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Pet Insurance - UK - August 2016

“The pet insurance market is currently experiencing strong growth, as more owners choose to take out cover. While Mintel expects this to prevail over the next few years, providers must continue to seek efficiencies, in order to contain costs and remain competitive. They must also find a balance between offering multiple products and cover levels – to appeal to a broad consumer base – and simplifying their propositions, so they are as easy to understand as possible.”
– Sarah Hitchcock, Senior Analyst – Financial Services

This report discusses the following key topics:

  • Target parents with family-friendly policies and attractive packaged solutions
  • Quality is as important as price

Despite the challenges, pet insurers are not short of distribution partners. There are numerous companies selling policies in the UK, most of which are from the general insurance, veterinary and retail sectors. They compete for business in a fairly crowded marketplace, but also benefit from having a large target audience. Mintel’s online survey shows that 59% of UK adults have at least one pet in their household, most commonly a cat or a dog.

Mintel’s consumer research also reveals what proportion of pet owners have insurance and what type of policy they have taken out. It identifies the main concerns shared by pet owners, and assesses policyholder attitudes and buying behaviour. Lastly, it explores the level of interest in certain policy features and benefits, including preferred referral networks, and assesses future buying and switching intentions.

Products covered in this Report

Pet insurance is designed to cover medical expenses if the insured pet becomes ill or is injured in an accident. Policies will not normally cover routine visits to the vet or events that could have been anticipated, such as routine vaccinations and neutering. Most products cater for cats and dogs, although there are policies available for rabbits, horses/ponies and more exotic pets.

Policies fall into three main categories:

  • High-level/lifetime policies – provide the most comprehensive cover, paying out a set amount for veterinary treatment (which may be a total amount per year or a set amount per condition), which renews each year in line with the renewal of the policy. They cover ongoing and recurring illnesses for the lifetime of the pet, providing the policy remains active (ie the premiums keep being paid). As a result, lifetime policies are often the most expensive option. Moreover, premiums will rise with the age of the pet, and as a result of any claims made.
  • Mid-level/‘per condition no time limit’ policies – provide cover for conditions up to a set amount but there is no time limit placed on how long the policyholder can claim for. Once the amount has been reached the condition is then excluded from any future payouts.
  • Basic-level/time-limited policies – provide cover up to a maximum amount per condition for a limited period of time (usually 12 months). After this time, the condition is excluded, even if the policy is renewed. Any further treatment needed after the 12-month period would need to be self-funded. These policies tend to be the cheapest, but offer the lowest level of cover of the three main types.

In addition, there are low-cost accident-only pet policies, which only provide cover for accidents and exclude cover for illnesses.

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • The market continues to experience strong growth
              • Figure 1: Forecast of pet insurance premiums – Fan chart, 2011-21
            • Sub-sector performance
              • Veterinary inflation remains a major threat…
                • …being largely responsible for rising claims costs
                  • Companies and brands
                    • A heavily concentrated market…
                      • Figure 2: Market share of the top three underwrites, by gross written premium, 2015
                    • …but one populated with numerous distributors
                      • New partnerships formed over the past year
                        • RSA makes waves with the launch of its new referral network
                          • The consumer
                            • It’s very common to own a pet in family households
                              • Figure 3: Ownership of pets, by number of each type, June 2016
                            • More pet owners are taking out insurance…
                              • Figure 4: Proportion of pet owners with insurance, 2014-16
                            • ...most of which opt for mid-level cover
                              • Figure 5: Type of pet policy held, 2014 and 2016
                            • Fear of being faced with a large vet bill is the main purchase driver
                              • Figure 6: Level of concern relating to common pet problems – Dog and cat owners only, June 2016
                            • Pet owners favour providers that can demonstrate their expertise
                              • Figure 7: Agreement with statements about arranging pet insurance, June 2016
                            • Significant consumer interest in referral networks
                              • Figure 8: Provision of and interest in extra benefits/services, June 2016
                            • Nearly half of all policyholders might be prepared to switch at renewal
                              • Figure 9: Future consideration of switching, amending or upgrading policy, June 2016
                            • What we think
                            • Issues and Insights

