How Does Pet Insurance Work? It’s Time to Bark Up the Right Tree for the Future of Furry Finances

By Arthur Bessieres and Daria Pelini Published on May. 02, 2023

When we looked at pet ownership, we realized that not only did the industry continue to grow, but we also saw a new way of owning pets developing. With this comes a significant implication for the insurance industry.

This article delves into the critical elements that are shaping the future of pet insurance and the opportunities they present for industry players as we analyze the current state and future prospects of the market and draw on a variety of sources, including industry data, expert analysis, and the insights of four pet insurtech founders.

How does pet insurance work? An introduction to the changing pet insurance space

So, how does pet insurance work? It is an emotionally charged product. As such, these shifting demands and expectations are pushing insurance providers to embrace customer-centric approaches, develop new strategies to influence positive behavioral changes, and create comprehensive ecosystems that prioritize the well-being, comfort, and prevention of unwanted events for pets.

Factors leading to industry transformation: pet insurance for multiple pets and evolving demographics among pet owners

The pet insurance market is experiencing significant changes due to two primary factors, changes in pet owner behavior and the rising cost of veterinary care.

The changing demographics of pet owners, particularly Millennials and Gen Z, are reshaping the industry. These younger generations view their pets as family members and place a high priority on their well-being. Millennials lead the share of pet owners in the US, with 76% owning a pet — many of which own multiple. As a result, there is an increased demand for comprehensive insurance coverage. Furthermore, their reliance on technology for their pets' needs drives innovation and creates opportunities for insurtechs to offer tailored solutions.

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To remain competitive, insurance providers must offer user-friendly digital platforms, mobile apps, and online resources that provide seamless and convenient experiences to tech-savvy pet owners.

On the other hand, rising veterinary costs are placing significant burdens on pet owners, with costs increasing by 10% in the past year alone in Europe. To meet the changing needs of pet owners and remain competitive in this evolving market, insurance providers must offer comprehensive coverage options.

The benefits of comprehensive pet care ecosystems

The need for comprehensive and affordable pet care services drives the creation of pet ecosystems that integrate various stakeholders such as insurers, veterinary clinics, pet owners, and technology providers.

Insurers have two options: either orchestrate the ecosystem themselves or participate in an existing ecosystem.

how does pet insurance work_cat at veterinarian

Orchestration involves the insurer directly creating additional services or partnering with service providers to assemble a seamless customer journey. This approach suits larger insurance companies willing to take a higher risk and invest in developing and maintaining the technology and infrastructure needed to deliver a smooth experience.

On the other hand, participation involves the insurer participating in an existing ecosystem orchestrated by other players. This approach is suitable for all sizes of insurance companies depending on their intended strategy and willingness to collaborate with other players in the pet care industry.

Creating a comprehensive pet care ecosystem benefits not only pet owners and their pets but also insurance companies. Insurers can reduce costs associated with illnesses and injuries by offering a range of services that promote pet health and well-being.

This additional value they provide to their customers is a key differentiating factor. Moreover, educational resources and tools provided through their ecosystems increase awareness and higher penetration of pet insurance products across the EMEA region.

Insurtechs transforming the pet insurance market

In recent years, insurtechs have been shaking up the pet insurance market by leveraging cutting-edge technology to offer innovative and customer-centric services. By utilizing AI-powered underwriting and claims management processes, these companies can provide more accurate risk assessments and customized policies tailored to the specific needs of each pet and owner.

To offer a comprehensive range of services, some insurtechs in the pet insurance market have adopted the Managing General Agent model. This approach allows them to underwrite policies, set prices, and manage claims on behalf of an insurance carrier. By partnering with established carriers, these Insurtechs focus on providing innovation and tailored customer experiences while benefiting from their carrier partners' financial stability and regulatory compliance.

Underwriting in the pet insurance market is also evolving into a more personalized approach to pricing that relies on new data points. Factors such as a pet's weight, exercise habits, and food choices are considered when assessing risk. Technologies like IoT and pet ecosystems provide additional data points for underwriting, allowing insurers to offer more granular pricing. Personalized underwriting is increasingly enabled by younger generations' rising ownership of pets. This group of customers is willing to share data and use technology to monitor their pet's health and security.

Monoline vs. multiline insurers

Pet owners can choose between monoline and multiline insurers in the pet insurance industry. Monoline insurers specialize solely in pet insurance and have an in-depth understanding of the unique needs of pet owners. On the other hand, multiline insurers, such as Lovys, provide a more comprehensive approach to insurance, offering a range of products that may appeal to pet owners looking for a one-stop shop for all their insurance needs.

While multiline insurers may specialize in pet insurance differently than monoline insurers, they offer other benefits that may appeal to pet owners.

Below is a market map with the pet insurtechs in EMEA grouped by stage:

how does pet insurance work_EMEA Pet Insurtechs

An untapped market with massive growth potential in EMEA

When looking at venture capital investments in the space, it’s true that it is an untapped market with massive growth potential in the EMEA region.

Money really flowed into the space in 2021, when $1.4bn (Pitchbook 2023) VC money went into pet insurtechs. In 2020 we only had about $700m. An explanation could be the high increase in pet ownership during the COVID-19 pandemic. During the pandemic, many people gained animal companions, or “COVID pets,” with whom they developed strong emotional connections during prolonged periods of isolation. In 2022, $900m was invested — a slight dip from the 2021 high.

The three largest funding rounds for pet insurtechs in EMEA were:

  1. Many Pets (UK-based), which raised a $350m Series D in 2021, is known for its insurance policy covering pets with pre-existing conditions.
  2. Santé Vet (France-based), which raised a $171m series B in 2022 and offers pet health coverage against accidents and illness, with a focus on prevention for small mammals in France and Belgium.
  3. Napo (UK-based), which raised a $19m Series A and builds a solution that offers pet owners everything necessary for their pets to live long, happy, and healthy lives.

