Oct. 18, 2023 - Artificial intelligence, something that is causing a lot of chatter in the insurance space, is a "key metric" for tech-focused Spot Pet Insurance, according to the company's top executive.
In an exclusive interview with S&P Global Market Intelligence, Spot Pet Insurance CEO Trey Ferro made it clear that the company's use of AI is something he feels differentiates it from the business models of the older, more traditional insurance carriers.
"It's definitely something that sets us apart," Ferro said. "I don't see a lot of people in the industry doing this."
Ferro said Spot uses AI alongside large language models to identify the customer demographics that would be most receptive to pet insurance. Spot also uses AI to communicate with customers, especially as a way to have frequent touchpoints.
"When people use it, they stick," Ferro said.
Fast Growth With More Projected
As the cost of pet care rises, pet insurance has become one of the fastest-growing insurance segments in the US.
Spot itself was founded in 2020, at a time where only about 2% of the pets in the US had insurance, a stark contrast from the UK and the rest of Europe, where the take-up of pet insurance was at around 30% to 40%
In 2023, pet insurance take-up in the US has at least doubled to around 4% to 5%, which Ferro said is a "great sign" of the growth that is yet to come.
"This is an industry that has been around for 20 to 25 years, and I think it's just getting its first boost of energy from companies like Spot," Ferro said.
Spot grew by 201% in 2022 and expects to meet or exceed that growth rate in 2023. The company also recently reached a milestone of surpassing $100 million in gross written premiums.
Ferro's company has worked hard to reach a demographic of people — millennials and Gen Z — that traditional carriers were not targeting as much. Spot has done this through marketing and social media, using things like celebrity partners to peak interest among the younger generations.
Pet insurance sold through the employer channel is also "growing like a weed" right now, Ferro said, noting that more employers than ever this year are going to be offering Spot and pet insurance in general as a voluntary benefit.
"I believe around 15% of companies come open enrollment this year are going to be offering pet insurance," Ferro said. "That's up from 12% last year so huge, huge growth."
Ferro added that normally the fourth quarter is one of the bigger quarters in terms of enrollment since Spot offers it through voluntary benefits packages.
Looking to the future, Ferro expects pet insurance in the US to see rapid growth, reaching and perhaps surpassing the take-up in Europe in the next five to 10 years.
"I'm hoping to reach that 20% to 30% in the next five years and in the next 10 to be in that 30% to 40% range," Ferro said.
Competitive Market
The pet insurance space is competitive, with about a dozen or so major players established in the field. Ferro said Spot is one of the fastest-growing insurance companies but it still has to contend with the likes of the Nationwide Mutual Insurance Co.'s of the world and Trupanion Inc., which is a publicly traded pet insurer.
But despite there having been some new entrants, Ferro said there are a lot of "barriers" to entry due to the pet insurance space being highly regulated.
"State insurance commissioners do a good job of making sure that everyone's playing along nicely," Ferro said. "Obviously, competition is always encouraged."
Overall, though, Spot views itself as the disruptor in the industry with its focus on technology and outreach to a younger cohort.
For now, Spot only offers pet insurance that covers cats and dogs, but Ferro said the company does have plans to expand beyond the two most beloved household pets in the near future, hopefully even by next year.
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