Digitally savvy start-ups can use data as a powerful tool to drive profit in the pet insurance market
The COVID lockdowns saw an unprecedented buying spree of pets. According to Dogs Trust, internet searches for ‘buy a puppy’ increased 120 percent during the first month of restrictions and the Pet Food Manufacturer’s Association suggests that 3.2 million households in the UK have acquired a pet in lockdown. There are now some 17 million households with a furry friend.
A growing market
Despite this growth, only around 25 percent of UK pet owners take our pet insurance. Perhaps owners do not consider the risk of illness in a cuddly puppy or young kitten? The average cost of an annual insurance policy for dogs is around £170, according to Compare The Market, and with the cost of puppies often four or five times higher, pet insurance take up will surely grow in the future.
Pet insurance is a relatively new market for insurers and offers a both a growing market and a potentially lucrative insurance book. However, the market does have certain quirks, and this could potentially offer data savvy fintechs and insurtechs an advantage over more established competition.
A complex market
Several large insurers have, in the past, been attracted to the pet insurance market only to exit the business rapidly. Despite there seemingly being an opportunity to grow written premium from young and healthy pets, the larger insurers have found the claims costs unpalatable. Many underestimated the large number of claims received in the early lives of otherwise healthy pets.
Young dogs and cats may not suffer with ageing conditions such as arthritis or cancer, but they are often foolhardy. While insurers might expect a pet insurance book to perform well when animals are younger and less so as they age, the reality is somewhat different. Young cats and dogs get in fights, chase other animals and eat things they should not. This means that pet insurance is not the immediate star performer many traditional insurers expected and is actually quite “cash-hungry” in the early phase of growth.
Data driven innovation
What does make a successful pet insurance proposition is data driven innovation. And this is much more the traditional domain of the digitally savvy insurtech start-up than the large insurance company. Fully digital insurance propositions can now instantly serve a customer with a quote and policy documents based on detailed information on the pet. Claims can be handled at the point of healthcare delivery by connecting insurers to vets directly and assessing claims against reasonable expected costs for that animal’s breed, age and region of the country, based on previous data insight. Claims can then be settled in moments, delivering high levels of customer satisfaction as well as vastly reducing the staffing required to support the operation.
On a wider basis, data analytics that helps understand the risks associated with not only different pets, but also different breeds, enables insurers to take a more proactive approach to managing risk across their entire proposition. This ensures they have the right balance of young and old pets, and different breeds to provide a more predictable volume of claims. As digital insurers gain more information over time, so past data delivers more insight into future outcomes.
There will be more data driven innovation in the future. If insurers can use insight from data to help prevent or further delay pet illness by proactively offering preventative medicine for illnesses suffered by breeds, insurers can reduce claims, boosting book performance and helping pets and owners to avoid heart-breaking operations or worse for longer. Healthy pets make for happy owners and profitable pet insurers. Intelligent use of data analytics can help this become a reality.
Mark Colonnese | Product Marketing Director | Aquarium Software
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