Key Note Ltd, has published Pet Insurance 2015, a report into the state of the UK pet insurance market which forecasts that premiums will rise by 46.7% by 2019.
The report notes that the percentage of adults in Great Britain owning at least one dog has increased by 2.1 percentage points over the past 5 years, and the percentage owning at least one cat is 2.5 percentage points higher than it was 5 years ago. Yet despite growth in the pet population, the increase in the volume of pet insurance policies (23.6% between 2010 and 2014) has been far exceeded by the increase in the value of premiums written (40.7%).
Key Note says claims inflation has been a major factor in rising premiums; despite gross written premiums for cats, dogs and other pets increasing by 13.3% between 2013 and 2014 alone, the cost of claims for the same animals rose by 14.7% over the same period, over and above the premium increases seen.
According to the company, rising claims are largely down to the increasing cost of veterinary treatment — as advances in pet medicine increase apace with those in human medicine, treating pets is getting more costly. Not only this, but other factors, such as the rise in overweight or obese pets and even antibiotic-resistant bacteria, both common problems in the human health service, are also pushing up the costs of veterinary treatment.
In other general insurance markets, most notably motor insurance, which price comparison websites (PCWs) were initially set up to focus on, competition exerts a major downward pressure on premiums. However, the report says this is not always the case in the pet insurance market. This is because it can be difficult for those who have already claimed on pet insurance policies to switch insurers; the result of doing so is often that the condition the pet has previously been treated for is classed as ‘pre-existing’ in the new policy and therefore it, and related conditions, will not be covered under the new policy. This could leave pet owners liable to pay for veterinary treatment in full.
The situation has been further exacerbated by the high-profile withdrawal of a number of underwriters from the pet insurance market. The nature of the pet insurance market, though at first seeming diverse, actually involves a relatively limited pool of underwriters behind the numerous brands available. The report details how just four underwriters between them either underwrite or, at the very least, arrange and administer the pet insurance policies of 27 of the foremost brands in the pet insurance market.
Key Note forecasts that although insurance companies will see an increase in the volume of pets insured, this will not compensate for the relentless increase in the cost of claims which will be largely responsible for driving the cost of pet insurance up 46.7% by 2019.