer, a deputy press secretary for Garamendi, said the state filed the motion to appoint a conservator Monday in Orange County Superior Court. But the state delayed asking for a hearing date because Stephens was able to produce evidence of financial backing from American Livestock. The state expects either to approve American Livestock as an investor this week or to proceed with the motion to place Veterinary Pet in conservatorship, Maurer said.

The state claimed that Stephens’ company does not have enough capital and surplus to meet a state minimum of $200,000. A recent audit by the accounting firm Coopers & Lybrand, in fact, shows that Veterinary Pet has a deficit of $529,624, according to the state.

Stephens said, however, that if his customers paid their outstanding bills, he would have a $205,000 surplus. The money is due from other insurance companies for which he acts as an agent, he said, but the state does not allow him to count such receivables as an asset.

Veterinary Pet holds 50,000 active policies from customers in 34 states. It charges $54 a year to insure puppies and kittens, and from $60 to $65 a year, on average, for older pets. Stephens, a former veterinarian, said he recently insured a 23-year-old cat.

The insurance policies pay for office visits, injections, prescriptions, lab fees, surgery and hospitalization.

The company is owned by a group of 750 veterinarians and has been in business since 1982.

Veterinary Pet was also in the news in February, when Garamendi’s office charged that the company was taking too long to pay claims. Since then, the company has computerized its payment system and is paying claims within 60 days, Stephens said. He hopes to cut the claim processing period to 30 days by the end of September.

Stephens said he processes a much higher percentage of claims per policy than the average insurer. “I’m not sure why,” he said. “Maybe it’s that the first people to buy something like this--a new product--are more likely to use it.”