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Pet Insurance - UK - August 2014

“Mintel expects the market to continue to grow at a fairly robust rate, in value terms, over the next five years. This is based on moderately higher demand levels, an improvement in the economic environment and further price increases. However, there remains the possibility of significantly boosting take-up among the non-insured and, thus, the market outperforming expectation.”
- Sarah Hitchcock, Senior Analyst – Financial Services
This report looks at the following issues:

  • There remains good potential to expand the market
  • Providers need to attract new customers to reduce the risk of an ageing portfolio
  • The secret to sustainable premiums is effectively managing claims costs

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Table of contents

  1. Introduction

      • Product definition
        • Abbreviations
        • Executive Summary

            • The market
              • Standard model predicts solid growth in premium income
                • Figure 1: Forecast of pet insurance premiums, at current prices – fan chart, 2009-19
              • Stable exposure despite dip in subscriber numbers
                • Market segmentation
                  • Market factors
                    • Size of the UK pet population
                      • Average cat and dog lifespans
                        • Counting the cost of caring for pets
                          • Claims ratio
                            • Incidence of fraud
                              • Company, brands and innovation
                                • Two brands dominate
                                  • Figure 2: Market shares of the top four underwriters, based on GWP, 2013
                                • Online distribution focus
                                  • Product innovation
                                    • Brand reinforcement
                                      • The consumer
                                        • Pet ownership
                                          • Figure 3: Number of pets in household, by type of pet, June 2014
                                        • Insurance take-up
                                          • Figure 4: Ownership of common household pets and penetration of pet insurance, June 2014
                                        • Product choice – determining factors
                                          • Figure 5: Factors influencing choice of policy (top five only), June 2014
                                        • Frequency of visits to vets for non-routine treatment
                                          • Figure 6: Number of unexpected visits to vets within past two years, June 2014
                                        • Attitudes among the non-insured
                                          • Future consideration of pet insurance
                                            • Figure 7: Likelihood of renewing or taking out new pet insurance policy within the coming year, June 2014
                                          • What we think
                                          • Issues and Insights

                                              • There remains good potential to expand the market
                                                • The facts
                                                  • The implications
                                                    • Providers need to attract new customers to reduce the risk of an ageing portfolio
                                                      • The facts
                                                        • The implications
                                                          • The secret to sustainable premiums is effectively managing claims costs
                                                            • The facts
                                                              • The implications
                                                              • Trend Application

                                                                • Trend: Play Ethic
                                                                  • Trend: Return to the Experts
                                                                    • Trend: Creature Comfort
                                                                    • Market Drivers

                                                                      • Key points
                                                                        • There are as many pets as people in the UK
                                                                          • Figure 8: Size of UK pet population, 2014
                                                                        • After food, veterinary costs account for the largest proportion of household spending on pets
                                                                          • Figure 9: Average weekly household spending on pets – UK, by category, 2008, 2011 and 2012
                                                                        • Rise in veterinary fees continues to outpace inflation…
                                                                          • Figure 10: Total annual household spending on pets, by category, 2008-12
                                                                        • …and drive up the cost of claims incurred…
                                                                          • Figure 11: Value and incidence of pet insurance claims incurred, claims ratio and average claim value, 2009-13
                                                                        • …impacting on premiums
                                                                          • Fraudulent claims amounted to £1.4 million in 2012
                                                                            • Figure 12: Fraud repudiation rates, 2010-12
                                                                        • Market SWOT Analysis

                                                                            • Figure 13: The pet insurance market– SWOT analysis, 2014
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • New providers launch in partnership with third-party specialists
                                                                              • Healthy Pets and Sterling Pet Solutions launch new white-label propositions
                                                                                • Existing providers modify their pet policy ranges to target a wider range of needs and budgets
                                                                                • Market Size and Forecast

