Pet Insurance – Analysis

We’re always on the lookout for interesting sectors in financial services which we believe have the potential for growth. Pet insurance is an example, with significant opportunity for expansion over the coming years, so we’ve produced one of our two-minute summaries on this topic . . .

Growth rates and competition

According to The FT, UK pet insurance premiums are set to grow from a base of around £975m back in 2015 to £1.6bn by 2021. This kind of expansion makes it a real prospect for insurers who are faced with very high levels of competition in traditional markets such as home and motor, where the established players are fighting it out.

Pet insurance is dominated by the global giant Allianz, which trades under the Petplan brand. Another player is RSA, which acts as the underwriter for Marks and Spencer, Tesco and its own More Than business. However, many smaller firms are vying for a piece of the action, and there are now around 80 brands selling pet insurance, about 15% more than four or five years ago.

The costs of pet ownership

The Guardian claims that the monthly cost of owning a dog is between £94 and £154, depending on size and breed. Many people spend more, particularly those in areas such as London who pay for walks or “doggy day care” while at work. When ‘Box Office Phil’ is talking about reduced growth, low productivity and a tough environment for households the last thing people want to deal with is an unexpected vet bill.

According to This is Money, pet owners without insurance pay out an average of £810 every time their animals need treatment at the vets. Pet owners have a high emotional attachment to their pets and consider them as an additional member of the family. Pet insurance is a cost that many will meet to keep their pets fit & well – becoming an accepted monthly financial outgoing.

The Outlook

With 54 million pet owners in the UK, there are many reasons why the future is indeed rosy for pet insurers who can stand out in a crowded marketplace. This, from Mintel:

“…most pet owners don’t have insurance, so there are plenty of opportunities to expand the market. As long as premiums can be kept at a reasonable level, and the benefits of policies are effectively marketed, pet owners’ fondness for their animals will mean pet insurance continues to grow into the future.”
Rich Shepherd, Senior Financial Services Analyst, Mintel

The ability to market products effectively will be the critical factor deciding long-term sustainable growth.

There will always be demand for low cost operators providing a cheap and cheerful product for the aggregators. Their business model will be built on reducing costs to  offer cut-price solutions. At the other end of the spectrum, big players like Allianz and RSA will continue to exploit large marketing budgets and their ability to cross sell to a vast database as the quickest way of promoting their products.

For the rest, developing a differentiated brand and efficient communication will be vital to success. This will involve creating a clear proposition and using a mix of digital and traditional media. We see many businesses wasting money through inefficient marketing techniques or poor implementation of digital media plans. Optimisation will be vital.

Summary

Pet insurance looks set to become an attractive area of growth in the insurance industry. The big players will continue to see their lead threatened by mid-sized and specialist insurers. The winner among the ‘rest of the pack’ will be the organisation best able to develop a marketing strategy positioning it as the leading challenger brand. This will be achieved through the efficient marketing of its proposition using digital media and PR.

Sources:

The FT

The Statistics Portal

Insurance Times

The Guardian

This is Money