In the midst of COVID-19, pandemic puppies and kind kittens have emerged as go-to companions to get us through the extended public healthcare crisis. This is one of the many reasons that pet insurance is touted as the next hot growth segment for personal insurance carriers, with the global market projected to surpass $10 billion by 2025 and grow 6.7% annually.
In this rapidly changing market, we believe that most innovations are focused on the following trends:
With all this in mind, we’ve identified seven diverse trends and themes that insurers should consider as they plan their entry or expansion into the pet market.
Consumers may question whether pet insurance provides good value for the money spent. Some might view pet insurance as costly and confusing or may be unsure which procedures are covered, what exclusions exist, and how costs rise as the pet ages. Plus, many consumers simply don’t think they need pet insurance. All of these factors weigh heavily on the buying decision.
This presents an opportunity for insurers to create compelling, innovative product offers, wrapped in a personalized omnichannel experience. Recommended offerings include:
With such models, insurers can underwrite risks previously deemed uninsurable and offer point-of-need prices.
A digitally enabled approach to product innovation can lead to new business models, such as:
Traditionally, price has been the main differentiator in the pet insurance market. With the rise of millennial customers, however, pet insurers must increasingly differentiate through an enhanced customer experience. Capturing the attention and loyalty of this segment can be challenging. Insurers need to simplify and digitize customer journeys across digital channels, and to delight customers with a 360-degree selection of value-added services beyond mere insurance.
Making this shift requires a human-centered design perspective. This involves identifying the personas of key stakeholders, tracking their user journeys, and supplying relief for key pain points, as well as opportunities for additional revenue streams across these journeys.
Legacy core systems of existing pet insurers were typically built, patched and upgraded to support traditional manual processes. These aging systems are bound to affect the flexibility and scalability required for success. Insurers must reimagine and modernize their core systems, rules and processes to promote flexibility, agility, innovation and speed-to-market. This effort should revolve around business capabilities, as this focus will ensure that the derived technical capacities best align with business outcomes.
Key business capabilities for pet insurers include:
Pet insurance carriers can accelerate their digital evolution with advanced AI, which will enable them to automate core capabilities in new ways, such as the following:
The following figure further illustrates AI’s potential.
The question is, what to tackle first? New entrants in the pet insurance space are betting big on innovative claims experience capabilities as a key differentiator. With the success of this formula in other insurance lines, pet insurers would be wise to shift gears on their claims experience as well.
Another potentially strong differentiator for pet insurers is loss prevention services. Pet owners’ overriding concerns are their pets’ health and security. Insurers can continuously engage with their customers and better promote safety through device- or sensor-driven alerts (which, by reducing injury claims, can in turn translate into premium discounts).
We believe that the growing use of devices and wearables provides a great opportunity for insurers; recent investments by RSA insurance are a harbinger of things to come. By enabling their systems to integrate with third-party wearable-device data, insurers will gain significant insights. They can continuously monitor these data streams and pass contextual recommendations to owners to help improve their pet’s health. Insurers could further track pet parent activities by integrating with social and online data, thus staying abreast of the pet’s risk ecosystem and delivering contextual wellness recommendations. Gamification could deliver an even more vivid experience.
The pet insurance market is rife with untapped opportunity. Insurance carriers that take advantage of these developments to innovate with new customer-centric insurance products and services will be tomorrow’s market leaders. This journey won’t be easy, given the challenges of updating legacy processes, modernizing systems and changing consumer behaviors. But designing a lean, cost-effective, digitally enabled operating model is critical, as insurers reimagine the future of pet insurance.
For further insights see our white paper, “The New Age of Pet Insurance: Barking up the Right Tree.” To learn more, visit the Insurance section of our website or contact us.