                              • Target parents with family-friendly policies and attractive packaged solutions
                                • The facts
                                  • The implications
                                    • Quality is as important as price
                                      • The facts
                                        • The implications
                                        • The Market – What You Need to Know

                                          • A growing market with good expansion potential
                                            • Dog insurance is by far the largest sub-sector
                                              • Veterinary inflation continues to pose a challenge
                                                • The cost of claims incurred
                                                • Market Size and Forecast

                                                  • Increase in subscribers boosts premium income
                                                    • Figure 10: Size of the pet insurance market, by exposure years, number of subscribers and gross written premiums, 2011-15
                                                  • Good potential for future market expansion
                                                    • Strong growth forecast
                                                      • Figure 11: Forecast of pet insurance premiums – Fan chart, 2011-21
                                                      • Figure 12: Forecast of pet insurance gross written premiums, at current and constant prices, 2016-21
                                                    • Forecast methodology
                                                    • Market Segmentation

                                                      • Number of dog policy subscribers was up 11% in 2015
                                                        • Figure 13: Number of pet insurance policy subscribers, by type of pet, 2011-15
                                                      • Rise in popularity of multi-cat policies
                                                        • Figure 14: Exposure to subscriber ratio, by type of pet (cat and dog only), 2011-15
                                                      • Dog policies account for the largest proportion of pet premiums
                                                        • Figure 15: Pet insurance gross written premiums, by type of pet, 2011-15
                                                      • Fall in the average premium for other pet policies
                                                        • Figure 16: Average pet insurance premium (based on exposure), by type of pet, 2011-15
                                                    • Market Drivers

                                                      • The UK has nearly as many pets as people
                                                        • Figure 17: Size of UK pet population, 2015/16
                                                      • The need to make an unexpected visit to the vets is fairly common
                                                        • Figure 18: Number of unexpected visits to vets within past two years, June 2014
                                                      • Veterinary costs account for nearly a third of total household spending on pets
                                                        • Figure 19: Average weekly household spending on pets – UK, by category, 2008-14
                                                      • The cost of claims incurred continues to rise
                                                        • Figure 20: Value and incidence of pet insurance claims incurred, claims ratio and average claim value, 2011-15
                                                      • Other factors driving up premiums
                                                      • Companies and Brands – What You Need to Know

                                                        • The supply side is heavily concentrated…
                                                          • …while there are numerous distributors
                                                            • Movers and shakers
                                                              • RSA introduces a new way of dealing with non-urgent claims
                                                              • Market Share

                                                                • Top three underwriters control around three quarters of the market
                                                                  • Figure 21: Leading pet insurance underwriters – UK, by gross written premium, 2013-15
                                                                • Unable to compete with leading incumbents, some smaller players have exited the market
                                                                  • Aviva moves up the rankings
                                                                    • Markerstudy acquires Ultimate Insurance Company
                                                                      • Pinnacle also achieves strong premium growth
                                                                        • The market continues to attract new distributors
                                                                          • Figure 22: Selected providers of pet insurance and their underwriting partners, June 2016
                                                                      • Competitive Strategies

                                                                        • Affinity partnerships and distribution developments
                                                                          • New alliances
                                                                            • Markerstudy launches new affinity division
                                                                              • NCI’s ambitious plans to grow its pet business
                                                                                • Brightside partners with Markerstudy
                                                                                  • Industry innovation and new product launches
                                                                                    • RSA introduces preferred referral networks for non-emergency treatment
                                                                                      • SunLife launches ‘straightforward’ pet insurance
                                                                                        • Bought By Many buys Brooks Braithwaite (Sussex) and aims to become the ‘next-generation insurance intermediary’
                                                                                        • Advertising and Marketing Activity

                                                                                          • Providers cut back heavily on above-the-line advertising
                                                                                            • Petplan and Animal Friends account for three quarters of the industry’s adspend…
                                                                                              • Figure 23: Top 10 pet insurance advertisers using above-the line, online display and direct mail channels, 2013/14-2015/16
                                                                                            • …both of which invest in TV advertising for mass coverage
                                                                                              • Figure 24: Proportional distribution of pet insurance adspend, by media type, 2013/14-2015/16
                                                                                            • Pet insurers’ growing use of digital media
                                                                                              • SunLife’s April Fool promotion
                                                                                                • Nielsen Ad Intel coverage
                                                                                                • The Consumer – What You Need to Know

