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Pet Insurance - UK - August 2015

“The pet insurance market has huge potential for growth, with 56% of pet owners currently uninsured. Pet insurers that wish to capitalise on this opportunity, however, face an uphill struggle as those yet to take out an insurance policy are put off by accelerating premiums that leave them questioning the value of the product. Innovation in company strategy, product design and advertising will be needed if this challenge is to be overcome successfully.”
– Jessica Morley, Financial Services Analyst

This report looks at the following areas:

  • Insurers need to prove their value
  • Replacing basic cover with simpler, niche policies
  • Difficulties in switching affect competition

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • 13% annual increase in premium income
              • Gross written premiums forecast to reach £1.5 billion in 2020
                • Figure 1: Forecast of pet insurance gross written premiums – fan chart, 2010-20
              • Average pet insurance claim reaches £679
                • Figure 2: Average claim value for all policies, 2013-14
              • Number of cat and dog owners subscribing to pet insurance increases, but market remains under-penetrated
                • Figure 3: Number of pet insurance policy subscribers, by type of pet, 2010-14
              • Strong competition for cat insurance policies, drives down premium prices
                • Figure 4: Average pet insurance premiums (based on exposure), by type of pet, 2010-14
              • Key players
                • RSA and Allianz dominate market
                  • Figure 5: Leading pet insurance underwriters – UK, by gross written premiums, 2014
                • Increase in advertising expenditure fails to take spend above peak
                  • Figure 6: Total above-the line, online display and direct mail advertising expenditure on pet insurance, 2011/12-2014/15
                • The consumer
                  • 56% of pet owners are without a policy
                    • Figure 7: Ownership of pet insurance, by type of pet owned, May 2015
                  • Majority of insured pets are covered by a lifetime policy
                    • Figure 8: Type of pet insurance owned, May 2015
                  • Advertising spend and market experience drives up popularity of specialist pet insurers
                    • Figure 9: Providers used to arrange most recent pet insurance policy, May 2015
                  • 62% of policy owners influenced by online factors in policy selection
                    • Figure 10: Factors affecting policy selection of most recently arranged policy, May 2015
                  • Confusion about coverage increases the likelihood of complaints
                    • Figure 11: Levels of understanding relating to setting of premium prices, May 2015
                  • Taking out a policy is the right decision for most
                    • Figure 12: Proportion of pet insurance policyholders satisfied with aspects of their policy, May 2015
                  • Highlighting high levels of trust can boost product uptake
                    • Figure 13: Proportion of pet insurance policyholders that believe they would be treated fairly if they were to claim, May 2015
                  • Non-lifetime, lifetime policies are a cause for concern
                    • Figure 14: Attitudes towards the cost of pet insurance, May 2015
                  • Providers need to raise awareness of costs to boost customer pool
                    • Figure 15: Agreement with the statement “I do not need pet insurance as I can afford the cost of any vet bills,” by ownership of pet insurance policies, May 2015
                  • Claimants are most satisfied with policies and most trusting of providers
                    • Figure 16: Agreement with statements regarding attitudes towards the value of policies and trust in policy providers, by claims history, May 2015
                  • What we think
                  • Issues and Insights

                    • Insurers need to prove their value
                      • The facts
                        • The implications
                          • Replacing basic cover with simpler, niche policies
                            • The facts
                              • The implications
                                • Difficulties in switching affect competition
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • 58 million pets in Britain
                                        • 13% annual increase in premium income
                                          • Gross written premiums forecast to reach £1.5 billion in 2010
                                            • Number of cat and dog owners subscribing to pet insurance increases, but market remains under-penetrated
                                              • Strong competition for cat insurance policies, drives down premium prices
                                                • Average pet insurance claim reaches £679
                                                • Market Size and Forecast

                                                  • Premium income increased by 13% in 2014
                                                    • Figure 17: Size of pet insurance market, by exposure years, number of subscribers and gross written premiums, 2010-14
                                                  • Market expected to experience solid growth
                                                    • Figure 18: Forecast of pet insurance gross written premiums – fan chart, 2010-20
                                                • Market Segmentation

                                                  • Number of dog policy subscribers increased by 11% in 2014
                                                    • Figure 19: Number of pet insurance policy subscribers, by type of pet, 2010-2014
                                                  • Cats more likely to be included on multi-pet policies
                                                    • Figure 20: Pet exposure, by number of years, 2010-14
                                                  • Dog insurance GWP increased four times faster than cat insurance in 2014…
                                                    • Figure 21: Pet insurance gross written premiums, by type of pet, 2010-14
                                                  • …as average premiums for dogs increase whilst those for cats decrease
                                                    • Figure 22: Average pet insurance premium (based on exposure), by type of pet, 2010-14
                                                • Market Drivers

