Sponsored content: Stephen Kennedy, director at Pearson Ham, discusses the market changes having an impact on pet insurance pricing
Pet insurance premiums in the UK rose at the start of the year, largely driven by persistent veterinary cost inflation.
For several years, the cost of pet treatments has outpaced general inflation, fueled by advances in diagnostics and care options, alongside a growing trend of corporate consolidation within the veterinary sector.
In 2024, payouts from members of the ABI exceeded £1bn for the third year running, more than doubling the figure from a decade ago, with average claims costs reaching £685.
The first quarter of 2025 saw modest yet consistent premium increases. Lifetime policies rose by 0.4% in February and 0.6% in March, bringing average premiums just 1% higher than a year earlier.
However, a reversal occurred in April and May, with -0.8% and -0.7% drops in lifetime premiums. This fluctuation suggests that insurers are adjusting pricing strategies based on current claims data, future inflationary expectations and market competition.
Segment specific
Segment specific patterns are being observed. Premiums for dogs rose 0.8% in March, while cat premiums remained steady or dipped slightly.
Regionally, the North West experienced the strongest price increases in March at 1.3%, while East England and the South West saw modest rises of 0.2%.
In May, London saw the steepest premium drop at -1%, whereas the Midlands experienced the smallest decline at -0.4%. Differences in animal risk factors and regional veterinary cost differences are likely to play a part.
The market itself is undergoing rapid expansion. Since the pandemic, UK pet ownership has soared, with over four million households now insuring pets. Consumers increasingly view pets as family members, boosting demand for comprehensive policies such as lifetime and maximum benefit plans. While this has enabled insurers to raise premiums without significantly affecting uptake, long-term affordability remains a concern.
Insurers are introducing more pricing sophistication into pet pricing. Factors like breed, age, location and medical history now play a larger role in risk assessment and premium pricing. Higher-risk pets, including senior animals and brachycephalic breeds, are likely to face sharper cost increases, while low-risk groups may see stable or even reduced premiums.
Economic pressures
Broader economic pressures, including wage inflation and supply chain disruptions, have contributed to upward trends.
As general inflation is easing, there may be less upward pressure on premiums. However, there could be more non-pricing challenges for insurers. The FCA’s Consumer Duty regime is prompting greater scrutiny of fairness and customer understanding. Given the relative complexity of pet policies, this may become an area of greater scrutiny.
Looking ahead, insurers are likely to pursue targeted adjustments, especially for higher risk categories, while potentially introducing incentives such as loyalty discounts and wellness plan bundles.
The competitive landscape and emerging innovations may help mitigate price pressures, but regional and product specific variations will persist. This makes shopping around, considering different policy types more important than ever for consumers and keeping track of competitor price movements and product changes crucial for insurance providers.