                                                                                  • Key points
                                                                                    • Growth in premium income from pet insurance policies slowed in 2013
                                                                                      • Figure 14: Size of the pet insurance market, by exposure years, number of subscribers and gross written premiums, 2009-13
                                                                                    • Growth in multi-pet policies
                                                                                      • Solid market growth forecast
                                                                                        • Figure 15: Forecast of pet insurance premiums – fan chart, 2009-19
                                                                                        • Figure 16: Forecast of pet insurance gross written premiums, at current and constant prices, 2009-19
                                                                                      • Forecast methodology
                                                                                        • Fan chart explanation
                                                                                        • Market Segmentation

                                                                                          • Key points
                                                                                            • Number of dog policy subscribers declined 6% in 2013
                                                                                              • Figure 17: Number of pet insurance policy subscribers, by type of pet, 2010-13
                                                                                            • Cat exposure grew 7% in 2013, driven by greater take-up of multi-pet policies
                                                                                              • Figure 18: Pet insurance exposure, by number of years, 2010-13
                                                                                            • Premium income relating to cat policies was up 25% in 2013…
                                                                                              • Figure 19: Pet insurance gross written premiums, by type of pet, 2010-13
                                                                                            • …reflecting a significant increase in the average cat premium
                                                                                              • Figure 20: Average pet insurance premium (based on exposure), by type of pet, 2010-13
                                                                                          • Market Share

                                                                                            • Key points
                                                                                              • Allianz and RSA dominate the underwriting of UK pet policies
                                                                                                • Figure 21: Leading pet insurance underwriters – UK, by gross written premium, 2012-13
                                                                                              • Pet insurance providers and their underwriters
                                                                                                • Figure 22: Selected providers of pet insurance and their underwriting partners, June 2014
                                                                                            • Companies and Products

                                                                                                • Allianz Insurance
                                                                                                  • RSA
                                                                                                    • Direct Line Group
                                                                                                    • Brand Communication and Promotion

                                                                                                      • Key points
                                                                                                        • Providers cut back on adspend
                                                                                                          • Figure 23: Top 12 advertisers of pet insurance, 2011/12-2013/14
                                                                                                        • TV and press account for the largest proportion of spend
                                                                                                          • Figure 24: Proportional distribution of advertising expenditure, by media type, 2011/12-2013/14
                                                                                                        • A note on adspend
                                                                                                        • Channels to Market

                                                                                                          • Key points
                                                                                                            • Most pet insurance policies are sold online
                                                                                                              • Figure 25: Method of arranging (most recent) pet insurance policy, July 2013
                                                                                                          • Pet Ownership

                                                                                                            • Key points
                                                                                                              • Survey background
                                                                                                                • Figure 26: Proportion of sample with pets in household, June 2014
                                                                                                              • Just over half of all adult internet users have at least one pet in their household
                                                                                                                  • Figure 27: Number of pets in household, by type of pet, June 2014
                                                                                                                • C2 families represent a key target group
                                                                                                                • Penetration of Pet Insurance

                                                                                                                  • Key points
                                                                                                                    • Most pet owners do not have insurance
                                                                                                                      • Figure 28: Proportion of all pet owners who have pet insurance, June 2014
                                                                                                                    • Take-up is highest among dog and equine owners
                                                                                                                      • Figure 29: Ownership of common household pets and penetration of pet insurance, June 2014
                                                                                                                    • Most policyholders have non-lifetime cover
                                                                                                                        • Figure 30: Type of pet insurance policy held, June 2014
                                                                                                                      • Dog owners are slightly more likely than cat owners to go for lifetime cover
                                                                                                                        • Figure 31: Type of pet insurance policy held, by type of pet, June 2014
                                                                                                                    • Factors Influencing Policy Selection

                                                                                                                      • Key points
                                                                                                                        • Many pet policyholders made their product selection based on a personal recommendation
                                                                                                                          • Figure 32: Factors influencing choice of policy, June 2014
                                                                                                                      • Frequency of Non-routine Visits to Vets

