In February, Post held a roundtable, in association with Aquarium Software, to examine the state of the UK pet insurance market, touching on issues from consumer education and pricing, to how data and technology may revolutionise the market. Harry Curtis reports.
The discussion began with commentators focused on the ways in which insurers’ routes to market for pet insurance have changed in recent years and are continuing to change.
Edward Shropshire, managing director of Aquarium, said: “You’re now more likely to be buying insurance on your mobile phone while you’re waiting at the checkout than to pick up the leaflet. That is a fundamental and dramatic change.
“We see a very high percentage of buyers going purely through the aggregator route. Anything else is almost inconsequential, from our side anyway.”
Steven Mendel, CEO and co-founder of Bought by Many, agreed that digital routes to market were becoming increasingly important.
“Online, search and social are our biggest channels. We are very focused on the channels that consumers are picking for themselves rather than the channels that we’re picking for them.
“We did some direct consumer TV marketing starting last year. We used Virgin and Sky and we could even see, down to a household level, who was buying. This idea of using digital for a new way of understanding consumer needs is a core part of what we do.”
There was some discussion of how whether aggregators might become as important a channel for pet insurance that they are already are for home and car insurance.
Mark Bowden, head of distribution at RSA, said: “Adoption among home and motor is clearly at a different scale versus pet. The question is how quickly do we think consumer behaviour will translate across the products versus the more traditional distribution channels for pet?”
Money Supermarket’s head of niche insurance channels, Rose Howarth, responded: “The fundamental difference for that is that most motor and home shoppers shop every year. With pet, as we all know, customers tend to stay with their insurer, whether that’s because they’ve had a claim or not.”
Gero Bertolone, marketing manager at Pet Protect, added: “The other fundamental difference with car or home insurance is it’s the same sort of product. If you go onto an aggregator site now and look for pet insurance, even if you look for lifetime products, there are different aspects within those lifetime offerings. You’re not truly comparing similar products.”
Andrew Pearce, CEO of Petcover, reasserted the value of traditional channels such as vets while recognising the value of direct channels as well: “Traditional channels will always pull in a lot of business because it’s got professional endorsement, it’s got all of the right characteristics around why somebody would buy.
“But your direct channel will grow in proportion and will continue to grow. If you don’t move into that space, as a traditional insurer, you’re going to be caught short by the other players around the table.”
A more speculative change to pet insurers’ routes to market was the idea of packaging it with other types of insurance. Backing up that suggestion, Ian Webber, customer experience manager at Perfect Pet, said: “People don’t really like dealing with insurance or having to buy products. They could do that once and cover everything.”
Salient among the delegates’ responses to the idea was the issue of affordability, with hesitance over whether consumers would be willing to make the larger
one-time outlay a combined home-and-pet policy would necessitate.
One of the traditional channels for pet insurance is naturally vets, but it would be wrong to think that vets won’t also play a part in the newer, more direct routes with which insurers are experimenting.
Pirit Powar, head of pet insurance at Direct Line, said: “While vets, themselves, might be less of a significant channel [than they once were], having that endorsement and recommendation, combined with a great retail consumer experience on direct is massively important. It’s important to integrate vet service with your direct product.”
Vets, and other influencers
He felt vets play an integral role in pet insurance, paving the way for a wider discussion of the vet-pet insurer relationship. A contrasting point of view was offered by Perfect Pet managing director Natalie Surtees who suggested trust in vets isn’t as high as it used to be: “Because there are more corporate buyouts of the independent vets that does erode trust, especially when you’re looking at the pricing and you have got a condition limit.
“Ours are fairly small, at £4000. If your vet, on referral, is charging £3000 for an MRI, you can have the MRI and the pet can be diagnosed but you can’t afford the treatment. That’s the vet that is also recommending insurance.”
The role of vets in pet insurance might also be diminished by the shrinking extent to which pet owners have a regular relationship with a single vet.
Ross Halifax, affinity director at Markerstudy, made a comparison with healthcare: “15 years ago you had your own doctor. Then you started using NHS Direct, then you visited your pharmacy to do some things. Now there are digital doctors at hand.”
Technology, he intimated, may further lessen the stature of vets in the market: “There is a triage piece before you go to a vet that is going to come in in pet insurance.
“It’s difficult because animals don’t tell you what’s wrong with them, but actually, you start looking at algorithms now, they can take photos of eyes and paws and everything. It can tell you, within a certain percentage, what is wrong with that animal. Digitalisation will change that dynamic going forward.”
Vets are far from the only people who influence consumers’ decisions of which pet insurance policy to buy, however, with people increasingly likely to seek advice from friends or social media influencers as well as professionals.
Ian Bubb, head of pet insurance at Covea, explained: “We forget that the pet space is very different from home and motor. It’s such an empathetic product.
