What makes pet insurance policyholders tick?
Aquarium Director, Mark Colonnese, talks exclusively to California Broker magazine’s November edition, about the role of emotional bonds in pet insurance. The full magazine can be found here http://www.calbrokermag.com/ and Mark’s article is on pages 44-46.
With pet insurance clients in the UK and the US, my colleagues and I at Aquarium Software have a vested interest in understanding the workings of both markets and what makes them tick. Our research has led us to uncovering surprising similarities and differences between the Canadian, US and UK markets. We believe emotional bonds have a key role to play in unlocking the potential of the pet insurance market, not just in the US and UK, but worldwide.
You could be forgiven for thinking there would be many similarities between the UK and US markets and that was our initial assumption. Shared language and shared cultural norms reinforce this assumption and while this couldn’t be more right in some respects, the paradox is, the assumption couldn’t be more wrong. YouGov questions asked in both the UK and the US showed less than five per cent variance on average between the opinions of US and UK pet parents overall, with many uncanny similarities in terms of owner emotional ties with their pets. Broad agreement that pets are just as important to the family as humans (US 72 per cent agree; UK 69 per cent agree) and a majority in both nations would save their pet first if both their pet and a stranger fell into a river.
While the broad emotional wellspring is consistent, variants come in attitudes to health insurance, both human and animal. You would think the established health insurance market in the US would see Americans recognise the value of policies for pets, but while 71 per cent of Americans have private health insurance (compared to just 11 per cent of the UK); a staggering 74 per cent of Americans have never had pet insurance, compared to 42 per cent of the UK – a 32 per cent difference.
There does appear to be a special relationship (as we Brits like to say!) between the US and the UK in terms of their respective pet insurance markets, that industry watchers have been slow to realise. Emotional attachment is the unifying theme that binds pet parents, insurers and brokers alike, unlike any other insurance products. The exciting thing is, if these similarities and differences hold true worldwide, they represent a roadmap; a royal road to successful globalisation and commercialisation of the pet insurance market.
Why does this matter?
It can prove a leap, moving from the cold, hard world of motor and home insurance, into the softer area of health and this is true of pet health. A number of insurers pulled out of the UK market, finding it hard to make a profitable transition. Problems have arisen when thinking buying pet insurance is no different to buying, car insurance. Insurers and brokers who have made such assumptions have struggled. Too often, the approach has been to see the family pet in similar terms to the family Ford, but the difference is considerable, a fact successful brokers both sides of the pond are beginning to wake up to.
Pet parents do not buy pet insurance based on common sense, or if it will save them money in the long term. It is a decision based on emotion rather than necessity and this feel good factor must be accounted for considering approaches to market. Recognising this delivers some fascinating insights, such the primary focus should be on new pet owners, still in that ‘honeymoon period’, when emotional attachment is at its height. This is even more true of first time pet owners. In the US, 67 per cent take out pet insurance in the first six months. If you factor in the first visit to the vet, this rises to a massive 79 per cent.
When searching for motor insurance, price is key as motorists look for a competitive quote to keep them on the road and facts and figures sell. Not so, when it comes to pet health. While money is always a factor, it is not a key driver because the figures show those who can most afford pet insurance seem to be the ones who see the least intrinsic value in having it.
Current advertising tends to focus in on the cute pet. If emotion works, why is this not delivering a greater upsurge in new premiums and brokers phones ringing? The simple answer is, it is. Pet insurance growth in the US was triple the pace of accident and health coverage in 2014 and an industry worth over $600 million is still expanding. However, to reach its full potential, the emotional element must be tailored to specific areas and this means tapping into the social patterns of emotion within the areas and demographics concerned. It sounds complex, but it is really very simple.
Focusing on the emotional connection between pet and pet parent and its impact on the customer journey, are themes of critical importance to UK-US pet insurance sectors, but also further afield. Asia and the Far East are pet projects for Aquarium and we are seeing there how emotion with regard to pets, coupled with respect for trusted brands can deliver significant gains in market share.
74 per cent of Americans who have never had pet insurance represents a massive market opportunity. Better understanding the role of emotion provides a way to reach them, and the right technology can help make this a reality. Once persuaded to purchase the policy, pet parents need the right customer journey to see the advantages of continuing to renew and intuitive applications can help insurers improve their pet proposition while at the same time delivering a profitable pet insurance business model with long term viability.
To conclude, software developers, brokers, insurers, vets, indeed and everyone connected to the industry need to focus on the compassionate and caring reasons for having pet insurance. On speaking to delegates at NAPHIA it was clear that many already understand these facts. The challenge now is to communicate this to pet parents more effectively and get better at tapping into the emotional underbelly of pet insurance and why owners make that purchasing decision.