                                                  • 46% of households have a pet
                                                    • Figure 23: Size of UK pet population, 2015
                                                  • Weekly expenditure on veterinary costs sees 50% annual increase
                                                    • Figure 24: Average weekly household spending on pets – UK, by category, 2011-13
                                                  • 15% increase in value of pet insurance claims
                                                    • Figure 25: Value and incidence of pet insurance claims incurred, claims ratio and average claim value, 2010-2014
                                                  • Fraudulent claims have risen, driving up costs
                                                    • Consumers are complaining about rocketing premiums
                                                    • Key Players – What You Need to Know

                                                      • RSA and Allianz dominate market
                                                        • Desire to extend brand reach drives marketing innovation
                                                          • Insurers put the focus on prevention
                                                            • E&L highlights potential uses of wearables
                                                              • Providing joined up services to boost value of product
                                                                • Increase in advertising expenditure fails to take spend above peak
                                                                • Market Share

                                                                  • Allianz is responsible for underwriting nearly 50% of all premiums
                                                                    • AXA exits the market
                                                                      • Figure 26: Leading pet insurance underwriters – UK, by gross written premiums, 2012-14
                                                                    • Pet insurance providers and their underwriters
                                                                      • Figure 27: Selected providers of pet insurance and their underwriting partners, July 2015
                                                                  • Competitive Strategies

                                                                    • MORE TH>N extends the reach of its brand
                                                                      • Promoting preventative care to cut claims costs and limit premium inflation
                                                                        • Wearables for fraud prevention and early detection
                                                                          • Providing an holistic package
                                                                          • Advertising Expenditure

                                                                            • Total advertising expenditure increases by 20%
                                                                              • Figure 28: Total above-the line, online display and direct mail advertising expenditure on pet insurance, 2011/12-2014/15
                                                                            • Petplan more than doubles spend
                                                                              • Figure 29: Top advertisers of pet insurance, by above-the-line, online display and direct mail expenditure, 2010/11-2014/15
                                                                            • Television and press dominate traditional advertising spend
                                                                              • Figure 30: Proportional distribution of advertising expenditure, by above-the-line, online displays and direct mail media types, 2010/11-2014/15
                                                                            • The role of social media
                                                                              • A note on adspend
                                                                              • The Consumer – What You Need to Know

                                                                                • 56% of pet owners are without a policy
                                                                                  • Majority of insured pets are covered by a lifetime policy
                                                                                    • Advertising spend and market experience drives up popularity of specialist pet insurers
                                                                                      • 62% of policy owners influenced by online factors in policy selection
                                                                                        • Confusion about coverage increases the likelihood of complaints
                                                                                          • Taking out a policy is the right decision for most
                                                                                            • Highlighting high levels of trust can boost product uptake
                                                                                              • Non-lifetime, lifetime policies are a cause for concern
                                                                                                • Providers need to raise awareness of costs to boost customer pool
                                                                                                  • Claimants are most satisfied with policies and most trusting of providers
                                                                                                  • Ownership of Pet Insurance

                                                                                                    • Majority of pets are uninsured
                                                                                                      • Figure 31: Ownership of pet insurance, May 2015
                                                                                                    • Dog owners most likely to insure their pets
                                                                                                      • Figure 32: Ownership of common household pets and penetration of pet insurance, May 2015
                                                                                                    • High-level cover preferred policy choice amongst insured owners
                                                                                                      • Figure 33: Type of pet insurance owned, May 2015
                                                                                                    • Existing policyholders are most likely to take out a new policy in next 12 months
                                                                                                      • Figure 34: Interest in taking out policies not currently owned within the next 12 months, by current pet insurance holders and pet owners without an existing policy, by type of policy, May 2015
                                                                                                      • Figure 35: Proportion of current pet insurance policyholders and pet owners without an existing policy that have cancelled or changed a policy in the past, by type of policy, May 2015
                                                                                                  • Type of Policy Providers Used

                                                                                                    • Pet owners most likely to rely on specialist pet insurance providers
                                                                                                      • Figure 36: Type of providers used to arrange most recent pet insurance policy, May 2015
                                                                                                    • Retailers have an opportunity to provide an all-in-one service
                                                                                                    • Factors Influencing Policy Selection