4 innovative pet insurtechs making waves in EMEA

We are taking a deep dive into four trailblazing pet insurtech startups that we believe are going to have a significant impact on the market in the future.

FurryChamp: A pet health insurtech with an innovative data-driven approach with unique proprietary pricing algorithms based on breed specifics for cats and dogs. This granular approach enables FurryChamp to offer customers the fairest prices with one of the broadest coverages based on the most common illness and injuries. Their fully automated platform offers a lean customer experience with easy onboarding, 100% digital first notice of loss (FNOL), and fast reimbursement.

how does pet insurance work_cat in blanket

Napo: A “tooth-to-tail” pet insurtech player focused on providing pet parents with everything they need to ensure their pets live long, healthy, and happy lives. Their primary focus is building virtuous circles between educating pet parents, providing veterinary care, and improving pet health overall — leading to lower health issues, lower premiums, and happier members (and pets) in the long term. The company recently closed its £15m Series A after only being founded in June 2021.

Cooper Pet Care: Launched in late July 2022, it is an early-stage European insurtech, building radically better pet health insurance with embedded telemedicine and online pharmacy. Since launch, they have attracted thousands of loving pet parents. Customers love our product, evidenced by an excellent net promoter score (NPS) of 75 and a customer satisfaction score (CSAT) of 92%.

Fluffy: They are on a mission to make pet care less stressful and more affordable. They offer comprehensive pet care plans that include 24/7 vet support, insurance coverage, and training content, with the added bonus of earning rewards for taking better care of your pet. VitalityHealth, the largest behavioral engagement platform in the world, encourages consumers to make better choices and rewards them with a premium range of health, lifestyle, and leisure benefits. Now, picture the same for our furry friends. That's right, a platform that incentivizes pet owners to prioritize their pets' health and wellness.

Opinions on the future of the pet insurance industry from EMEA startup founders

By Houda Lemrini, Co-founder and CEO of FurryChamp

Pet insurance is still a new business line in the EMEA market (except for some countries like Sweden). We can see that this market is growing steadily…. Key drivers for its growth are the expanding symbiotic relationship between pets and their parents, the increasing vet costs, and the multiplication of pet insurance distributors who are raising awareness about this new type of insurance product.

By Jean-Philippe Doumeng, Co-founder and CEO of Napo

The EMEA market (and the global market) is currently experiencing impressive growth (c. 25% CAGR), with Europe accounting for more than half of the pet insurance market share, with more than 200 million pets (cats & dogs) and more than 80 million households having at least one pet.

how does pet insurance work_parakeets in bird cage

One significant difference between countries is the level of penetration of pet insurance. In the UK, the largest market in Europe, pet insurance penetration stands at around 30%, and in Sweden, it’s at an impressive 80%. However, in other parts of Europe, the penetration rate is still below 5%, highlighting a significant opportunity for further adoption of pet insurance.

The increasing awareness of pet insurance and the rising popularity of pets as family members have been the main drivers of this growth. In addition, as more pet parents become aware of the potential high costs associated with veterinary care, they realize the importance of having a safety net to protect their pets and finances.

By Michael Fisher, Co-founder and CEO of Cooper Pet Care

Pet insurance is one of the fastest-growing lines in property and casualty insurance, fueled by the new breed of pet parents. For millennials and Gen Zs, pets are not companion animals but true family members. Pet humanization, increased pet ownership, and longer pet lifespan contribute to double-digit pet insurance penetration growth across EMEA and globally.

By Pavel Gertsberg, Co-founder and CEO of Fluffy

Pet insurance is becoming increasingly popular in the EMEA region as more pet parents recognize the benefits of having their pets insured. With rising vet costs (vet inflation), it's a rational choice for consumers to get the cover, but we all know that insurance products have unique challenges. One challenge facing the pet insurance industry in the EMEA region is the lack of awareness and education among pet owners.

Many people are not aware that pet insurance exists or understand the benefits it can provide. The key trends that we expect to see in the space are:

  1. Rise in preventative care: Unlike human health insurance, pet insurance has made little effort to implement preventive care outside of televet solutions. This can have a significant impact on the industry's loss ratios.
  2. New coverage models: Pet insurance is costly and often turns people away. I believe there will be a rise in different models and coverage, making pet insurance more affordable.
  3. White-label opportunities: Many pet brands or even retailers for humans want to add pet insurance as part of their offerings. But very few insurers can provide a white-label option at a reasonable price and timeframe. I see a lot of strong pet brands demanding simpler and cheaper white-label solutions on the market.

There is always a big belief on my side that, sooner or later, pet insurance will become mandatory in some countries. With society's focus on animal welfare, the lack of insurance simply results in unnecessary suffering and euthanasia in pets that can be avoided. This might start with a mandatory third-party liability in some countries.

Embracing new pet insurance offerings

The pet insurance industry is undergoing significant changes due to the increasing importance of pet ownership, changing demographics, and the growing trend of animal humanization.

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Embracing customer centricity, influencing behavior change, and creating comprehensive pet care ecosystems focused on prevention will be critical for insurers to succeed in this evolving market. Additionally, the creation of comprehensive pet care ecosystems and the availability of monoline and multiline insurers provide pet owners with a range of options to meet their specific needs and preferences.

Plug and Play Tech Center'sMunich, Germany office is situated in a city that's home to a number of large corporations and has one of the most vibrant startup scenes in Europe. To join our platform, please contactArthur Bessieres, Ventures Associate, orDaria Pelini, Ventures Analyst for more information.