The UK pet insurance market is the largest in the world, with premiums reaching nearly £800 million in 2013. However, intensifying competition and rising veterinary fee inflation are inevitability taking their toll on margins, leading to the withdrawal of one key underwriter within the past year. It is also a fairly concentrated market, with just three underwriters responsible for three quarters of total premium income in 2013. And yet there are numerous distributors – most of them from the insurance, veterinary and retail sectors – all touting for business from a diverse customer base.

The market may have matured, but debate rages over whether it is nearing saturation or whether there is still scope to further increase product penetration, particularly given consumer concerns over rising treatment costs. This unresolved issue represents the central theme of Mintel’s report, which provides an overview of the market’s size and composition, its strengths and weaknesses, recent innovation and promotional activity. The market analysis is complemented by the results of an online consumer survey, which offers insight into the attitudes of pet owners towards pet insurance and identifies those demographic groups who are most likely to take out cover.

Pet insurance policies are designed to cover the cost of medical expenses if the insured pet becomes ill or is injured in an accident. However, they will not normally cover routine visits to the vet or events that could have been anticipated, such as routine vaccinations and neutering.

The most important feature of a pet insurance policy is the vet fee cover and how this pays out. It typically ranges from as low as £500 to as much as £12,000.

Pet insurance policies fall into two main categories.

1. Lifetime cover – offers the most comprehensive level of cover, paying out for ongoing illnesses for the lifetime of the pet, but can become quite expensive as the level of vet-fee cover increases.

There are two sub-types:

Per condition per year lifetime cover provides a maximum cover limit per condition, which resets every year. Policyholders can claim for more than one condition per year

Annual lifetime cover provides a maximum overall cover limit that resets each year.

Both types of lifetime policy will cover ongoing illnesses year on year, so long as the premiums keep being paid.

1. Non-lifetime cover – limits how much the insurer will pay per condition before it is excluded.

There are two sub-types:

Per condition non-lifetime cover pays a limited amount per condition with no time limit, but once the amount has been used up the condition is then excluded from any future payouts.

Time-limit per condition non-lifetime cover has both a per-condition and a time limit (of typically 12 months) before the condition is excluded. These policies tend to be the cheapest, but offer the lowest level of cover.

In addition, there are low-cost accident-only pet policies, which only provide cover for accidents and exclude cover for illnesses.

Few pet insurance policies on the market will cover pre-existing conditions (and those that do typically only cover historic conditions, ie those that have not been treated nor had any symptoms within the past two years). This can make switching provider difficult for policyholders.

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