A GlobalData poll reveals that pet insurance policyholders in the UK are more inclined to switch providers than before, citing price as the primary motive behind their decision. Pet insurance premiums are anticipated to increase in the short term, potentially leading to a further increase in switching activity. As a result, pricing strategies will become more important for insurers.
According to GlobalData’s 2023 UK Insurance Consumer Survey, 15.7% of pet insurance holders switched providers at renewal, with 64.3% of respondents citing price as the reason. This switch rate rose from 13% in 2022, highlighting that this is a growing trend for pet insurance holders. As the cost-of-living crisis continues to squeeze household incomes and insurance becomes less affordable, pet policyholders will look to cut costs, resulting in increased switching activity.
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GlobalData reveals that over the last three years, switching activity from dog insurance holders has risen by 0.8 percentage points (pp), whereas switching from cat insurance holders has risen by 4.7pp. Likewise, in 2023, the proportion of customers who shopped around for dog and cat insurance grew by 1.5pp and 1.9pp, respectively, compared to 2022. This increased activity can be attributed to the combined impact of rising premiums and the cost-of-living crisis, as switching is one of the few ways policyholders can seek to reduce costs. Of those who switched, 60% recorded a premium saving of 6%–10%, a material difference. This indicates that pet owners are becoming increasingly inclined to actively seek out better prices and alternative options.
Charities such as the PDSA and Blue Cross have noted the rapidly increasing demand for its (free or subsidised) veterinary services due to the increasing unaffordability of private veterinary care and the rising cost of pet coverage. According to Insurance Times, the average pet insurance price rose by 21% between February 2023 and March 2024. In this climate of rising premiums and squeezed incomes, more pet owners will seek to reduce their costs by switching. However, in September 2023, the UK competition regulator launched a formal investigation into the £2bn veterinary industry, with concerns that pet owners were overpaying for medicines and treatment. Also, the Competition and Markets Authority has provisionally decided to investigate whether a cap on treatment costs and prescription fees is necessary. These developments, coupled with the Office of National Statistics’ prediction that inflation will drop significantly over the next two years, indicate that it is likely that vet costs will fall during the next few years and the upward pressure on premiums will ease. This presents a unique opportunity for insurers to employ new pricing strategies to secure a greater share of the market.
Not only are more pet owners shopping around for insurance, but switching is most popular among customers who use price comparison websites (PCWs). PCWs will become increasingly important in aiding customers in switching and shopping around, hence we can expect increased switching through these channels. Finding value is driving pet insurance consumer behaviours, as rising premiums and vet costs are squeezing pet owners in an already difficult economic landscape. Insurers should respond by adjusting price strategies to ensure policies remain competitive in both retaining existing customers and attracting new business.
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