Insurance and pets and vets: Oh my!
Despite pets now being prioritized as family members, the penetration of pet insurance remains exceptionally low.
In 2020, the U.S. saw a pet boom of historic proportions, with around 90 million homes — that’s 70% of U.S households — having a pet of some kind, according to the Insurance Information Institute. And it’s a number that’s growing. With the evolution of hybrid working and de-urbanization, pet category growth remains positive.
More interestingly at the macro level, this increase in pets has developed in lockstep with another pet trend; humanization — with 85% of pet parents now considering their pets part of the family rather than just an animal.
Combined, these trends have led to a surge in the pet category of demand for premium food, treats, toys, beds and even apparel, with celebrities and well-known brands bringing human equivalents to pets across the country.
But despite pets now firmly considered an intrinsic and prioritized family member, the penetration of pet insurance remains exceptionally low.
Pets, like humans, need preventative, diagnostic, urgent and specialty care. And vet bills can add up, especially for households with multiple pets, and even more so in inflationary environments. But at present, only 2.5% of pets in the U.S. are estimated to have coverage. Compare that to the 25% in parts of Europe. Or maybe a better comparison given the humanization trends is to compare it with the 63% of adults in the U.S. who have private health coverage.
It’s a stark contrast, particularly when anybody who’s had to say a final goodbye to a pet knows how devastating it can be, especially when the decision has been influenced by the uninsured costs of treatment.
This creates opportunities.
With a total addressable U.S. market standing around $2.5 billion, and with a five-year historical CAGR of 26%, the pet insurance market represents not only a business opportunity but also a pet life-saving opportunity. According to the North American Pet Health Association, insured dogs visit the vet 29% more and insured cats visit the vet 81% more than those uninsured.
It’s precisely that axis of opportunities and advancing of our purpose that was the catalyst for Petco’s recent partnership with Nationwide Insurance, bringing together a leader in pet health and wellness with an established, national pet insurer, all to advance the mission of ensuring as many pets as possible have access to the best care available.
By a simple interpretation, the partnership aims to create an elegant solution to an inelegant problem; how to make pet insurance simply more accessible.
But the reality is more nuanced. Part of the issue with pet insurance penetration is that it’s difficult to convey the value proposition. Home insurance; you cover the value of a stolen item. Auto insurance; you cover the value of a damaged vehicle. But with pets, most pet owners don’t want to think about treatment for injury or illness. That is until they get the bill, and it’s high, and then it’s too late. And chances are, that cost could have been lower had preventative care been covered in the first instance.
This is where bringing insurance within a broader pet offering makes sense.
Over the last four years, Petco re-engineered the business away from just a specialty retailer to a whole health and wellness company, marrying merchandise and services — including training, grooming, and veterinary care — to create an ecosystem that meets the needs of the 54% of pet parents who want a one-stop-solution for their pet’s health and wellness.
It’s partly convenience; you only have one place to go for all your pet needs, and you have experts on hand to advise on the right food or toys for your dog, cat or other animal’s mental health and development.
But there is also heightened connectivity. Say, for example, a dog gets groomed at one of our locations, and the groomer notices a rash. They ask the vet to check it and it turns out they need treatment, which we have as an owned-brand, over-the-counter solution right there in the store. One trip, peace of mind; happy pet and pet parent.
We evolved that ecosystem over the last 12 months with our own Vital Care membership offering, where pet parents can get discounts on food, and free routine vet exams. This creates immediate value for the consumer as well as delivering a personalized customer experience, but is good for business, driving higher long-term customer value, retention and cross-category spending.
Our partnership with Nationwide to bring an expanded insurance offering within that ecosystem, connecting to their wealth of claims data, was a natural next step to offer solutions to keep pets healthy, happy, and part of the family as long as possible.
If this partnership means one less family has to say goodbye to a pet because of the cost of care, this is a partnership that is worthwhile. More broadly, it’s the vision that this partnership creates a highly differentiated insurance product that will accelerate growth and change across the pet insurance industry in its entirety, meaning pet families can have longer healthier lives together — a concept that is core to Petco’s purpose.
Ultimately, it’s the combined ambition of both companies to elevate the pet insurance category as a whole, bringing together insurance companies, animal welfare organizations and retailers in the space to increase awareness, adoption and penetration of pet insurance. There is an opportunity for all of us to make pet insurance more accessible by clearly communicating benefits to consumers and educating pet parents on the potential savings associated with having pet insurance.
In short, by evolving the way pet insurance is offered and integrated into everyday pet parenting, insurance can finally be at pace with the evolution of pet parenting more generally.
Around 20 years ago, dogs slept outside. 10 years ago, they were allowed into the house. And today, most of them sleep on our beds. It’s all part of the humanization trend. After all, if Lassie has a puffer jacket to match their owner’s, and is on a consistent heart-healthy diet like their owner (should be…) isn’t it natural that Lassie should also have a choice of coverage and deductibles too?
Jenny Wolski, senior vice president, omnichannel experience, Petco
Leader of Petco’s omnichannel customer experience across merchandise, services and memberships. An experienced enterprise leader skilled in business strategy, marketing strategy, recurring revenue, operations, customer experience, employee experience, negotiations, and transformation. Dedicated to leveraging the power of people and data to build company culture, growth and profitability with a startup mindset.
Jennifer Nocco, head of pet insurance, Petco
Leader of Petco’s insurance offering, which includes Petco Insurance and aggregator site, PetInsuranceQuotes.com. Responsible for setting the vision for the product and customer experience as well as developing, marketing and overseeing the operations of a variety of pet insurance and preventative care products and services on digital channels, in stores and in veterinary hospitals.
Opinions expressed here are the authors’ own.
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