Pet insurance is in the air. With 200 million cats and dogs in Europe and a penetration rate of around 5%, pet insurance is sparking the interest of many entrepreneurs. If we consider that nearly 80% of all Swedish pets are insured (compared to about 8% in France), we get a sense of the enormous opportunity at stake.
Traditionally served by a handful of established players (SantéVet, Assur'O Poil, ECA Assurances, etc.), the French market is seeing the arrival of new players such as Dalma or Lovys seeking to shake up its codes and services.
We interviewed Omer Bourret, Chief Pet Officer at Lovys, who leverages its 20 years experience in the field to decrypt the Pet insurance landscape for us.
Hello Omer, in your opinion, what will be the main trends that will define the Pet Insurance market in the years to come?
Hello ! I see 5 main trends.
Product: The real innovation is still to come in France
I find it interesting to look at the UK to get an idea of what is around the corner for the French pet insurance market. With a penetration rate of almost 20%, it is estimated that our UK counterparts are almost 6 years ahead in terms of product awareness.
Led by particularly innovative companies such as Bought By Many or Waggel, UK insurtechs are ahead of the curve in terms of product simplification. In fact, some conditions that we take for granted in France have become unacceptable to consumers across the Channel. Take the example of the exclusion of hereditary diseases. Refusing to cover asthma treatment just because a relative suffered from it would seem intolerable to us as humans. It will soon be the same for animals.
This is the type of product evolution that we are leading at Lovys, but having an impact on the market will take time. Making a product simpler and easy to understand has a technical cost. But the French consumer isn’t willing to accept it yet. Any company seeking to differentiate itself would therefore risk ending up less competitive.
But market expectations are changing. The primary cause of customer complaints in Pet insurance is payment refusal. The need for product transparency and readability is growing and will soon exceed that of affordability. And the day Pet insurance reaches a 20% penetration rate, insurers will have to comply with customers’ demands.
Consumption: Young people are driving the market towards simplicity
In general, the evolution of the Pet insurance market is directly correlated to the evolution of the population. Let’s not forget that today, young people are the ones driving acquisition. It is to their habits that the market will have to adapt. And these are relatively codified.
First of all, there is a clear trend towards "budgeting", financially speaking. In addition to soaring prices, 47% of 25-34 year olds feel they have been economically affected by the pandemic. The result? A young generation much more financially aware.
Their approach: "What are my recurring costs? What budget do I have left to enjoy with my friends?" We can see that the insurance budget ends up in an excel spreadsheet compared to other monthly expenses such as a phone subscription or a monthly Netflix payment.
That should in theory drive the prices way down. However, this price awareness is counterbalanced by the fear of the unexpected: "What happens if something goes wrong?
Indeed, the less savings we have, the harder hits the unexpected. If we look at the figures, studies show that the French spend a total of up to €1,224 per year on their pets. When you consider that the average income of 18-30 year olds is around €2,000 per month, it is clear why young consumers prefer a €20/month insurance policy to paying a thousand euros claim.
This aversion to the unexpected also has an impact on their service expectations. This translates into an exacerbated frustration with "hidden costs". This is also one of the choices made by the neo-broker Dalma, which has largely focused on the absence of deductibles or other "surprise fees". For instance, extra charges for split payments have become unacceptable to the younger generation.
Tech: Winners will integrate the best ecosystem of services
It's a fact: our lives are moving towards the instantaneous. We travel by Uber on demand, we get our groceries delivered in 10 minutes using Gorilla or Cajoo, we make instant money transfers on Lydia or Revolut, etc.
All these services define consumer expectations. Pet insurance will inevitably be assessed using the same criteria. The sector naturally understood that a while ago. But it has to deal with very strong regulatory constraints and heavy tech legacies.
This complexity has led to a fragmentation of the value chain into a wide array of highly specialized services - such as Dutch (editor's note: a service specializing in animal telemedicine that completed a $20m Series A a few weeks ago).
Merging these highly specialized services into one seamless customer experience will be key. This is why we see players like SantéVet positioning themselves as service aggregators facilitating the booking of appointments via VétoLib and the management of payment through PayVet.
Although telemedicine penetration rate is still rather low, with around 6% of pet owners using it, we at Lovys anticipate that they will be essential prerequisites in the future.
In short, Pet insurance will be technological, or it will not be.
Market: The market is concentrating. The Revolution is starting...
Of the 19,000+ veterinarians, it is estimated that 62% are self-employed. In fact, the National Observatory of the Veterinary Profession lists 8,000 veterinary establishments. The big question: Who will be able to federate and leverage such a fragmented network?
Investors are on it. This is why we see players such as Crédit Mutuel Equity investing in services such as Incineris (specialized in animal incineration). This allows them to integrate the Veternity group and its veterinary network to position itself across the entire value chain. And this is only the beginning. We can easily imagine future investments in pet food, drug delivery, digital care, etc. Once all these services are brought together under the same holding, will start the integration phase.
Just like the French National Health payment system is globally divided between Almérys, Cétip and Viamédis, the pet health payment market will only be run by a few key players. This natural selection will result from extremely high barriers to entry, such as the vast amounts of capital and considerable network effect required.
In short, the winners will be those who manage to build a conglomerate and integrate into Pet services networks.
Current: In 2021 began a new chapter for Pet Insurance
6,7%. This is the estimated annual growth rate for the Pet Insurance sector, which is expected to almost double over the next 5 years and reach $10 billion by 2025.
The pandemic served to strengthen the bond between the French population and their pets. The demand for pet insurance has never been so strong. While the French market is more advanced than the Italian one, for example, it is still emerging. It will be interesting to see how the ecosystem and the market will structure itself in the face of such demand.
This sector has a bright future ahead of it.