15th August 2024
As the number and range of lifetime policies increases, what can providers can do to improve consumer understanding for this type of pet insurance?
The UK is a nation of pet lovers: over 57% of us own a pet. Trips to the vet can be expensive, though, especially for new, advanced treatments, which means that many owners buy insurance.1
One type of pet insurance is lifetime cover. Lifetime policies provide the most comprehensive cover of all the types of pet insurance. As the cost of veterinary treatment will rise over the course of the pet’s lifetime, these policies are designed to offer continued peace of mind, covering accidents, illnesses and any conditions your pet may develop throughout their lifetime. They also have a defined yearly amount of cover that will reset, with no lapses in cover when the policy is renewed, and the amount of cover can be increased, usually at renewal.2
The pet insurance market has become increasingly complex in recent years when it comes to lifetime cover, though, which can make it difficult for customers to work out what is the best coverage for their pet.
This blog looks at how providers can do better to help guide their customers to finding the right products.
During the past six years, the pet insurance market has become more crowded as a sector. This isn’t because there are more insurers in the market. In fact, there are fewer providers offering pet insurance than in 2018. Instead, what’s happened is that there has been an increase in the number of policies on offer. This has had the result of giving customers more choice, but has also added complexity, potentially making it harder for customers to select the right policy for their needs.
According to Fairer Finance data, the relative shares of different types of pet insurance policies being sold has changed dramatically since 2018. Time limited, maximum benefit, and accident-only policies have declined, while the number of lifetime policies currently being offered has increased by 105% from 139 to 286.
A rise in pet ownership especially amongst first-time pet owners, and a commitment to invest in the health of their pets, has changed shopping habits. Due to a continuous rise in vet fees and the risk of unexpected veterinary expenses causing potential financial burden, pet owners have increasingly become more likely to seek out comprehensive options. Insurers are reacting to this demand.3
On average, each pet insurer now offers five different levels of coverage for vet fees in lifetime policies.
In 2018, only 15 providers across the sector offered vet fee cover limits between £10,000 to £15,000. This has now expanded to 30 providers offering £10,000 and more. In the past year, we have seen providers such as Agria and The Kennel Club offering lifetime products with cover for vet fees of around £20,000 to £25,000. Offerings of vet fee cover now range from £1,000 to £25,000, to suit a wide variety of needs, according to the breed type and price.
With the expansion in the range of vets fees covered, there has also been an increase in cheaper lifetime policies being offered. Lower coverage policies offer cover for the same types of conditions as premium products but require more of a contribution towards the cost of the claim if the fees exceed the cover limit. Insurers should make customers aware that lower coverage will most likely not fully cover for a claim and that this is not suitable if customers are looking for full coverage against vet fees.
This increase in the number of lifetime policies has likely resulted in uncertainty for customers regarding how much coverage is suitable for them and appropriate for their pet. It is imperative that customers are able to select the right amount of cover to avoid financial consequences in the event of a large unforeseen vet bills since customers typically choose lower vet fees than they more realistically might need. Furthermore, picking the right provider is important to properly benefit from the lifetime policy, customers need to stay with their insurer for an appropriate and corresponding length of time.
Overall, there has been an increase but little to no innovation in products, with template products replicated across insurers. If this trend continues with more focusing on lifetime products, insurers could look to differentiate themselves by introducing cover for things like vaccinations, regular checkups, preventative treatments and pre-existing conditions.
Providers could do better to help consumers select the right product for their needs by being more transparent about the cost of average vet fees for common treatments. Customers are not being given this information from their vets, and often only find out that their cover is insufficient when they come to claim. Whilst some providers already do this, others don’t explain and immediately lead customers to their product journey, with little to no guidance on the criteria to make the right choice for them and their pet.
ManyPets illustrates the average cost of common illnesses, accompanied by an explanation of these conditions and how some conditions can occur in succession. But this isn’t easily accessible on their main product page - it requires customers to search for it. If customers are uncertain about which lifetime policy is right for them, it's essential to provide the right information to help them make an informed decision. Indeed the FCA’s new consumer duty rules require them to do this.
Many Pets notably provides an extensive list of the cheapest and most expensive dog breeds to insure.
With pet insurance in the spotlight - both from the FCA and the CMA investigation into veterinary practices, providers need to up their game in terms of the information they are providing to their customers. These are complex products and in a Consumer Duty world, firms have an obligation to ensure they’re doing everything they reasonably can to help their customers understand what they are buying - as well as what they are not buying. Some insurers have begun stepping up to this challenge. But most have more to do.
1 According to the ABI, over £1 billion was paid out by pet insurers in 2022, averaging around £2.8 million claims a day - a large leap from £872 million of claims paid in 2021. With insurers dealing with around 3,600 new claims a day.
2 Other cover types that are lower in cost, either have time constraints (Time limited), have a cap on how much you can claim on a certain condition (Maximum benefit) or do not cover illnesses (Accident-only), can arguably leave consumers worse off in the longer term and as their pet ages.
3 According to the FCA, the proportion of customers that bought different types of policies in 2022 were 4,019,515 for lifetime, 985,130 for time limited and 587,270 for maximum benefit. https://www.fca.org.uk/publications/data/general-insurance-value-measures-data-2022