Pet insurance should be more affordable. Here’s why it’s so expensive in 2018.


Pet insurance has made a huge difference to many animals’ lives. The principle is simple: you pay a relatively small monthly sum to the insurance company, and if your pet is unfortunate enough to fall seriously ill or have an accident, the insurance covers the costs of the vets’ bills. Of course this is subject to the expected caveats of pre-existing conditions and excess contributions, but still, the principle is sufficient to make a huge difference to the affordability of vets’ bills for thousands of people. The benefits for animal health and welfare have been immense.

The history of pet insurance

Pet insurance has been popular in many countries around the world for a long time. The concept of insuring a pet dog started way back in 1924, in Sweden, and even now, Sweden is a global leader in pet insurance, with around 80% of the nation’s dogs covered. The UK was the next big market to open up, but although the first policy was written in 1947, market penetration has stayed relatively low, at around 20 – 25% of the pet population. Uptake of pet insurance varies from country to country: in the USA, pet insurance has never taken off in a wide ranging way, with estimates that less than 1% of pets are covered.

Escalating premiums are now making pet insurance less popular

In recent years, however, pet insurance has begun to be a victim of its own success. When a pet is insured, the cost of treatment doesn’t matter directly to the owner. This means that people are able to obtain a far higher level of treatment for their pets than most would have been able to afford without insurance. The veterinary industry has responded to this demand by offering advanced care, including diagnostic imaging (such as MRI and CAT scans) and specialist surgical procedures (such as pacemakers for the heart, joint replacement surgery and even “Supervet” style prosthetic limbs). This is remarkable, life-changing stuff for the animals, but it is very costly. And guess what? Because the “insurance companies are paying”, there’s a direct effect at the other end of the equation: pet insurance premiums have been going up. After all, insurance companies are not some kind of generous philanthropic organisations: they are businesses, and they need to cover their costs as well as making some sort of profit. While it is still possible to buy pet insurance that’s excellent value, many people have been finding that the monthly premiums have gone so high that they can no longer afford to keep their pets covered.
In 1992, you could get a dog or cat insured for less than £4 a month for the duration of the animal’s life, even if they fell ill and developed long term chronic illnesses. These days, the high level of claims that have to be paid by insurers mean that insurance premiums have been steadily climbing.
The vicious circle of premium cost going up and the expectation of some sort of return on their “investment” by the policy-holding pet owner means the inflationary cycle is perpetuated.

Multiple factors are to blame for higher pet insurance premiums

As well as this general underlying inflationary pressure, there are four practical reasons why pet insurance has become so expensive.

  1. First, science continues to advance, creating new and better ways of treating animals, with more advanced technology, novel drugs, better techniques and more highly qualified specialists. These advances, while laudable and impressive, lead to higher vet bills which need to be reflected in more costly insurance premiums.
  2. Second, owners have expectations that are higher than ever. They have seen what The Supervet can do on television, and they – understandably – want all the stops to be pulled out when their own pet is sick. After all, the insurance company is paying. So go for it. Do absolutely everything possible. Every single test. A referral to a specialist as soon as possible. Forget the cost. Just fix the problem, covering every single remote possibility, without delay. These high expectations do, of course, mean that, on average, their pet will receive better care. But the down side is that pet insurance premiums are going up. The connection is undeniable.
  3. Third, arguably, driven by high owner expectations, there’s a risk that a higher level of diagnostic work up may sometimes be done for animals that, in the past, might not have been seen as seriously ill enough to justify the extensive – and expensive – investigations. The age-old clinical judgement along the lines of “we’ll just wait and see if he’s better in a few days” is understandably less likely to happen when a pet is insured.  This tendency is bolstered by the CYA (“cover your ass”) attitude by some vets – especially those lacking experience – who may take the view that “if in doubt, investigate”, in the hope that it will reduce the risk of potential litigation if a case happens to go wrong. Pet insurance would be more affordable if vets reverted to the approach of using clinical judgement to hold back on early detailed investigations for animals that are not seriously ill, as they may already do with many pets that are not insured, where restrictions are placed because of owners’ limited budgets. Of course, the positive side of early intensive investigations for apparently minor illnesses is that a small number of serious problems are identified at an earlier stage, and these would have been missed if the investigations had not been done. Indeed, if money is  unlimited (as it, arguably, is for insured pets), the CYA approach is the most logical attitude for vets to take, and unarguably the approach that is most likely to avoid missing a rare diagnosis.
    The question remains, however: is the overall increased cost of insurance premiums worth this small number of cases? Vets are in a difficult position here: owners want them to do “everything”, and so it is not really fair to expect vets not to pull out all the stops. Nor is it fair to expect vets to reduce the level of investigations for the worthy goal of reducing the overall cost of pet insurance premiums in the long term. Vets can only be expected to focus on the case in front of them: that is stressful enough without trying to see a nationwide picture at the same time.
  4. Fourth, some of the veterinary profession – and some owners – have begun to see death or euthanasia as abject failure. There is sometimes a belief that “life should be preserved at all costs”, even if the quality of life is poor to the extent of compromising the animal’s welfare, and even if the financial cost of reaching this stage is immense. If vets and owners were more realistic about what is happening to the animals under their care, insurance payouts to these tough cases would be reduced, and insurance premiums for everyone would fall. Again, the other side of this argument is that when it’s your own pet involved, it can be very difficult indeed to make the call to say a final goodbye. This is a challenging topic that deserves discussion and debate.

