Pet owners are growing in numbers and are becoming increasingly fond of their pets, according to Mark Colonnese (pictured), the product marketing director of Aquarium Software, an insurtech focusing on the developing growth opportunities in the pet insurance market. This year marks 40 years of pet insurance within the North American market, he said, and, according to the North American Pet Health Insurance Association, the pet insurance sector is estimated to be close to a $1 billion value.
Read more: Why pet insurance is booming
In the US, despite there being more than 100 million cats and dogs, just over 2% of these are covered by insurance, he said, while in the UK, about 30% of pet owners have insurance for their animals.
Four key drivers have been responsible for the growth in the pet insurance sector, Colonnese said, and these are – the number of pets in the world, how much people care about their pets, the cost of insurance against the cost of treatment for pets, and a demographic shift in pet owners. The first two of these factors is on the rise, he said, and the data on insurance is very interesting.
“While the average amount of a claim has increased by 75% in the last decade,” he said, “the average premium has only risen by 50%. This demonstrates that pet insurance has become better value for money in relative terms. Additionally, data from the Association of British Insurers (ABI) in 2018 showed that the average pet insurance claim was almost £800, driven by increasingly sophisticated medical procedures that are now available for animals.”
Other factors responsible for the growth of this sector include an increase in technological innovations and a growing interest in pets from younger generations with 57% of millennial households currently owning companion animals.
“Some couples are opting for pets before babies,” he said, “and this demographic is a particular target for pet insurers as they often pick more expensive designer breeds such as French Bulldogs that can require significant veterinary care.”
These are all reasons, Colonnese stated, why the pet insurance market is expected to grow at an annual rate of 20% between 2019 and 2025. There is still considerable room for growth in the market, he said, as many owners still choose not to purchase insurance for their animals and, throughout Europe, countries such as France, Spain and Germany are all still at the very early stages of development.
The growth within the sector has been and will continue to be heavily impacted by technological advancements, Colonesse said, highlighting that these advancements have generally had a huge impact on the way insurance providers implement procedures such as claims management and customer service. With the average claim amount rising faster than the average premium, insurance companies are faced with the choice of either cutting margins on policies or becoming increasingly uncompetitive in a market where there is plenty of choice.
“Digital technology can help insurers transform the efficiency of their operations which will enable them to be competitive and deliver outstanding customer service,” he said. “Utilising innovative digital procedures is becoming crucial for insurers to drive better business decisions. Furthermore, by analysing data, we can often identify pets that are susceptible to illness – either because of their breed, geography or other factors. Prevention is better than cure so we may be able to use this data to protect pets before they even get ill. For example, active dogs can suffer from arthritis in later life. Digital insight from data may enable us to protect a proportion of these from this risk earlier in life with medication or lifestyle management.”
Digital platforms also provide the necessary tools to quickly manage vast quantities of data which can be collected for pet insurance policies such as identifying pet breeds that are particularly susceptible to a certain illness or injury, he said, outlining how this data can also identify trends that have the potential to help insurance providers offer more accurate and competitive premiums in real-time.
The Aquarium platform deals with all relevant aspects of creating an insurance proposition, Colonnese said, giving the example of integration with third parties such as vets’ practices to ensure real-time claims settlement. The ability to provide intelligent, intuitive solutions with out-of-the-box deployment and access from anywhere in the world is what insurers are looking for from providers, he said, and he believes that the potential for digital growth in the pet sector is colossal.
“Digitising insurance processes delivers a huge short-term benefit in efficiency and can help companies become more competitive,” he said. “In the long run the benefits are even more significant: enabling insurers to interrogate millions of lines of data to deliver a more accurate, effective, efficient and increasingly completely automated insurance process.”
