COVID-19 has resulted in an unprecedented shock to the economy and major disruption to household incomes in the short and medium term. Despite the threat to personal finances, only 1% of existing pet insurance holders say they are considering cancelling their policy within the next 12 months.

However, pet insurance remains a discretionary product. People experiencing or fearing financial difficulty will inevitably question their monthly outgoings and this is likely to result in more shopping around, particularly at renewal.

The market experienced a difficult 2019 and was showing signs of reaching maturity and the start of a correction period. The double-digit levels of growth seen over the last decade are not likely to return. 2020 will put even more pressure on margins in an already very competitive industry, especially as a reduced cashflow is expected as insurers follow regulators’ requirement to help customers in financial difficulties.

Despite the challenges, there is an opportunity for providers to improve communication and their overall relationship with existing customers to avoid cancellations, support customers and help them find the best product for their needs. Likewise, there is potential to attract switchers looking to reduce their premiums, though this will require new product development and innovation to overcome barriers such as lack of cover for pre-existing conditions. There is also an opportunity for providers to promote and improve their digital channels, such as online claims handling, and video-chat consultations.

Key issues covered in this report

  • The impact of COVID-19 on the pet insurance market.

  • Purchase drivers of pet insurance, perceptions of different types of provider and how easy customers find the research and purchase journey.

  • Consumers’ intentions regarding their pet insurance policies for the coming 12 months.

  • Opportunities and threats arising from COVID-19.

Products covered in this Report

This Report focuses on the UK pet insurance market. Pet health plans are also considered in terms of ownership, although these products are not covered as part of the Market Size, Market Segmentation or Market Share sections of the Report.

Pet insurance is designed to cover medical expenses if the insured pet becomes ill or is injured in an accident. Most products cater for cats and dogs, although there are policies available for horses and ponies, rabbits, fish and more exotic pets. For full definitions of the different levels of cover, see the Report Appendix.

COVID-19: Market context

This update on the impact that COVID-19 is having on UK consumers was prepared on 31 July 2020.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20 March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks.

The Health Protections Regulations 2020 came into effect on 15 June allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4 July, with many beauty businesses following on 13 July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Rules on travel remain fluid: from 10 July, travellers from more than 50 “low risk” countries no longer had to self-isolate for 14 days, but on 28 July the removal of Spain from this list of low-risk countries dominated headlines in the UK.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

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