“With social, there are so many communities in terms of groups of owners of Cockapoos or Great Danes and you live and die by the claim service. People can share their experiences so much quicker. When it comes to animals, people just want to know the policy is going to be stood by.”
A large portion of the discussion revolved around the need and responsibility of insurers to educate pet owners as to what kind of cover they need and what different policies cover.
A recurrent topic was the Insurance Distribution Directive, which came into effect in October last year, and makes provisions around informing consumers and firms providing products that meet consumers’ needs.
Powar said: “The IDD makes it even more important for us, as an industry, to educate customers. Now, we’re asking consumers to make a choice in terms of what product they’re interested in before they’re actually presented with product descriptions.
“Unless that education is provided up front and there is enough information out there for the consumer, the IDD could potentially lead to more difficult or wrong decisions from consumers who don’t completely understand the products.”
Paolo Farrugia, head of pet insurance at Verisk, highlighted another area: “The education also needs to be about cost. Because we’ve got the NHS, people don’t understand that a crucial op could be £8000. Therefore, when they are buying a policy, they think £4000 is loads, but they don’t get how much they could be spending.”
Lest education be seen as the solution to all of pet insurance’s problems, there was also cynicism around the table.
Webber said: “I’m not sure how much influence you can have over people’s behaviour with regards to how much they want to look into something. If your way of buying is on mobile on the tube the chances are you’re not going to look too deeply into that.
“If you give them too much information you may just put them off from buying at all. It’s a bit of a Catch 22.”
For John Walker-Lee, director of underwriting and claims at Agria Pet, if customer education is to be effective, it has to be placed upfront at the point of purchase of the animal: “You need to go, ‘right, I’m going buy a pug because I know everyone likes them. I also know I need this insurance or I need this much money in the bank.’ Make that the initial point, then the insurance becomes a lot easier.”
It’s not just consumers who could benefit from learning, however. As Faruggia pointed out: “People love speaking about their pets, so ask them more questions about them and they’ll be more engaged. Photos, anything that makes the journey more personal. If you get more information, you can make those products bespoke.”
Data and technology
As with any area of insurance, or indeed any area of modern life, data and technology promise many possibilities for pet insurance.
Delegates were, however, careful to check any tech-optimist tendencies they might have and recognise the limitations of data and technology in the market as it stands.
Gary Davess, director of personal and specialty lines at Allianz, which includes Petplan, said: “You’re dealing with averages. You can have a claim-free breed, but actually it’s got a propensity to have certain conditions and so on.”
Bubb noted another limitation of the data currently in the hands of insurers: “The data we all have as underwriters is from the customers that took the decision to buy the products in the first place.
“What we don’t have is a missing piece of the pie, which is all the people that didn’t choose to insure and, actually, what difference would that have on our expectations of individual breeds. It’s quite a significant bit of data which we’re missing.”
Where the delegates did see a real and present opportunity to better harness data was in the area of pricing.
Outlining the kinds of data at Bought by Many’s disposal, Mendel said: “We look at loss ratios by channel, by time of day that people buy products, by physically where they are when they buy it. We don’t use this for pricing today, but we definitely could. I see no reason why the industry won’t go down that route.
“Today we have no differential pricing by channel. We could say that someone who buys through a price comparison website or buys at 8 o’clock on a Sunday evening is actually a better risk. We would reflect that in the pricing.”
Here again, there was caution from around the table, with delegates agreeing that in cases of pricing differentiated in this manner, insurers would need airtight risk-based and data-backed explanations for price variations in order to appease the regulator. He also brought up the possibility of integrating different sources of data, for example coupling vet and customer records, which other countries do.
With regard to more tangible technology such as wearable tracking products for pets, delegates voiced excitement about the preventative possibilities of such products, but weren’t convinced by the quality of products currently on the market.
However, while use of that kind of technology may be not already be at hand, Andrew Moore, RSA’s director of pet claims, felt it was only a matter of time: “If you look across commercial and, obviously, risk management, it’s something you can do because of the size of the premium and the size of risk. Then you look across motor and home, it’s starting a bit. Pet, I’m sure, will be on that journey at some point.”
The roundtable concluded with a look to the future. The size of the UK pet insurance market reached the £1bn mark in 2017, and delegates discussed how much more it could grow by in the coming years.
Davess’ view of the pet insurance market split UK pet owners into thirds: “If about one-third of current pet owners will insure their pet, about one-third are there to be persuaded and one-third that will probably always reject insurance because they’d rather self-insure. There is quite a big market and consumer space to move into.”
A recurrent word throughout was ‘Sweden’. The Scandinavian country boasts a penetration rate that many in the UK market look towards as something to emulate.
However, as Mendel pointed out, there’s difficulty pinning down what the exact figure is: “There is no real central data source. It depends who you believe. You can find quotes that say 90%, you can find quotes that say 43%. Somewhere between those two is probably the right answer.”