Skip to main content

How a digital mindset in pet insurance has paved the way for disruption

digital business
(Image credit: Image source: Shutterstock/ESB Professional)

Historically the insurance industry has been more reticent than some other sectors to modernize its IT.  But in the last couple of years the use of digital technology has truly started to gather momentum. Insurers are now embracing smart, digital tools to improve operational efficiency, reduce costs and enhance customer experience to set themselves up for long-term success in a competitive marketplace.  

Arguably, digital disruption stems from initiatives in younger insurance markets, such as the fast-growing pet insurance sector, and we are now seeing traditional insurance sectors successfully adopting a digital mindset in areas such as claims management. 

Growth of investment in insurance IT 

The operational cost savings achieved by updating insurance technology was first debated some years ago.  McKinsey discussed the benefits that insurance companies could achieve by transitioning away from decades-old legacy IT systems in 2019, with benchmark research finding a saving on IT costs per policy of up to 41 percent for insurers using modern systems.  Gartner’s latest April 2021 forecast indicates that insurers are prioritizing strategic IT investment, with global IT spending in insurance predicted to grow by 5.2 percent in 2021 to reach $210 billion USD, driven by IT services and software.

Digital technology can be deployed in all aspects of insurance, from launching new products, to policy quotes and sales, policy renewals and claims processing.  Much of the current focus is on claims management, where insurers are tapping into technologies such as AI and machine learning to replace traditional paper and labor-intensive processes with automation and self-service to deliver better customer experiences.

Digital claims management 

According to the Association of British Insurers (ABI), UK insurance companies handled £46 million of claims in motor and property insurance every day and paid out a daily average of £15.8 million for income protection.  In pet insurance alone, UK insurers handled almost one million claims settlements worth £799 million, or the equivalent of £2.2 million a day in 2020.  

With burgeoning opportunity in pet insurance, and the average claim value across all pet policies now £817, pet insurers are well-positioned to drive change in this area that could also have consequences for other insurance sectors.  In claims management there is a strong business case for IT managers to choose automated rather than labor-intensive manual processes to rapidly deliver improvements in the speed of customer service and significantly reduce operational costs.  Ultimately, this reduces insurance premiums for the end customer and helps secure longer-lasting loyalty. 

Claims settled in an instant 

Digital technology has the potential to enable insurers to settle all but the most anomalous or highest value claims quickly and accurately.  In cases of true digital transformation, claims can be settled in a matter of seconds rather than hours or weeks through automated processes.  

Digital technology can also promote closer collaboration in the long-term by automating data sharing and communications between owner, insurer and vet.

Imagine that a vet advises someone that their pet needs an immediate operation costing £1200.  With a non-digital set up, this might expose an owner to unexpected cost before making an insurance claim, hoping the cost is covered by the policy and then eventually receiving compensation, minus an excess payment.  Along the way the process will involve several calls to the insurance company, explaining the details each time to someone new.  This process is extremely stressful for policyholders and time intensive for an insurance company.

Now imagine an alternative scenario.  The pet still needs the operation, but the vet is connected to the insurance company directly from the practice.  The vet inputs all the details of the treatment required, sends this to the insurer’s digital platform that analyses the age of the pet, the treatment required, the time needed to perform the operation, the average cost of such treatment both from both this vet and others in the region and nationally.  Analyzing this data, the platform recognizes this is a legitimate claim, addressing an issue that is common to a pet of this age, within the cost parameters set and responds with an approval code for the vet in near real-time.  The policyholder is asked to pay the excess and receives a text message to inform them the claim will be paid and how much cover is left on the policy.

Benefits for all 

The policyholder has been saved from significant trauma and hassle at a time when they are already concerned about their pet.  They do not need to consider how to finance the operation as they have confirmation that their policy will pay the claim and can simply pay the excess immediately. They also do not need to collate various documents, and either post them to the insurer or photograph them for the claim.  They do not need to fill in forms that can be misread or spend time on the telephone to the insurance company.  The process is extremely customer-friendly.

But the investment in digital technology delivers benefits to the insurance company as well.  Not only can it cut out significant administrative time and cost, but it can also reduce paperwork and ensure all relevant data is stored in the cloud.  There will be less requirement for customer services and claims professionals can focus on non-standard claims.  The insurance company is also building up insight into the cost of treatment in different vets.  If something is awry, it is easily flagged up for human intervention.

This scenario may sound futuristic, but it is being deployed already by some of the most innovative insurance companies around the globe.

The potential for other insurance sectors 

Arguably, insurers entering the pet insurance sector have had more opportunity than other sectors to deploy new technology from the outset, with less consideration of existing IT infrastructure.  The market is growing quickly, it is a relatively new area of insurance where innovation may add value and, most importantly, the process involves multiple stakeholders (customers, vets, the insurance company) and complex procedures – an ideal scenario for a digital platform to generate order from chaos.  Even if there is some reliance on legacy systems, cloud-based software is an effective way of implementing new processes that are customized to business objectives.  

Digital innovations used in pet insurance have huge potential for a broader range of insurance sectors including household, car, medical and travel claims.  For example, customers could make a household claim, have this paid within minutes and a repair company booked at the same time.  Or a car insurance claim could be made at the scene of the accident, backed up by images and GPS data.  In travel insurance, claims for delays and cancellations could be submitted and paid from an airport or hotel with no requirement for paperwork.

Front of mind for IT managers in insurance is that intelligent and customizable technology is pivotal to delivering quantifiable business benefits.  The pet insurance sector is a hub for digital innovation and is already using technologies that are transforming how insurance is delivered.  We expect to see a broader uptake in other insurance sectors over the next few years.  The key benefits are speed, ease and convenience of service that address current pain points for many insurance customers.

Mark Colonnese, director, Aquarium Software

Mark Colonnese has more than 20 years of experience working for innovative technology organisations around the world, from large corporate institutions to entrepreneurial start-ups.