Britain is known as a nation of animal lovers. This is just as well, since the bills for looking after our domestic pets can be breathtakingly expensive.
One unlucky owner of an uninsured three year old greyhound dog in London was served a single bill for a hip operation that topped £8,000. The sum wrecked her finances for a year and she has since been unable to get her dog insured as all hip issues are excluded.
Tales of the damage inadvertently caused by pets include uninsured dogs bolting from urban parks into traffic and causing multi-car pile-ups and an explosion of litigation, runaway guinea pigs shorting a neighbour’s air conditioning system, and rabbits chewing through local telephone lines.
The examples may be extreme but given the high costs of veterinary care, a growing number of pet owners are insuring their animals, paying a steady monthly premium for peace of mind. Claims have nearly doubled in the past six years, from £452m in 2012 to £815m in 2019, with the average claim totalling £793, according to Statista Research.
The pet insurance market can be a minefield of jargon-laden complexity, however. Multiple options are available at different levels of cover, compounded by higher premiums applied to problematic breeds or those with pre-existing conditions. People have a range of choices about how they structure their insurance, and the right one — for their pet and their finances — is seldom obvious.
The coronavirus pandemic has also been a factor of change: charities reported higher rates of pet adoption ahead of lockdown, and with families spending so much time at home, it’s been the ideal moment to get a new pet. But those facing financial difficulties as a result of the pandemic might also be tempted to save money by reducing or cancelling their cover. For some, it may turn out to be a wise choice; for others, it may make the shock of a big bill for medical care all the more painful.
A growth market
Farmers have been able to insure livestock since medieval times, but pets only began to be insured in 1890, when Claes Virgin, founder of the Swedish insurance group Länsförsäkringar Alliance, wrote a policy for a horse. In 1924, the world’s first dog was insured, also in Sweden. Perhaps the best known animal to be covered before the modern era of pet insurance was Lassie, the canine star of Hollywood, in 1982.
Today, pet insurance has become a commonplace expense for the owners of the UK’s estimated 21m dogs, cats and rabbits. Some 45 per cent of British households own a pet, and 3.6m people have pet insurance, with nine out of 10 policies covering a cat or dog, according to Statista.
The growth of pet insurance has come alongside a broader expansion in pet-related products and services, particularly at the high end. Getting a pet no longer appears to be just about companionship, calm or pleasing the children. A mini-industry of companies has sprung up to cater to the increasingly elaborate needs of pet owners, offering everything from bespoke nutrition for pets, spa-quality grooming, day care and boarding through websites such as Rover, luxury dog collars and, increasingly, pets with their own presence on social media.
At the onset of the pandemic, when home working and home schooling children became the norm, there was a surge in households adopting or acquiring pets. In the UK, before Battersea Dogs and Cats Home had to shut its doors, the charity said its dog adoption rate had doubled. And in the US, big cities reported a 90 per cent increase in pet adoption as the pandemic began, according to Global Market Insights, a US market research firm. This trend last occurred during the 2008 financial crisis, suggesting a link between global turmoil and the comforts of pet ownership.
The rise sparked a rapid burst of growth in the pet accessory market, as owners stockpiled pet food and took up DIY grooming and pet care after grooming shops closed.
It also fed through to the pet insurance market. The largest pet insurance firms reported policy cancellations by those looking to cut household spending, mostly in the first week of lockdown, but this was offset by a rise in new pet owners taking out policies. Some of these pet owners wanted a first time policy for a pet they had never insured before, citing the fear of a sudden large vet bill against a background of job instability.
Spoilt for choice
For a new pet owner, there are five choices when it comes to managing vet bills and liability claims.
A “lifetime cover” pet insurance policy covers your animal for new conditions across their lifetime, as well as accidents and third party liability, subject to an annual limit and excess. An annual “time limited” policy will cover your pet for conditions and accidents up to a specified sum and subject to excess for a term of 12 months. A “maximum benefit” (or “per condition”) policy will assign a fixed one-time sum per injury or illness until the sum has been spent. An “accident only” policy leaves mainstream vet bills to you but covers your pet in the event of accidental injury. Or, owners can take the final option of self-insuring and pay vet and accident costs as they arise.
Owners of more than one pet can often get a discount on their pet’s individual premiums by insuring them with the same provider. Agreeing a higher excess can also reduce premiums, though should be weighed against the costs when a claim is necessary.