                                                                                                  • It’s very common to own a pet in family households
                                                                                                    • More pet owners are taking out insurance…
                                                                                                      • ...most of which opt for mid-level cover
                                                                                                        • Fear of being faced with a large vet bill is the main purchase driver
                                                                                                          • Pet owners favour providers that can demonstrate their expertise
                                                                                                            • Significant consumer interest in referral networks
                                                                                                              • Nearly half of all policyholders might be prepared to switch at renewal
                                                                                                              • Pet Ownership

                                                                                                                • Around half the adult online population own a cat or dog
                                                                                                                  • Figure 25: Ownership of pets, by number of each type, June 2016
                                                                                                                • Households with children are most likely to have cover
                                                                                                                • Penetration of Pet Insurance

                                                                                                                  • Rise in take-up of pet insurance
                                                                                                                    • Figure 26: Proportion of pet owners with insurance, 2014-16
                                                                                                                  • 62% of dog owners have insurance cover
                                                                                                                    • Figure 27: Penetration of pet insurance, by type of pet, June 2016
                                                                                                                  • Owners with multiple pets are less likely to have cover
                                                                                                                      • Figure 28: Penetration of pet insurance, by number of cats or dogs owned, June 2016
                                                                                                                  • Type of Cover Held

                                                                                                                    • Most policyholders have mid-level cover
                                                                                                                      • Figure 29: Type of pet policy held, June 2016
                                                                                                                    • Fall in proportion of policyholders with comprehensive lifetime cover…
                                                                                                                      • …may be linked to aggregator influence
                                                                                                                        • Figure 30: Type of pet policy held, 2014 and 2016
                                                                                                                    • Common Concerns Facing Cat and Dog Owners

                                                                                                                      • 68% of dog and cat owners are worried about having to pay for expensive treatment…
                                                                                                                        • …and 64% are concerned about their pet developing a recurring or lifelong illness
                                                                                                                          • 50% are worried about losing their pet, including 20% who are ‘very concerned’
                                                                                                                            • Figure 31: Level of concern relating to common pet problems – Dog and cat owners only, June 2016
                                                                                                                        • Attitudes towards Pet Insurance and Buying Behaviour

                                                                                                                          • Around one in eight policyholders fail to check excess levels and exclusions prior to purchase…
                                                                                                                            • …while 54% find the different levels of cover confusing
                                                                                                                              • Demonstrate expertise and good claims handling to win over customers
                                                                                                                                • Figure 32: Agreement with statements about arranging pet insurance, June 2016
                                                                                                                            • Awareness of and Interest in Policy Features and Extra Benefits

                                                                                                                              • Only 46% of policyholders say their provider offers a multi-pet discount
                                                                                                                                • High level of interest in referral networks
                                                                                                                                  • Bereavement and legal advice lines also have strong appeal
                                                                                                                                    • Potential cross-sell opportunity
                                                                                                                                      • Figure 33: Provision of and interest in extra benefits/services, June 2016
                                                                                                                                  • Future Buying and Switching Intentions

                                                                                                                                    • 47% of pet policyholders would consider switching
                                                                                                                                      • 29% are open to the possibility of paying more for lifetime cover
                                                                                                                                        • 42% of lifetime policyholders would consider buying their pet insurance as part of a wider package of products
                                                                                                                                          • Figure 34: Future consideration of switching, amending or upgrading policy, by type of policy currently held, June 2016
                                                                                                                                      • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                          • Abbreviations
                                                                                                                                            • Consumer research methodology
                                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                                              • Total market forecast – Best- and worst-case scenarios
                                                                                                                                                • Figure 35: Forecast of new pet insurance premiums – Best- and worst-case scenarios, at current prices, 2016-21
                                                                                                                                              • Forecast methodology

                                                                                                                                              Companies Covered

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

                                                                                                                                              Pet Insurance - UK - August 2016

                                                                                                                                              £1,995.00 (Excl.Tax)