                                                                                                                        • Key points
                                                                                                                          • Half of all pet owners have made unexpected visits to the vets in the past two years
                                                                                                                            • Figure 33: Number of unexpected visits to vets within past two years, June 2014
                                                                                                                          • Insured pet owners are more likely to take their ill or injured pet to a vet
                                                                                                                            • Figure 34: Number of unexpected visits to vets within past two years, by ownership of pet insurance and type of pet(s) owned, June 2014
                                                                                                                        • Attitudes Among Non-insured Pet Owners

                                                                                                                          • Key points
                                                                                                                            • Cost concerns both inhibit and drive pet insurance sales
                                                                                                                                • Figure 35: Agreement with statements about pet insurance and veterinary fees, by type of pet, June 2014
                                                                                                                            • Future Consideration of Pet Insurance

                                                                                                                              • Key points
                                                                                                                                • Stable market penetration…
                                                                                                                                  • Figure 36: Likelihood of renewing or taking out new pet insurance policy within the coming year, June 2014
                                                                                                                                • … with policy lapses likely to be offset by new first-time customers
                                                                                                                                  • Figure 37: Likelihood of renewing or taking out a new pet insurance policy within the coming year, by existing policyholders and non-policyholders, June 2014
                                                                                                                              • Appendix – Market Size and Forecast

                                                                                                                                • Total market forecast – best- and worst-case scenarios
                                                                                                                                  • Figure 38: Forecast of pet insurance gross written premiums – best- and worst-case scenarios, at current prices, 2014-19
                                                                                                                                • Forecast methodology
                                                                                                                                  • Fan chart explanation
                                                                                                                                  • Appendix – Pet Ownership

                                                                                                                                      • Figure 39: Presence of pets in household, by type of pet and demographics, June 2014
                                                                                                                                  • Appendix – Penetration of Pet Insurance

                                                                                                                                      • Figure 40: Any pet owners who have insurance, by demographics, June 2014
                                                                                                                                      • Figure 41: Dog owners who have insurance, by demographics, June 2014
                                                                                                                                      • Figure 42: Cat owners who have insurance, by demographics, June 2014
                                                                                                                                      • Figure 43: Type of policy held, by demographics, June 2014
                                                                                                                                  • Appendix – Factors Influencing Policy Selection

                                                                                                                                      • Figure 44: Factors influencing choice of policy (top five), by demographics, June 2014
                                                                                                                                      • Figure 45: Factors influencing choice of policy (next five), by demographics, June 2014
                                                                                                                                  • Appendix – Frequency of Non-routine Visits to Vets

                                                                                                                                      • Figure 46: Number of unexpected visits to vets within past two years, by demographics, June 2014
                                                                                                                                  • Appendix – Attitudes Among Non-insured Pet Owners

                                                                                                                                      • Figure 47: Agreement with statements about pet insurance and veterinary fees (top five responses), by demographics, June 2014
                                                                                                                                      • Figure 48: Agreement with statements about pet insurance and veterinary fees (next four responses), by demographics, June 2014
                                                                                                                                  • Appendix – Future Consideration of Pet Insurance

                                                                                                                                      • Figure 49: Likelihood of renewing or taking out a new pet insurance policy within the coming year, by demographics, June 2014

                                                                                                                                  Companies Covered

                                                                                                                                  • Allianz Cornhill Insurance plc
                                                                                                                                  • Argos
                                                                                                                                  • AXA UK plc
                                                                                                                                  • Churchill Insurance
                                                                                                                                  • Co-operative Group
                                                                                                                                  • Direct Line Group Limited
                                                                                                                                  • Homebase Ltd
                                                                                                                                  • John Lewis Partnership
                                                                                                                                  • Marks & Spencer
                                                                                                                                  • MORE TH>N
                                                                                                                                  • Pet Plan Ltd. (Petplan)
                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                  • RSA
                                                                                                                                  • RSPCA
                                                                                                                                  • Sainsbury's Bank
                                                                                                                                  • UK Insurance Ltd

                                                                                                                                  Pet Insurance - UK - August 2014

                                                                                                                                  £1,995.00 (Excl.Tax)