Statistics from the industry show that too many people put in claims for sick pets

The basic principle of insurance as the concept is that the premiums of the many pay for the claims of the few. This principle is strained in the pet insurance market to the point where it is beginning not to work effectively. The statistics are telling: 15% of household policies are claimed on, 22% of motor policies have to pay out, while over 30% of pet insurance policy holders submit claims. Insurance is meant to be there to fund the “big ticket” items: the complicated fractured leg, the unexpected diabetes, or any number of other unusual but complex medical or surgical events. However, the bigger the individual “tickets” become (e.g. obvious uncomplicated Kennel Cough cases that are worked up to an extreme extent), the more difficult it becomes to share out the policy income across the portfolio of pet owners.
The Association of British Insurers produced statistics in 2018 which revealed that the average pet insurance claim had increased from £386 in 2007 by 96% to £757 in 2017. Once inflation is factored in, the rise seems smaller (£386 equates to £505 after inflation, making the rise to £757 a smaller, but still significant increase of 50%) Overall, the industry premiums were £1.1 billion in 2017, with indicative loss ratios of around 70% meaning that the claims settlements to pet owners are highly significant.
Pet insurance is not the only area of life where insurance premiums have been rising: car insurance has also been rocketing up, for different reasons, including changes in how compensation payouts are calculated, insurance premium tax, more whiplash-style claims and rising repair bills.
The pet insurance industry is responding to the challenge of higher claims and rising premiums in many ways. The widespread use of labour-saving technology and methods mean that insurance providers have squeezed out many inefficiencies in their systems. Pet insurance premiums these days closely correlate with the claims costs experienced by the pet insurance providers.
You can still buy excellent value in pet insurance. It’s easy to go online and get competitive quotes from different companies. As with everything in life, it doesn’t always make sense to choose the cheapest pet insurance product, it’s important to read the detail of the policy: there’s no point in buying cheaper insurance if it doesn’t pay out when you need it because your pet’s problem is excluded for some reason.

Perhaps we all need to ask ourselves where pet insurance is going.

  • Do we want to have a highly priced product that is beyond the financial reach of most pet owners, so that a select few pets are able to afford treatment that is superior to that available to most humans on the planet?
  • Or do we want to have an affordable insurance product that offers the majority of pets good cover for most of life’s unexpected crises?
  • Is there a place for a new type of pet insurance, with a reduced premium in exchange for specified strict conditions on claims? Can pet insurance be changed so that it moves back towards a model where low premiums for the many are able to be used to fund excellent quality care for the few?
  • Let’s talk about this: please make suggestions in the comments section below.
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10 thoughts on “Pet insurance should be more affordable. Here’s why it’s so expensive in 2018.