                                                                                                      • Online factors have greatest influence over policy selection
                                                                                                        • Figure 37: Factors affecting policy selection of most recently arranged policy, May 2015
                                                                                                      • The power of reputation
                                                                                                        • Specialist provider customers sold by the personal touch, whilst retail customers are drawn in by incentives
                                                                                                          • Figure 38: Factors affecting selection of most recent policy, by provider of most recent policy, May 2015
                                                                                                      • Understanding of Premium Costs and Policy Coverage

                                                                                                        • Improve understanding to avoid complaints
                                                                                                          • Figure 39: Levels of understanding relating to setting of premium prices, May 2015
                                                                                                        • More than a third unaware of maximum claim
                                                                                                          • Figure 40: Understanding of pet insurance policy coverage, May 2015
                                                                                                        • The need for retail providers to improve transparency
                                                                                                          • Figure 41: Agreement with the statement “I know what my policy will cover in terms of claims,” by provider of most recently arranged policy, May 2015
                                                                                                      • Satisfaction with Current Policy

                                                                                                        • Policy ownership provides peace of mind
                                                                                                          • Figure 42: Proportion of pet insurance policyholders satisfied with aspects of their policy, May 2015
                                                                                                        • Customers of specialist pet insurance providers are the most satisfied with their cover
                                                                                                          • Figure 43: Agreement with statements relating to satisfaction with current policy, by provider of most recently arranged policy, May 2015
                                                                                                        • Dissatisfied basic cover customers can be encouraged to up-sell
                                                                                                          • Figure 44: Agreement with the statements “I am considering switching my pet insurance provider within the next 12 months” and “I am concerned about the exclusions/restrictions on my policy,” by type of policy most recently arranged, May 2015
                                                                                                        • Majority of policyholders trust providers to treat their claims fairly
                                                                                                          • Figure 45: Proportion of pet insurance policyholders that believe they would be treated fairly if they were to claim, May 2015
                                                                                                      • Attitudes towards Policy Costs

                                                                                                        • Age is a cause of concern for more than a quarter of pet owners
                                                                                                          • Figure 46: Attitudes towards the cost of pet insurance, May 2015
                                                                                                        • High level of awareness of costs of veterinary treatment not enough to combat lack of perceived value in policies
                                                                                                          • Figure 47: Agreement with the statement “I do not think pet insurance is worth the money,” by ownership of pet insurance policy, May 2015
                                                                                                      • Policy Alternatives

                                                                                                        • Close to a fifth believe they could cover vet bill costs
                                                                                                          • Figure 48: Agreement with the statement “I do not need pet insurance as I can afford the cost of any vet bills,” by ownership of pet insurance policies, May 2015
                                                                                                        • Condition-specific policies can make pet insurance more personalised….
                                                                                                          • Figure 49: Agreement with the statement “I would be interested in simpler/cheaper insurance products that would only cover the costs of specific illnesses/injury,” by ownership of pet insurance, May 2015
                                                                                                        • …and expand the size of the market
                                                                                                        • Claims History

                                                                                                          • A third of policyholders have made a claim
                                                                                                            • Figure 50: Proportion of pet insurance policyholders that have ever made a claim, May 2015
                                                                                                          • Making a claim highlights the benefits of having a pet insurance policy….
                                                                                                            • Figure 51: Agreement with statements regarding attitudes towards the value of policies and trust in policy providers the statement, May 2015
                                                                                                          • ….and improves understanding of finer policy details
                                                                                                            • Figure 52: Agreement with statements relating to understanding of policy coverage, by claims history, May 2015
                                                                                                          • The need for real lifetime policies
                                                                                                              • Figure 53: Attitudes towards policy costs, by claimants history, May 2015
                                                                                                          • Appendix

                                                                                                            • Forecast of pet insurance gross written premiums, 2010-20
                                                                                                              • Figure 54: forecast of pet insurance gross written premiums, at current prices and constant prices, 2010-20
                                                                                                            • Total market forecast – Best-and worst-case scenarios
                                                                                                              • Figure 55: Forecast of pet insurance gross written premiums – best and worst-case scenarios, at current prices, 2015-20
                                                                                                            • Forecast methodology
                                                                                                              • Fan chart explanation
                                                                                                              • Product Range

                                                                                                                  • Lifetime policies
                                                                                                                    • Non-lifetime policies
                                                                                                                      • Accident only policies
                                                                                                                        • Policy features
                                                                                                                          • Figure 56: Examples of additional features offered as part of pet insurance packages, July 2015

                                                                                                                      Companies Covered

                                                                                                                      To learn more about the companies covered in this report please contact us.

                                                                                                                      Pet Insurance - UK - August 2015

                                                                                                                      US $2,570.96 (Excl.Tax)