Trends and challenges of the pet insurance market

Two weeks ago, I found myself in a meeting with representatives of pet insurance companies, discussing the trends in and challenges of the pet insurance market. It was quite an open discussion but companies of course didn’t reveal too much of their analysis, as this will help them take an edge over their competitors. Nevertheless, a few interesting themes came up.

Credit crunch

Is the credit crunch affecting customers’ perception of pet insurance and have insurers seen any change in policy sales?

Most insurers said they haven’t yet seen any big impact on sales but reckon that customers tend to shop around more come renewal time. In a recession period, every penny counts and if I had insurance I would shop around at renewal. People are used to look for a better deal every year on their car insurance. Why not for their pet cover?

In fact, pet insurance is a far more complex product than car insurance. All car insurance policies are pretty much the same. In pet insurance, all companies do not pay claims in the same way (12-month capped, condition-capped, lifelong) and at the end of the day, you really get what you pay for: the more expensive the premium, the more comprehensive the cover. Customers understand more and more about pet insurance and the differences between all policy types, but price remains the main factor in choosing a provider.

Also, once you start claiming on your pet insurance policy, the condition you’re claiming for will be excluded if you change provider because it will be pre-existing. Some companies give you the possibility to downgrade/upgrade to a different, often cheaper, product at renewal but still provide cover for these conditions that you have claimed for: it’s called continuous cover and it’s most likely to be offered by lifelong insurers.

Is the market over-saturated?

At latest count, there were around 8-10 underwriters (Axa, Allianz, RBS, QBE…) distributing pet insurance policies under 60-70 brand names, including direct insurers, supermarkets, brokers, sub-brokers and affinity partners. It is believed lots of these sub-brokers and affinity programmes do not actually make money for the underwriters and will eventually disappear, leading to a consolidation of the pet insurance market.

So who’s gonna be there to pay your claims in a few years? I wouldn’t worry because your insurance contract is actually with the underwriter, not the broker or distributor. Furthermore FSA regulations stipulate that should companies decide not to carry on their insurance services, they must find an alternative for their customers. In most cases anyway, other insurers will acquire the “book of business” (customers policies) and keep on running it on the same basis.

If you are not insured yet, it would make sense to choose a provider that is well-known, with a respected brand. You know that if your local football club starts selling you pet insurance you’re not on the right path. You can compare pet insurance providers and policies here: all of them are established pet insurers.

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