  1. I declare an interest as both a practicing Vet and a consultant for a pet insurance company.

    This is an excellent summary.
    My experience is that insurance companies work on a margin of approximately 3% so premiums are a pretty fair reflection of claims history.
    When I mentioned a cheaper policy with limited scope at s recent debate an insurance CEO pointed out that the huge increase in claims under £1k is having much more impact than the headline complex multi £K surgical cases.

  2. Practicing Vet here –

    Perhaps there’s a place for policies with a much higher excess (eg several hundred pounds), on the theory that most ‘everyday’ trips to the vet for vomiting, diarrhoea or minor stitch ups wouldn’t be worth claiming for, but the insurance would still be there for major ops (ie fracture repairs, FB surgeries, etc)?

  3. I think the major clash is going to be between the corporate vet business model vs big business insurance companies. All referral centres (nearly all owned now by ivc/cvs/linaeus/vets4pets) have a client base that is almost exclusively insured and so it is one big business trying to suck the money out of another big business. The RSA network was inevitable. Insurance companies could have done a brilliant job of getting rid of the BOAS dogs by simply refusing to insure them (think 18yr olds in sports cars) hence depriving referral centres of an income stream. As a practice owner I have a fee structure that welcomes insured money but we have invested in equipment people and skills so that we can do a great job at a price that gives clients a choice. We can offer referral but many policies leave clients out of pocket if they choose referral so by keeping work in-house we get greater job satisfaction and the younger generation stay involved and motivated and develop a can do attitude. We keep clients informed and yes we may not get “perfect” diagnostics and outcomes but neither do referral centres. Clients are better informed and involved in the decision making process and a environment of trust develops where clients accept that if and when things don’t turn out as planned, everyone was doing their best. I have been qualified nearly 25 yrs and don’t pretend to be perfect by any means but i think being frank open and honest with clients about diagnostic options and subsequent therapeutic options has served me well. As you have said before, there is a massive difference between a definitive diagnosis (clinical interest) and probable prognosis (Owner interest) we forget the latter at our peril.

  4. Thanks for a very timely post. I have just received a renewal notice from John Lewis for insuring Jessie, my 6 year old labrador. The premium has jumped up to just under £700, and that’s despite a £250 excess and a £3000 treatment limit per year. Its almost as if the insurers are trying to force us to cancel! My concern is that if we go elsewhere Jessie’s hip displaysia (not too bad at the moment but likely to worsen with age) won’t be covered. Even so I’m thinking we will be better off self-insuring at these levels of premium. As you say, we need to find a better model for pet insurance.

    1. I’ve just had my Direct Line renewal for my 5 year old Labrador…£705. I also have a GSD pup. I am seriously thinking about self insuring by sticking £120 a month in an ISA to build up a pot of money should I need it for vet bills in the future

  5. It’s a really difficult debate. Last time I owned a greyhound, she had a cruciate ligament failure that turned into months and months of problems, all treated under my insurance policy. She recovered and it was wonderful that she was able to run again, but I couldn’t afford the increased premiums after that, and she was later put to sleep after an unrelated condition that still torments me with ‘what if’ questions. The insurer (who I cannot fault) later left the pet insurance market.

    It’s an awful sick feeling, the guilt of wondering if you put money ahead of love, and I can’t blame people for thinking: well, I do HAVE insurance, and being unable to make that complicated decision about whether THIS condition is the one that’s bad enough / expensive enough to make a claim for. When you’re already living on toast to make sure your beloved elderly dog gets his heart medication, the question of ‘do I really need to make a claim’ is a hard one. Given the lifespan of dogs, you don’t always know what your financial position is going to be, ten years down the line.

    And then there’s all the social media tutting about people who surrender elderly pets because they are ill: “I would never…” yes, right, but there are people out there for whom it is genuinely a choice between surrendering a pet and paying the rent, and elderly animals need warmth and comfort.

