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The Pet Insurance Claims Cost UXB

Updated: Jun 17

In 1979 there was an ITV television drama series called Danger UXB. It chronicled the exploits of a fictional British Army Royal Engineer Company during the Blitz. Company 97 went around London in 1940 neutralising WW II unexploded bombs (UXBs) lying unseen beneath the streets of the capital whilst the Battle of Britain raged above. The most significant disruption to our way of life since WW II was the COVID19 Pandemic, which has left many hidden problems across many areas of society.


The substantial growth in new household pet ownership during the Pandemic has left a UXB-type situation in the claims portfolios of pet insurers. According to research by the Pet Food Manufacturers Association (PFMA), quoted by the BBC [1], “A total of 3.2 million households in the UK … acquired a pet since the start of the pandemic”.


The Pet Insurance Claims Cost UXB - iB&W mage of soldiers digging into a bomb crater

Image source (Unsplash)


Where is this thread going, you might ask?

In January 2024 Procurato published a piece which pointed to inflation issues in the Pet Insurance sector [2] and why the CMA investigation wouldn’t address them. Hot on the heels of our piece, Insurance POST published an article which further highlight the key inflation concerns we believe can be addressed through proactive action.


On 7th February, a piece entitled Insurance premiums for older pets surge by over a quarter [3] covered current research from Pearson Ham that pet insurance premiums overall have increased by 13%, with animals over six years old seeing premiums up by 26% in the same period. In an interview for the same journal in November 2023 Steven Mendel, Founder of ManyPets said, “The continuing high levels of vet expense inflation absolutely leads to dramatic increases in insurance pricing because there's no other option … The continuing high levels of vet expense inflation absolutely leads to dramatic increases in insurance pricing.”


Interestingly, in the Pearson Ham data also noted that premium prices for animals under six was static. This is because age of animal is a determining factor in the claims experience of the pet. Although it varies by animal type and breed, the basic claims profile is younger animals have fewer and less serious claims than older ones. Which means all those Pandemic Pets, which are now about 4 years old, are nearing prime claim territory. The inevitable 6-year+ age point means increased claims cost at inflated prices is already baked into those pets and their policies, but without the price rises to mitigate them.


The sector is already having to try and price its way out of unfettered claims inflation because, as we have argued previously, insurers have not put in place robust claims data and cost management solutions. In addition, underwriting capacity is already in short supply, with a number of notable providers exiting completely or severely constraining the terms on offer.


Rather than reacting after the fact by hiking premiums, the option to act now and get a handle on supply chain and, in particular, referral vet costs is within insurers grasp. Add to this recent warning shots from the FCA and FOS about fair treatment of pet policyholders, and it’s evidently a minefield best avoided.


Our conversations with insurers recently have changed in focus, moving towards addressing the issue by implementing claims spend analysis. However, as an industry, the Pet Insurance sector would do well to take a leaf out of the fictional Royal Engineers Tunnelling Company 97, which neutralised the threat before the bombs went off.

 

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