Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The pet insurance market continued to grow rapidly in 2006 due to high premium rates and increased volumes 2
Pet insurance premium income grew by 13.9 per cent in 2006 2
Production penetration increased in 2006, fuelling the increase in GWP 2
The pet population has stalled, while dog numbers continue to experience a marginal decline due to a shift in social-economic conditions 2
Societal trends are proving to be a boon to the cat population while detrimental to dog numbers 2
With the economy performing robustly, fewer people now have the time for a pet 2
The dog population continues to slowly decline though the number of cats has increased and will need to form a larger part of a future pet insurance market 2
Consumers of pet insurance in the UK are price conscious, affluent and middle aged 3
Price has been the principle means for policy differentiation for consumers so far 3
Older consumers are less likely to own a pet and those that do are not likely to insure it 4
Affluent consumers are more likely to have insured their pets than those with low incomes 4
Distribution of pet insurance remains in the hands of direct writers but newer platforms are making gains as advertising campaigns have been decreased 4
Direct writers continue to dominate, though retailers have made significant inroads into the market 4
Telephone remains the key distribution platform for pet insurance but the Internet is gaining ground as well 4
Pet insurance advertising declined in 2006 as insurance providers grew more focused in their efforts 4
New entrants and M&A activity have increased competition in the market though most insurers have continued to grow their books 5
The acquisition of pet insurance players has altered the pet insurance environment resulting in heightened competition 5
New broker entrants to the market demonstrate the attractiveness of this fast growing sector despite its difficulties 5
Swiftcover launched a pet insurance policy in October 2006 hoping to cross sell to its existing customers 5
The top three insurers wrote almost 79 per cent of the pet insurance market in 2006 5
The rest of the top 10 accounted for the remainder of the pet market's premium income in 2006 5
Penetration rates will be the deciding factor in the growth potential of the pet insurance market over the next five years 6
Pet population and pet ownership trends are not forecast to change significantly in the next 5 years 6
Premium growth subsides to an annual average of 6.4 per cent, totaling £539.3 million in 2011 6
Table of Contents 7
Table of figures 8
Table of tables 9
Chapter 1 Introduction 10
What is this report about? 10
Who is the target reader? 10
How to use this report 10
Chapter 2 Market Context 11
Introduction 11
The pet insurance market continued to grow rapidly in 2006 due to high premium rates and increased volumes 11
Pet insurance premium income grew by 13.9 per cent in 2006 11
Product penetration increased in 2006, fuelling the increase in GWP 12
The pet population has stalled, while dog numbers continue to experience a marginal decline due to a shift in social-economic conditions 14
Societal trends are proving to be a boon to the cat population while detrimental to dog numbers 14
With the economy performing robustly, fewer people now have the time for a pet 14
Employment trends have resulted in fewer households with a person at home to care for a pet 16
The shift towards smaller households has contributed to the decline in pet ownership, hitting dogs disproportionately 18
The dog population continues to slowly decline though the number of cats has increased and will need to form a larger part of a future pet insurance market 21
Increases in premium rates were substantial in 2006 due to high claims inflation 23
The pet insurance market is dominated by cats and dogs, though dogs are on the decline 23
PFMA statistics show that around 52 per cent of UK homes had a pet in 2004, the majority of which were cats or dogs 23
The exotic pet market remains a niche section of an already small market 25
Claims inflation remains a concern for the pet insurance industry as it fears it could restrain growth 26
Claims inflation in 2006 was estimated to be 11.3 per cent due to high veterinary bills 26
Non-veterinary claims costs are not a significant factor in pet insurance claims bills 26
Policy changes have not been effective at limiting claims inflation in the pet insurance market 26
Consumers must be better educated as to the features of their policies and how this generates claims inflation 26
Chapter 3 Customer Focus 28
Consumers appear reluctant to compare policies on anything other than price 28
Price has been the principle means for policy differentiation for consumers so far 28
New and more economical products need to reflect consumer needs 29
Consumer education on claims costs will be crucial in ensuring the market can support higher premiums 29
Consumers of pet insurance tend to be below 60 and in the higher income brackets 29
Older consumers are less likely to own a pet and those that do are not likely to insure it 29
Affluent consumers are more likely to have insured their pets, with a penetration rate of 43 per cent 31
Distribution of pet insurance remains concentrated in the hands of direct writers but newer platforms are making gains 32
Direct writers continue to dominate, though retailers have made significant inroads into the market 32
Telephone remains the key distribution platform for pet insurance but the Internet is gaining ground as well 34
Aggregators have not made an impact on the market as of yet 35
Direct mail was eclipsed by television spending for the first time in 2006 36
Petplan was the top pet insurance advertiser in 2006 36
Pet insurance advertising declined in 2006 as insurance providers grew more focused in their efforts 38
Chapter 4 Competitive Dynamics 41
Introduction 41
