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Pet Insurance - UK - November 2012

“Although price comparison websites have made it easier for consumers to compare the costs of policies and find the cheapest policies on the market, a higher number of pet insurance holders still choose policies based on the level of cover rather than just on the cost. Rather than competing on price, providers should emphasise the quality of their product, as short-term savings on cheaper premiums could actually be a false economy for customers, as they could face higher costs in the long term.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • Is the squeeze on household incomes leading to a reduction in pet insurance sales and product cancellations?
  • Has the proliferation of price comparison sites made consumers look only at the cheapest policies?
  • Has the fraudulent claims culture spread to the pet insurance market?
  • Do pet insurance holders trust insurers to pay out on claims?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Value of pet insurance market is expected to increase
              • Figure 1: Forecast for value of the pet insurance market, by GWP, 2007-17
            • Channels to market
              • Market factors
                • Veterinary expenses account for 32% of household spend on pets
                  • Technological advancements and better treatments leading to higher costs
                    • Fraudulent claims are increasing
                      • Companies, brands and innovation
                        • Market share
                          • Brand promotion
                            • Who’s innovating?
                              • The consumer
                                • Pet ownership
                                  • Figure 2: Pet ownership, August 2012
                                • Pet insurance ownership
                                  • Figure 3: Pet insurance ownership, August 2012
                                • Pet insurance providers
                                  • Figure 4: Pet insurance provider, August 2012
                                • Influencing factors
                                  • Figure 5: Influencing factors, August 2012
                                • Attitudes towards pet insurance
                                  • Figure 6: Attitudes towards pet insurance, August 2012
                                • What we think
                                • Issues in the Market

                                    • Is the squeeze on household incomes leading to a reduction in pet insurance sales and product cancellations?
                                      • Has the proliferation of price comparison sites made consumers look only at the cheapest policies?
                                        • Has the fraudulent claims culture spread to the pet insurance market?
                                          • Do pet insurance holders trust insurers to pay out on claims?
                                          • Trend Application

                                            • Extending product offerings to make a more complete package
                                              • Marketing insurance as part of a healthy lifestyle
                                                • 2015: East Meets West
                                                • Market Drivers

                                                  • Key points
                                                    • Cats and dogs are the most popular pets in the UK
                                                      • Figure 7: Top pets in the UK, 2009-11
                                                    • A third of pet expenditure goes onto veterinary and other services
                                                      • Figure 8: Proportional annual household spend on pets, 2010
                                                    • Veterinary expenditure has more than doubled since 2001/02
                                                      • Figure 9: Annual household spend on pets, 2001/02-2010
                                                    • Better treatments and technology, but higher costs
                                                      • Changes needed to tackle rising costs
                                                        • Complaints about pet insurance increase in 2011/12
                                                          • Insurance sales holding up relatively well…
                                                            • Figure 10: GDP quarterly percentage change, Q1 2008-Q3-2012
                                                          • …but pet abandonment is on the up
                                                            • Fraudulent claims are increasing
                                                              • Charities and self-insurance present some competition to providers
                                                              • SWOT Analysis

                                                                  • Figure 11: Pet insurance market SWOT analysis, 2012
                                                              • Who’s Innovating?

                                                                • Key points
                                                                  • First multi-pet insurance comparison service launched
                                                                    • Petplan redesigns policies to prevent customer confusion
                                                                      • MORE TH>N signs deal to sponsor pet channel on MSN website
                                                                        • Churchill launching pet insurance debut advert
                                                                          • Summer heat leads to discount on pet insurance policies
                                                                          • Market Size and Forecast

                                                                            • Key points
                                                                              • Pet insurance premiums up by 12.5% in 2011
                                                                                • Figure 12: Estimated value of the pet insurance market, by GWP, 2007-12
                                                                              • Ownership of pet insurance down slightly in 2012
                                                                                • Figure 13: Pet insurance ownership, 2007-12
                                                                              • Market forecast
                                                                                • Value of pet insurance market will continue to grow over the next five years
                                                                                  • Figure 14: Forecast for value of the pet insurance market, by GWP, 2007-17
                                                                                  • Figure 15: Forecast for total value of pet insurance market, at current and constant prices, by GWP, 2007-17
                                                                                • Forecast methodology
                                                                                  • Fan chart explanation
                                                                                  • Market Share

