Has pet insurance hit its stride?

It’s been something of a struggle to establish pet insurance as a standard in pet care in the United States, but a new generation of pet owners may be changing that.

Baby boomers have long been the generation to sell things to, due to their sheer numbers. For the first time, however, younger consumers—millennials and gen Y—have outpaced baby boomers when it comes to pet ownership, and it may signal a big change for the veterinary industry.

“When you’re in a room with a client who has pet insurance and you’re talking about the cost of care, and you have that same conversation with someone who doesn’t have insurance, it’s a totally different conversation,” says veterinary consultant Bash Halow, CVPM, LVT. “You can really focus on the relationship with the patient and the client without tiptoeing around the money.”

A new power generation

A 2017 report by Packaged Facts revealed that while pet ownership has remained steady at around 54.6% of households, trends in pet ownership are shifting. Once dominated by older adults and families, millennial pet ownership is on the rise.

According to a 2017 report by the American Pet Products Association, the Millennial/Gen Y age group has for the first time surpassed baby boomers in pet ownership, with the younger generations accounting for 35% of pet owners (32% of boomers own a pet). Industry watchdogs have been wondering how this upcoming generation would behave in terms of spending and pet ownership, and as pet spending continues to rise, it could be a promising sign for the profession, the report suggests.

Generational versus cultural shifts?

Liz Watson, vice president of agency operation and marketing at Crum & Forster Pet Insurance Group, says while the change in pet insurance trends is particularly noticeable as this younger generation comes into its own, the shift may be just as much cultural as generational.

“What you’re finding is that pets have really changed their place in the family hierarchy,” Watsons says. “Some studies have said that anywhere from 95% to 98% of pet owners say their pet is part of the family. I think that’s a big piece of it.”

Sarah Wooten, DVM, CVJ, Fetch dvm360 conference speaker, agrees, adding that younger pet owners are demanding more than the basic care expected by previous generations.

“They want holistic, integrative options. Wellness to them is not just about vaccines and heartworm prevention. It’s also mental, emotional and environmental,” Dr. Wooten says. “They want wellness in all of those aspects. So if you provide those services, it is so valuable.”

Coping with the cost of modern pet ownership

The problem, however, can be paying for today’s ideal level of care. Paying for pet care and services may not be a problem in small chunks, and pet owners have demonstrated this at the register.

“If you think about today in terms of the variety of products and services available for pets, from natural and holistic foods to fancy dog beds and crates and all the accoutrements that go with being a pet parent, it really has become a vibrant industry,” Watson says. “Society as a whole is changing in that way, not just one specific demographic.”

As this spending has increased, though, Watson says there have been significant shifts from the original base audience buying pet insurance. “Both the culture for pets has changed, as well as the millennial influence,” she says.

An evolving product for an evolving market

Over the past five or so years, the market for pet insurance has grown younger. Watson says the 25- to 44-year age group is now the primary market for pet insurance, with 28% of pet owners 25 to 34 years old and 20% of 35- to 44-year-old pet owners purchasing pet insurance.

One possible explanation for the growth in these markets is an increase in employer-backed plans.

“What employers are finding, particularly among millennials, gen Z and those coming after them, is that they want to have access to buy pet insurance products through their benefits package,” Watson says, attributing as much as 15% to 20% of the market growth to an increase in employer-sponsored plans. “That factor has as much to do with the growth of the pet insurance industry as anything.”

Pet insurance has evolved as a product, too, she says, further contributing to an increase in popularity. Once seen mostly as coverage for emergencies and accidents, wellness is the new trend.

“Today, most pet insurance companies are combining accident and illness coverage,” Watson says. “Wellness is a very popular add-on, and consumers can choose to purchase this with pet insurance or not. That particular model is the most popular for giving the consumer the most choices.”

Insurance companies want to offer a variety of products that make sense, she says, and there is a wider set of products on the shelf than ever before. Complete coverage for many plans includes accident, illness and wellness coverage.

“When we think about what really is our sweet spot in the pet insurance marketplace, it’s the ability to have those three flavors of products, but also a variety of annual limits, deductibles and copays. We want customers to get the best products they can afford,” Watson says. “What we know also about millennials is that they are coming out of school with a lot of debt, they want insurance, but they want a product they can afford.”

This is where insurance really shines, adds Halow.

Complete care, one month at a time

“There’s a definite trend in America for us to buy into subscription services,” Halow says, noting the roughly 800-fold increase in subscription services in recent years.

“I think we have to consider that people in general are more amenable to a monthly cost for something,” he says, adding that this trend could be just what the veterinary profession has been waiting for. In small doses, comprehensive veterinary care is easier to digest. “Wellness plans were first discussed 20 years ago, but this may finally be the time.”

By spreading costs at levels the client can afford, it isn’t such a difficult decision to get that dental care or annual blood work done. Even accidents and serious illnesses are accounted for.

“The best advice for a pet owner to maybe not have to face that challenge is to insure their pets when they are puppies and kittens,” Watson says. “If they buy it when their pet is young and healthy, they have it when they need it. The costs go up with age, and pet insurance is the best way to provide for that unknown, unexpected or unplanned for circumstance.”

And with limited finances alongside idealistic care expectations, younger generations are jumping on the chance to plan ahead.

“These are practical, financially savvy young people, and they are making good financial planning decisions,” Watson says.

Ms. Zimlich is a former reporter for dvm360. In addition to freelance writing, she works as a registered nurse at the Cleveland Clinic in Cleveland, Ohio.