UK Pet Insurance 2007

Table of Contents

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