                                                                                    • Key points
                                                                                      • A handful of underwriters dominate the UK pet insurance market
                                                                                        • Figure 16: Pet insurance underwriter market share, based on GWP, 2011
                                                                                      • RSA makes big gains at the expense of Direct Line Group
                                                                                        • Figure 17: Overview of proportional market share for pet insurance providers, 2009-11
                                                                                    • Companies and Products

                                                                                      • Agria Pet Insurance
                                                                                        • Allianz Insurance Plc
                                                                                          • AXA Insurance
                                                                                            • Direct Line Group
                                                                                              • Equine and Livestock Insurance
                                                                                                • Royal & Sun Alliance
                                                                                                  • New entrants
                                                                                                  • Brand Communication and Promotion

                                                                                                    • Key points
                                                                                                      • Adspend falls by 34% in the year to August 2012
                                                                                                        • Figure 18: Topline advertising expenditure in the pet insurance market, 2008/09-2011/12*
                                                                                                      • Top five advertisers account for around 75% of adspend
                                                                                                        • Figure 19: Top 20 advertisers of pet insurance, 2009/10-2011/12
                                                                                                      • Pet insurance advertising is dominated by television campaigns
                                                                                                        • Figure 20: Pet insurance adspend, by media type, 2009/10-2011/12
                                                                                                    • Channels to Market

                                                                                                      • Key points
                                                                                                        • Specialist providers account for around two fifths of product sales
                                                                                                          • Figure 21: Channels used to buy pet insurance, August 2012
                                                                                                        • Around 68% of pet insurance holders arrange cover online
                                                                                                          • Figure 22: Methods used to arrange pet insurance, August 2012
                                                                                                      • Pet Ownership

                                                                                                        • Key points
                                                                                                          • Over 50% of internet users have a pet in their household
                                                                                                            • Figure 23: Pet ownership, August 2012
                                                                                                            • Figure 24: Pet ownership, August 2012
                                                                                                          • Women are more likely to live in a household with pets
                                                                                                            • Figure 25: Pet ownership, by gender, August 2012
                                                                                                          • Presence of children and partner influential for pet ownership
                                                                                                            • Figure 26: Pet ownership, by presence of own children, household size and marital status, August 2012
                                                                                                          • Around 46% of private renters have a pet
                                                                                                            • Figure 27: Pet ownership, by housing situation, August 2012
                                                                                                          • Most pet owners have only one pet
                                                                                                            • Figure 28: Repertoire of pet ownership, August 2012
                                                                                                        • Pet Insurance Ownership

                                                                                                          • Key points
                                                                                                            • Significant scope to increase pet insurance ownership
                                                                                                              • Figure 29: Proportion of pet owners who have cover for that pet, August 2012
                                                                                                            • Household income plays a large part in pet insurance ownership…
                                                                                                              • Figure 30: Pet insurance ownership, by socio-economic grouping and gross annual household income, August 2012
                                                                                                            • …as does an improvement in consumers’ financial situations
                                                                                                              • Figure 31: Pet insurance ownership, by financial situation compared to a year ago, August 2012
                                                                                                          • Pet Insurance Providers

                                                                                                            • Key points
                                                                                                              • Specialist providers and mainstream companies lead the way
                                                                                                                • Figure 32: Pet insurance provider, August 2012
                                                                                                              • No discernible difference between dog and cat owners
                                                                                                                • Figure 33: Pet insurance provider, by pet insurance ownership, August 2012
                                                                                                            • Influencing Factors for Arranging Pet Insurance