    I have not adopted another greyhound, despite the legions of them in rescues and although I love the breed, because, no question, they are more fragile and more expensive to insure and treat than crossbreeds. I don’t know what the answer is.

  6. As a worker on national wage I find it had to have a few hundred pounds knocking around when my pet is ill. Now some people say if you can’t afford the vet bill don’t have a pet. Doesn’t that add to the rise of stray and abandoned pets we already have. I pay pet insurance so I can budget for the unexpected. Others say don’t pay insurance have a separate account you save in for pet needs. What happens if I haven’t saved enough when it’s needed. It’s getting to the point where premium rises are getting too much to afford. I want my vet to honest and open with me about my pets health and not do test after test if there will be no quality of life. Our vets are there to help not make money and misery from our suffering pets. Yes I want the best for mine but I wouldn’t want my old dog operating on for him to die on table or a week later as it was too much for his body to handle. I think pets should come first not the vets pocket or the owner wanting more time with an already suffering pet they don’t want to let go of. Vets are the professionals. That’s what they need to be and owners to trust in their ability. Be honest and open with no false hope. Hope this makes sence

    1. Absolutely makes sense. I think, once again, communication is the key isn’t it – rather than the owner not wanting to admit what the limits on their finances are, or the vet thinking they know what the owner would want, both sides need to be honest. And of course, that honesty will include the times when the answer really is “I don’t know”. Veterinary medicine is not an exact science, and not every patient has read the textbook!

  7. This is a great discussion and goes to the heart of an issue that has driven me over the last 10 years. Again, in the interests of transparency, my viewpoint comes from somebody who is both a vet and pet insurer. Like so many small animal vets, I am driven to continued improvements in pet welfare – I spent several years working for a veterinary group and was involved in the launch of a 24 hour emergency centre, referral centre as well as the acquisition of numerous pieces of breakthrough medical equipment. I can honestly say that, like most vets, our motives were never financial – but came from a common veterinary desire to push standards up and improve the standards of pet care. However, when the last recession hit, I did start to personally question whether this drive was in line with the needs of my clients and whether pet insurance was simply ‘masking’ the unsustainable pace of advances in veterinary care.

    Whilst much attention at the time (and still today) is placed on finger pointing between insurers, pet owners and vets, the reality was that there was no lined up approach to the issue and that the cost of insurance and the levels of cover on offer had actually become completely dissociated with what clients were willing/ able to pay long-term. The challenge is further exacerbated by the great diversity of veterinary models. For example, two practices in the same town can operate in two completely different ways (unknown to the client) – with one offering complete care under one roof provided by experienced ‘general practitioner’ vets and another serving as a ‘feeder model’ to divert most ‘non standard’ cases to a referral centre or ‘hub’ with a Specialist vet taking on the case. Whilst it is impossible to generalise and say that one approach is better than the other, what is clear is that the result will certainly involve a very different client experience and bill. However, the pet insurance premium paid by the client will be the same given that insurers base their pricing traditionally on postcode. This dissociation between the actual cost of the veterinary care provided and the cost paid by the client for pet insurance is a critical component to this discussion.

    After much research and learning, we launched Vetsure Pet Insurance in 2009 – the model aims to address this issue by directly linking the cost of the pet insurance premium to the cost of the services provided by the vet clinic in question. We now work with over 500 first opinion vet clinics across the country in this way – pet owners can use any vet clinic they want to in the country but pay £20 extra as a claims excess if they use ‘non-accredited’ first opinion vet practices. In this way, we are able to more closely price the premiums to the veterinary fees being charged. We do not dictate, in any shape or form, what vet practices should charge or what referral centres vets should use, but by re-establishing the link between insurance premiums and cost of veterinary provision we are providing a structure that we believe to be fairer to all pet owners and which, we believe is more transparent and sustainable.

    That’s not to say that we’ve cracked this affordability nut – there’s still a long way to go. The provision of genuinely lifelong insurance in a fair and sustainable way whilst still supporting advances in veterinary medicine is far from easy. But an open and honest dialogue between insurers, vets and owners, as stimulated by this blog, can only be a good thing.

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