After Chris and Natasha Ashton got stuck with a vet bill for $5,000 for their cat, Bodey, they got an idea: insurance for pet lovers.
FORTUNE — Commerce Bank founder Vernon Hill has gotten loads of press for the flashy Metro Bank, which he opened in the United Kingdom last summer. But he is equally ecstatic about his investment in the fast-growing Petplan USA. “There’s a crying need for pet insurance,” says Hill, who can often be seen cradling his Yorkshire terrier Sir Duffield, feeding him favorite foods like chicken wings or ice cream.
Hill is a true believer in the business. Sir Duffield, or Duffy as he is known, has had 11 teeth pulled and never misses a checkup; and Petplan covers Duffy’s top-notch care. Hill also offers pet insurance to his employees as part of their benefit packages.
Pet insurance is a tiny piece of the financial services world — estimated at about $550 million in North America — but it’s booming. Revenues in the U.S. have jumped about 20% a year for the last decade and should hit $880 million by 2014, says David Lummis, an analyst at consumer goods research firm Packaged Facts. There’s room for growth, too. Less than 1% of pets are insured in the U.S., versus 25% in the U.K.; and veterinary costs are going up.
Petplan has competition, including Veterinary Pet Insurance and PetHealth. But it also has high profile backers — Rachel Ray’s vet Ernie Ward is an advisor along with Hill. The company’s sales have leapt about 50% a year since it was launched in 2006. It broke even in 2009, and it now generates about $30 million a year in revenues.
Petplan was started by a British couple named Chris and Natasha Ashton who entered the pet insurance business while cash-strapped Wharton students. “Our cat Bodey fell ill, and we had to save her,” says Natasha. An emergency room visit stuck the couple with a $5,000 bill that they could not afford.
To help animal lovers in similar financial straits, Petplan offers up to $20,000 a year in coverage for an average premium of $350 a year (in line with industry rates). Of course, insurance is costly if your pet is the picture of good health; and pricing is based in part on zip code, making it more expensive for people in richer parts of the country. But, says Hill, “As more people would do almost anything to save their pets, this is a business with unlimited upside.”
A shorter version of this article originally appeared in the November 7, 2011 issue of Fortune.