                                                                                                              • Key points
                                                                                                                • Veterinary costs are the biggest driver of pet insurance uptake
                                                                                                                  • Figure 34: Influencing factors, August 2012
                                                                                                                • Cheaper premiums are important, but providers can also leverage their brand image
                                                                                                                  • Small differences between dog and cat owners
                                                                                                                    • Figure 35: Influencing factors, by pet insurance ownership, August 2012
                                                                                                                  • Adults influenced by lifetime cover more likely to buy from specialist insurers
                                                                                                                    • Figure 36: Pet insurance provider, by influencing factors, August 2012
                                                                                                                  • Cheap monthly premiums are more appealing to those without pet insurance
                                                                                                                    • Figure 37: Potential reasons to take insurance, August 2012
                                                                                                                • Attitudes Towards Pet Insurance

                                                                                                                  • Key points
                                                                                                                    • Two thirds of pet owners shop around before taking out cover
                                                                                                                      • Figure 38: Attitudes towards pet insurance, August 2012
                                                                                                                    • Only a quarter of policyholders trust insurers to pay claims
                                                                                                                      • Figure 39: Attitudes towards pet insurance, by attitudes towards pet insurance, August 2012
                                                                                                                    • Potential to simplify policy terms and aid product comparison
                                                                                                                      • Specialist providers slightly more popular among consumers looking at cover, and not just cost
                                                                                                                        • Figure 40: Pet insurance provider, by attitudes towards pet insurance, August 2012
                                                                                                                      • Quality of cover is more important for those influenced by lifetime policies and reputable brands
                                                                                                                        • Figure 41: Attitudes towards pet insurance, by influencing factors, August 2012
                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                        • Figure 42: Best and worst case forecast for total value of the pet insurance market, by GWP, 2012-17
                                                                                                                    • Appendix – Pet Ownership

                                                                                                                        • Figure 43: Any pet ownership, by demographics, August 2012
                                                                                                                        • Figure 44: Dog(s) pet ownership, by demographics, August 2012
                                                                                                                        • Figure 45: Cat(s) pet ownership, by demographics, August 2012
                                                                                                                        • Figure 46: Repertoire of pet ownership, by demographics, August 2012
                                                                                                                    • Appendix – Pet Insurance Ownership

                                                                                                                        • Figure 47: Any pet insurance ownership, by demographics, August 2012
                                                                                                                        • Figure 48: Proportion of overall UK online population that has pet insurance, by type of animal covered, August 2012
                                                                                                                    • Appendix – Pet Insurance Providers

                                                                                                                        • Figure 49: Pet insurance provider, by demographics, August 2012
                                                                                                                    • Appendix – Influencing Factors for Arranging Pet Insurance

                                                                                                                        • Figure 50: Influencing factors, by demographics, August 2012
                                                                                                                        • Figure 51: Potential reasons to take insurance, by demographics, August 2012
                                                                                                                    • Appendix – Attitudes Towards Pet Insurance

                                                                                                                        • Figure 52: Attitudes towards pet insurance, by demographics, August 2012

                                                                                                                    Companies Covered

                                                                                                                    • Agria Pet Insurance
                                                                                                                    • Allianz Cornhill Insurance plc
                                                                                                                    • AXA PPP healthcare
                                                                                                                    • AXA UK plc
                                                                                                                    • Bluefin
                                                                                                                    • Capital One Bank (Europe) plc
                                                                                                                    • Churchill Insurance
                                                                                                                    • DDB Worldwide Communications Group Inc.
                                                                                                                    • Direct Line Group Limited
                                                                                                                    • E&L Insurance Services
                                                                                                                    • Financial Services Authority (The)
                                                                                                                    • Legal & General Group PLC
                                                                                                                    • Marks & Spencer
                                                                                                                    • MORE TH>N
                                                                                                                    • MSN UK
                                                                                                                    • Pet Plan Ltd. (Petplan)
                                                                                                                    • Royal Bank of Scotland Group plc
                                                                                                                    • RSA
                                                                                                                    • Saracens Ltd
                                                                                                                    • Swiftcover
                                                                                                                    • The Green Insurance Company
                                                                                                                    • The Kennel Club

                                                                                                                    Pet Insurance - UK - November 2012

                                                                                                                    £1,995.00 (Excl.Tax)