How the pet insurance market is driving insurtech growth
Insurtech investment around the world is booming with investment having just reached record levels for the first half of 2021, according to the recent Quarterly InsurTech Briefing from Willis Towers Watson. Worldwide insurtech investment reached $7.4bn in the first half of 2021, exceeding investment in the whole of 2020 and every other previous year.
Here in the UK, total investment in UK fintech companies – which includes investment in insurtech – has reached a record high with firms attracting $24.5bn in the first half of 2021, along with the highest volume of deals on record. UK investment soared in the first six months of 2021 to four times the $5.9bn invested during the entire 2020.
Investment levels in fintech sectors – particularly for insurtech - are being driven by demand in the marketplace. Consumers and businesses increasingly expect insurance to be delivered when and how they want it, which means providing digital platforms that are quick and easy to use.
Pet ownership and insurance boom
One element of the rise in insurtech investment is driven by the demand for companies to meet the continued growth of pet insurance. Demand for pet insurance has boomed following a rapid increase in the number of people buying pets during the global pandemic.
The global pet insurance market is forecast to grow to $5.89bn in 2025 from $3.21 billion in 2020. New research suggests that the global pet insurance market for dogs and cats is expected to reach its highest compound annual growth rate (CAGR) by 2026. Insurers around the world are investing in existing or new pet insurance businesses and turning to the latest digital platforms to maximise competitiveness.
Huge growth potential
The USA is still set to see huge increases in pet insurance sales, as less than three percent of the USA’s pets are currently covered by insurance compared with an average of roughly 20 percent across European markets, according to IBISWorld. The research firm predicts that earnings from pet insurance will climb from $1.6bn in 2020 to $2.4bn in 2025.
Although American pet owners spent an all-time record of almost $2bn on pet health insurance in 2020, this market will continue to grow significantly year on year as more owners take out pet insurance policies. In the UK, only around 25-30% of pet owners hold pet insurance policies, which again means there is also massive growth potential in that market.
An underserved market
These market conditions mean there is going to be continued demand for pet insurtech applications and platforms as more firms seek to capitalise on attractive long-term market opportunities. The pet insurance sector is a hub for digital innovation and is already using technologies that are transforming how insurance is delivered.
There is plenty of room for innovation in insurtech as pet insurance is a high growth and potentially highly profitable product. If the service is right customers will retain policies for many years. The potential profitability of the pet insurance market is now drawing a record number of policy providers, which is in turn helping drive record Insurtech growth and innovation around the world.
About the author: Mark Colonnese is a Director of Aquarium Software, the software platform for fast, profitable growth in insurance markets – especially pet insurance.