5 Powerful Pet Insurance Trends Every Innovative Insurer Must Leverage

Key takeaways

• Pet insurance is growing rapidly but quick changes in the market can leave insurers behind.
• Regulators are paying more attention than ever. Compliance is critical.
• Simple CX wins. The UK’s pet insurers are ahead of the curve, offering other insurers a path forward.
• Ecosystems are the best way to grow. Technological integration is critical to a new insurer’s success.

Pet insurance has made rapid strides since the pandemic to become one of the hottest business lines in the insurance industry. The numbers are staggering. The North American Pet Health Insurance Association's (NAPHIA) State of the Industry 2022 report notes that Americans own 160.5 million pets, but just 4 million of them are insured.

Penetration rates in Europe are comparatively higher but stand at just five percent. Allied Market Research predicts a $16.8 billion global pet insurance industry valuation by 2030. 

Given these eye-popping numbers, which trends should you keep an eye on?

Trend one - Regulators are refining pet insurance laws

The COVID-19 pandemic accelerated several trends. While digitization hogged the headlines, increased pet ownership rose exponentially. As a result, regulators initially played catch-up but have made rapid strides in framing laws governing the industry.

The National Association of Insurance Commissioners (NAIC) in the United States recently finalized its Pet Insurance Model Act. This Act proposes statements that will standardize pet insurance processes in the 50 American states. While native to America, regulators worldwide view it as a model to follow.

Pre-existing conditions are perhaps one of the most scrutinized portions of NAIC's framework. The issue arose after a pet insurer declined a claim to treat a dog that had swallowed a stuffed toy. The insurer cited the animal's tendency to eat objects as a pre-existing condition.

NAIC's model proposes the following:

• Insurers must define pre-existing conditions coverage transparently.
• Insurers must offer consumers a "free look" period to try a product before committing to it fully. 

If regulators worldwide follow these recommendations, you must rethink your underwriting criteria and policy prices.

For now, NAPHIA predicts pet insurance premiums will rise to counter these requirements. Given the current macroeconomic climate, you must leverage analytics to create innovative products and intelligent pricing to attract consumers.

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Trend two - The United Kingdom is ahead of the curve

The UK boasts the highest pet insurance penetration in the world. Market research firm Mintel reports that 54% of people who became pet owners after March 2020 have pet insurance. Overall market penetration is slightly below 50%.

As a result, the UK's pet insurers are roughly five to six years ahead of the curve. Innovations in product design reflect the state of the UK's progress best. For instance, UK insurers routinely cover hereditary diseases, while continental European insurers often exclude such coverage. 

Insurtechs such as Waggel offer simple products and outstanding customer experiences. For instance, Waggel promises 30-second quotes and custom prices to suit every budget. The company also covers add-ons such as dental treatment and recurring medical conditions.

Advanced technology is one of the reasons for many of these insurers' flexibility. From seamless onboarding to product design, technology is helping the UK's insurers increase pet insurance revenues.

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Trend three - Simplicity is winning

Consumers have grown accustomed to simple UIs and onboarding. A 2020 report by Wyzowl, a video creation service, revealed that 80% of users deleted an app because of poor onboarding UX. The solution is to simplify products as much as possible. However, if you’re outside the UK, you’ll probably face a dilemma.

Engineering simplicity has technical costs that customers are currently unwilling to bear. Thus, creating a great user experience might price your products out of the market. The trick is to strike a balance till consumer expectations change.

One encouraging trend for pet insurers is the rise of younger shoppers in the space. Younger generations are more accustomed to paying for premium digital experiences and humanizing their pets. While prices are a sticking point, you can justify higher prices by offering transparency in your products.

For instance, offering SaaS-like tiered product options and highlighting cost-effectiveness will help you gain market share. You can also contrast policy premiums with treatment expenses to boost product appeal.

French insurer Lovys uses this technique to market its pet insurance product. Consumers can customize their product and purchase policies for as little as €20 per month. A fully digital experience further appeals to younger consumers, boosting Lovys appeal in that demographic.

Balancing simple UX with cost-effectiveness is challenging. However, this goal is far from impossible.

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Trend four - Ecosystems are in

Technology such as IoT and wearables are transforming health insurance. Omnia Health reckons the tech ecosystem in health insurance will soon use AI and ML algorithms when offering policies to customers. Pet insurance technology will likely undergo a similar effect.

Health trackers and all-in-one apps are in high demand, given pets' increasingly central role in their owners' lives. You must create systems based on nimble and flexible technical infrastructure that allows you to incorporate new data sources while reducing backend complexity.

For instance, you must ensure that incorporating IoT datasets won't break your backend systems or create manual workflows for your employees. Employee attrition and product obsolescence are consequences of a rigid tech stack.

Ecosystems are also crucial in marketing. For example, American pet insurer Trupanion partners with breeders and vets to offer a one-stop shop for its customers. Fetch is an excellent example of modern digital marketing. The insurer was launched as an affiliate of the popular Youtube pet channel The Dodo.

Fetch highlights its partnerships with no-kill animal shelters, offering its customers the chance to adopt pets. In line with its partnerships, Fetch discloses that insurance premiums do not depend on a pet's sex or spay/neutering status. 

Insurers are thus boosting their appeal by creating an ecosystem that adheres to their customers’ values.

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Trend five - Tech integration is essential

Whether it's product design, customization, or analytics, insurers depend on technology to run their businesses. As the insurance business grows more digital, tech choices and integrations have become critical.

McKinsey and Company state that regulators are paying attention to insurers' technical debt. While popular tech like ML and AI hog headlines, less-talked-about features such as low-code platforms and payment integration are far more critical to your business.

For instance, a low-code platform provided by a supportive technological partner gives you the flexibility to create innovative products. API-based low-code platforms also help pet insurers accommodate the rise of new consumer tech.

Pet telehealth is increasingly popular, and consumers love its on-demand nature. While this trend is still developing, you must work with your technology partners to future-proof your business. Integrating these features is a formidable technical task and demands close collaboration between an insurer and its tech partner.

You must also consider the ramifications of customization on your workflows. For instance, changing payment processors might demand a revamp of backend systems and new workflows. The right technology partner will guide you through the process and ensure a seamless transition.

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An ever-changing sector

Insurance has gone digital, and business conditions are changing faster than ever. By embracing the trends highlighted in this article, you can future-proof your business and ensure a growing book at all times.

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