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Disrupting the static UK pet insurance market requires more clarity around cover

By Paola Farrugia  |  August 14, 2019

UK pet insurers can have a tough time keeping customers happy. Massive hikes in premiums, insurance pay-outs not always meeting the cost of higher vet bills, and confrontational, drawn-out claim processes can all cause pet owners to lose faith in the product.

Pet owners are not always aware of the restrictions on their policies. They’ll willingly let their vet proceed with diagnostics and treatment for a condition without being aware that once their insurer receives their pet’s clinical history, their claim will be rejected if it’s related to a pre-existing condition—leaving the owner to foot the bill. At the present time, pet insurers typically underwrite a pet’s level of medical risk at the point of claim rather than the point of sale.   

Premiums set by the insurer are rarely individualised until after the insurer has access to the clinical history of that pet, which then often results in an unwelcome hike in premiums for the owner of a dog or cat after the first claim is made.

Customers who then want to change their policy or move to another insurer in search of cheaper premiums will find themselves trapped, since whatever they have claimed for will now be classed as a pre-existing condition, and they’ll often be denied coverage for that condition.

But what can insurers do about it?

More trust can be built between the insurer and customer by knowing a pet’s risk profile from day one, by providing perfect clarity on what’s covered and what’s excluded, and by offering more coverage options to pets with pre-existing conditions that present manageable risks.

Verisk's Risk Rating has helped automate the assessment of pre-existing medical conditions with the Pet Black Box, a tool that guides customers through a series of simple questions about their pet’s condition and then generates a pet risk score that can be used to efficiently underwrite policies at the point of sale and provide that much-needed clarity.

A view of the market

The uptake of pet insurance in the UK remains relatively low compared to the number of animals owned. Association of British Insurers (ABI) statistics show that over 68 per cent of dogs and 84 per cent of cats were uninsured in 2018.

There are various reasons for this from a consumer point of view. Sometimes a pet is priced out of the market as it gets older or develops more conditions; and in some cases, the owners are opting to self-insure rather than pay an insurance premium that won’t cover a pre-existing condition.

The average pet insurance premium has increased to £336 for dogs and £199 for cats, according to the ABI, up 50 per cent over the last ten years.

Pet insurers paid out a record £785 million in claims in 2018, with the average claim size up by 75 per cent in the last ten years, reflecting an increase in vet bills.

Diagnostics in veterinary medicine have improved vastly over the past few years. A few years ago, you would never have thought of putting a dog through an MRI scanner; now, it’s quite a regular procedure at referral hospitals. This and the fact that costs are not regulated in the veterinary industry mean insurers are not only facing larger claims but some large variations in costs for the same treatment.

In the UK, there are four distinct types of pet insurance policy, as follows:

  • Lifetime policy. This is considered the most comprehensive form of pet insurance cover, whereby any accidents or illnesses are covered for a pet’s entire life, subject to each individual policy’s limits.
  • Time-limited policy. This will cover a pet against accidents and illnesses, but only for a limited time.
  • Maximum benefit policy. This will cover a pet against accidents and illnesses up to a specified limit. But unlike a time-limited policy, a customer can claim for the same conditions more than once, and there is no time limit on treatment.
  • Accident only. This is the most basic form of cover and will cover a pet only in the event of an accident and not for long-term illnesses.

Across these different policy types, there will be exclusions and limitations that customers may be completely unaware of, and it’s important for insurers to be transparent. Puppy and kitten owners are encouraged to purchase lifetime cover for their new pets. 

The introduction of the Financial Conduct Authority’s (FCA) Insurance Distribution Directive (IDD) in October 2018 coincided with new requirements applying to firms distributing insurance. One of the requirements was for insurers to identify customers’ insurance needs and ensure that products offered are consistent with them.

Pet insurance premiums are rated on three main factors: age, breed, and postcode. A French Bulldog will be predisposed to complex breathing problems and therefore will require a higher policy limit than a Jack Russell, for example. The policy limits available can vary and therefore will not always reflect the required treatment costs for that pet—something the IDD aims to remedy. Insurers need to take responsibility for educating pet owners on exactly what cover they need and the policies available, including making them aware of the cost of some standard treatments.

How Verisk can help

Helping insurers make more informed decisions about underwriting is at the core of what Verisk's Risk Rating does. Our medical risk assessment tool (the Black Box) has helped insurers develop specialised products for customers with pre-existing conditions since 2000.

Initially focused on the travel insurance sector—and having now expanded into the health, income protection, and pet insurance markets—Black Boxes have helped transform the insurance sectors in which Verisk operates by automating medical underwriting at the point of sale.

By facilitating more coverage options for pets with pre-existing conditions, the Pet Black Box can help open up the market to customers who wish to change their insurer but keep comprehensive cover and may even appeal to those who have decided not to insure due to previous pre-existing cover restrictions. The risk scores generated by Pet Black Box can help insurers establish a pricing structure and really understand what they’re signing up for with each pet—all while affording greater flexibility to the customer.


Paola Farrugia is business development manager for Verisk’s Pet Risk Rating. She can be contacted at Paola.Farrugia@verisk.com.

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