Competitive conditions in the pet insurance market have increased with new entrants and M&A activity 41
The acquisition of pet insurance players has altered the pet insurance environment resulting in heightened competition 41
Swedish pet insurance giant Agria purchased PetPartners in March 2007 41
Domestic and General, the insurer behind PetProtect, has received multiple offers led by Homeserve in May 2007 41
New entrants to the market demonstrate the attractiveness of this fast growing sector despite its difficulties 41
Swiftcover launched a pet insurance policy in October 2006 hoping to cross sell to its existing customers 41
Confused.com has contemplated adding pet insurance to its product line up 42
Swinton targets £3 million in pet GWP by 2009 with new pet insurance line 42
Castle Cover, a broker targeting the over 50s market, launched in 2006 with a pet insurance range 42
The pet insurance market remained highly consolidated in 2006 42
The top three insurers wrote almost 79 per cent of the pet insurance market in 2006 42
Petplan remained the market leader in 2006, with 42.9 per cent of the market 42
RBS's multi-brand approach has resulted in a market share that accounts for just over one quarter of pet insurance premium income 43
AXA experienced strong growth in 2006 remaining the third largest pet insurance underwriter 43
The rest of the top 10 accounted for the remainder of the pet market's premium income in 2006 43
Chapter 5 Future Decoded 46
Introduction 46
Pet population and pet ownership trends are not forecast to change significantly in the next 5 years 46
Social trends are likely to continue their course over the next 5 years 46
The dog and cat population is not forecast to increase under either scenario 46
Penetration rates will be the deciding factor in the growth potential of the pet insurance market over the next five years 46
Scenario 1: Pet insurance market reaches £581.9 million by controlling claims inflation 47
Insurers can slow the increase in premium rates as claims inflation subsides 47
Product penetration remains high as more high profile insurance providers offer pet insurance 47
Premium growth subsides to an annual average of 8.4 per cent, totaling £581.9 million in 2011 47
Scenario 2: Claims inflation remains elevated, constricting the market 49
Insurers are unable to control claims inflation and premium rates continue to rise unsustainably 49
Product penetration falls throughout the forecast period 49
Pet insurance GWP will only reach £508.8 by 2011 49
APPENDIX 52
Supplementary data 52
Definitions 53
Methodology 54
Ipsos MORI data 54
Sample design 54
Competitor data 55
Further reading 55
Ask the analyst 56
General insurance research and analysis team 56
Datamonitor consulting 56
Disclaimer 56
List of Tables
Table 1: UK cat and dog insurance premium income, 2002-6 12
Table 2: Penetration levels of UK pet insurance, 2003-6 14
Table 3: UK economic activity levels, 1997-2006 16
Table 4: UK Employment rates by sex, 1997-2007 18
Table 5: UK housing completions by bedroom number, 1994/5-2005/6 21
Table 6: UK dog and cat population, 1996-2006e 23
Table 7: The percentage of animal-owning households in the UK, 2004 25
Table 8: Penetration of pet insurance products split by age group, 2006 30
Table 9: Top pets by ownership in the UK by age, 2006 31
Table 10: Penetration of pet insurance split by income, 2006 32
Table 11: Distribution of UK pet insurance by channel, 2006 34
Table 12: UK pet insurance distribution by platform, 2006 35
Table 13: Top ten pet insurance advertisers by medium, 2006 38
Table 14: Pet insurance advertising spend by medium, 2003-6 40
Table 15: Top UK pet insurers' market shares and premium income, 2005-6 45
Table 16: Scenario 1: UK pet insurance GWP, 2002-11f 48
Table 17: Scenario 2: UK pet insurance GWP, 2002-11f 51
Table 18: Top 10 pet insurance advertisers by medium, 2005 52
Table 19: Pet insurance insurers by premium income, 2005-6 53
List of Figures
Figure 1: The overall pet population was static, though cats became more popular in 2006 3
Figure 2: Premium income from pet insurance increased in the dog and cat sectors in 2006 12
Figure 3: The proportion of households with pet insurance increased again in 2006 13
Figure 4: The number of economically active persons in the UK has steadily grown, making owning a dog more difficult 15
Figure 5: The number of women in employment remained high in 2006 despite a softening of economic conditions 17
Figure 6: One and two person homes have grown as a proportion of society, leaving fewer people to take care of a pet 19
Figure 7: The size of the average new home has declined dramatically due to an increase in the number of flats 20
Figure 8: The overall pet population was static, though cats became more popular in 2006 22
Figure 9: Cats and dogs are the only animals to be kept by over 10 per cent of pet owners 24
Figure 10: Price is the main concern for pet insurance policy holders 29
Figure 11: Pet insurance is most attractive to consumers in their mid-life, when financial and family commitments make insurance attractive 30
Figure 12: Pet ownership declines as people progress past 60 31
Figure 13: As pet owners have more income they are more likely to take out pet insurance 32
Figure 14: A few direct writers dominated the distribution of pet insurance in 2006 33
Figure 15: The use of the telephone in arranging cover has increased to over half of all policies 35
Figure 16: Direct mail and television spending formed the bulk of the top 10's advertising spend in 2006 37
Figure 17: Pet insurance advertising has contracted as providers reduce their spend on direct mail 39
Figure 18: Through its subsidiary Petplan and a number of affinity partnerships, Allianz dominated the pet insurance market in 2006 44
Figure 19: With penetration rates stable, the pet insurance market reaches £581.9 million in 2011 48
Figure 20: The market will achieve much lower growth if claims inflation is not brought under control and premium rate increases moderated 50