Pet insurance is at breaking point. In 2023, U.S. providers paid out nearly $2.5 billion in claims on just under $4 billion in premiums – a staggering 63% claims ratio that leaves little room for growth or resilience. It's a similar story in the U.K., where annual claims have exceeded $1.3 billion (£1 billion) for three consecutive years. If the industry continues down this path, the model likely becomes commercially unsustainable or at the very least undesirable.
Something has to give. However, this is an opportunity more than it is a problem. The answer isn't higher premiums or tighter exclusions alone. In an increasingly aggressive and commoditized market, insurers that compete solely on priced risk are triggering a race to the bottom. Instead, differentiation through value-added services is the only sustainable path. It's about reimagining the model entirely around pet owners' success.
Let me explain. As a pet owner today, I have to consider exercise, environment, vet bills, pet food, entertainment and of course pet insurance. And when we understand how pet owners feel about their pets, we know it's not just a significant financial burden.
For example, most Americans (62%) own a pet, including about a third (35%) who have more than one. Nearly all U.S. pet owners (97%) say their pets are part of their family, according to a
Pets matter a lot to their owners. Combine this with insurers under pressure, but also sitting in the apex of supply chains with pet wellness ecosystem potential and we might have the perfect storm.
Let me break this down even further.
Pet insurance needs to do more than reimburse. It must actively support pet owners in predicting problems and delivering real-time value so they can mitigate insurance risks whilst increasing the joy of pet ownership. All while extracting more value in the process, of course. Creating sticky, service-led experiences in this way not only strengthens relationships but also drives higher customer lifetime value across the insurance and wellness continuum.
Traditional pet insurance is often perceived as a grudge purchase. Reframing it as a subscription to proactive pet care can completely change the value equation. By owning or deeply integrating across the pet care supply chain, from diagnostics to nutrition, insurers can materially reduce expense ratios and reclaim margin.
This could be as simple as letting people know what optimal exercise looks like, or as clever as using a smart collar and providing interactive track & monitoring capability. For example, by creating invisible fences and monitoring your dog's location remotely, you can make sure that their favorite canine never gets lost. Additionally, you can monitor their fitness and behavior to make sure they are staying healthy, and even set up an exercise regimen for them.
An ecosystem approach that integrates everything from vet care and diagnostics to nutrition and behavior support can fundamentally shift the economics of pet insurance. Vet networks are vital to pet claims processes, but they can also be leveraged to keep pets wellness optimal, and to provide some discount and ongoing benefit back to the pet owner. Given that vets operate in a largely unregulated pricing environment, the cost of treatment can be eye-watering, making preventative care not just a wellness strategy but a financial imperative.
To be fair, these models have been around for some time, but few have had the success expected. However, the issue isn't in the idea, this moderate failing is in the execution.
Pet insurers still build technology foundations centered around pet policies. Instead, we need to build them around customers and pets. This sounds like a simple mindset shift, but it isn't, these technology foundations look more like eCommerce platforms and they are therefore built very differently.
Ecosystems of partners are integrated around API's, but these need to be orchestrated into cohesive digital experiences. This requires the data to be fluid and event streamed around a customer ID. It must also be able to hold multiple products, not just insurance products, and even combine these to build new adaptable, risk mitigating and advice-led services.
Equally these models can offer more dynamic experiences even within the traditional pet insurance lifecycle, such as policy selection where data services can be integrated and utilized to form guided experiences.
The important value in all of this is that this approach to the technology is a game changer for the business overall:
- Many products, sold / priced / serviced together
- Many touchpoints (web/mobile/car/POS devices .. Anywhere the customer seeks.)
- Same experience for sales, service, payments, etc
- In the center of a broader supply chain (vets, pet food, pet accessories or wearables, etc.)
- No constraints on the experience
- Unique and compelling UX – driving experience as a differentiator
- Absolute ownership of the relationship- and the customer with complete visibility
- Endless product offerings, personalized, partnered or adjacent
- Instantaneous changes without downtime, for any reason
- Real-time analytics and data science
The insurer that puts people and pets at the heart of the model won't just survive, they'll dominate. The key is building an integrated customer success platform and an ecosystem that embeds into pet owners' lives - using real-time data to mitigate risk and become a true partner in pet wellbeing.