Market research conducted by insurance firm Petplan, which has 1.3m UK customers, found that people were more likely to claim on their pet insurance than on their car or home insurance.
“Unfortunately, pets are just as susceptible to illness and injury as we are, and contrary to popular belief, 90 per cent of the claims we pay out are for illness rather than accidents. Even if pets appear healthy, they can develop long-term conditions that, without the right insurance policy, can leave pet owners footing very large veterinary bills,” the company says.
Despite this, many pet owners do eschew pet insurance and prefer to stockpile cash in anticipation of illness or injury. Ashley Feinstein Gerstley, a US personal finance expert and author of the “Fiscal Femme” blog, follows this approach for her family’s dog.
She put aside $25 every fortnight into a pet insurance sinking fund. Six years on, it contains nearly $4,000. “It’s an interesting exercise to calculate how much you’d put aside in premiums each month if you were to get pet insurance and how much that would total over five years, 10 years and even 15 years. We don’t use the fund for regular vet bills, this is only set aside for our dog’s emergency health expenses.”
“Of course, there are situations where young dogs get very sick and need costly surgeries or medical treatment and if this happened our pet ‘insurance’ fund wouldn’t have had enough money set aside and we would have had to pay for it in other ways, but most of the expensive pet medical costs happen later in their lives,” she says.
As a pet insurance company, Petplan highlights the dangers of such an approach. “Practically, the risks are that your pet becomes ill or injured before you have saved enough money or that your pet develops an ongoing condition that requires medication for the rest of its life or even multiple conditions at the same time. Vets can do more for pets than ever before, but treatment costs can quickly mount up and many people underestimate the sums of money that may be required to treat their pet, which can far exceed the monthly premium they intend to ‘save’ each month.”
One way of reducing your pet insurance bill is to avoid dog or cat breeds that attract higher premiums, such as Great Danes, French bulldogs and chihuahuas, or Maine Coon and Bengal cats. Research last year by Which?, the consumer group, found choice of breed made a difference of as much as £450 to an annual premium, with the average lifetime cover policy for a single dog amounting to £496, against the cat average of £278.
Age is another key factor in the expense of premiums. Pets aged over 12 were almost twice as expensive to insure as those aged between 4 and 6.
Ensuring your pet is properly vaccinated against common pet diseases, as well as microchipped, is essential to keeping premiums to a minimum. However, UK pet owners have become more hesitant about vaccinating their pets in recent years, reflecting a rise in misinformation about vaccination. Only two-thirds (66 per cent) of pets were given primary vaccinations in 2019, down from 84 per cent in 2016, according to pet charity PDSA’s annual Animal Wellbeing report.
“The health of both humans and animals can suffer when they are not vaccinated, and negative messages about the vaccination of one may lead to hesitancy in vaccinating the other,” the report said. Insurers are firmly on the side of vaccination, raising premiums when pets have not had their jabs.
Can pet insurance go wrong?
One FT Money reader, who wished to remain anonymous, said he had made complaints about escalating lifetime cover pet insurance premiums following his dog’s diagnosis with a heart condition at the age of 7.
As the policy renewed, the annual premium jumped from £445 to £972. A complaint to the insurer was rejected, so the owner filed a complaint with the Financial Ombudsman Service (FOS). During the time it was investigating his case, the premium was renewed again, leaping to £1,945.
The FOS eventually directed the owner to a report on pet insurance by the FCA published in 2017 and concluded that the insurer could have made it clearer that premiums can rise sharply in the light of claims and a pet’s age.
The reader was awarded £750 compensation by the insurer and subsequently took his business to a new insurer but remains troubled over the concept of lifetime cover. “What continues to concern me about lifetime pet cover is that it is rendered largely meaningless if the insurer doubles and redoubles premiums once a pet has a condition or long-term illness,” the owner says.
Although it is typical for premiums to rise after a claim, confusion over the small print of pet insurance policies remains widespread. Yet pet insurance complaints are surprisingly few in number. In 2018-19, the FOS logged 388,400 complaints across all financial products, but only 1,593 concerning pet and livestock insurance. Withdraw livestock insurance complaints and the number of unhappy insured pet owners in the UK falls to three digits.
Open to misinterpretation
Though complaint rates in pet insurance are relatively low, the FCA launched a marketplace review in 2017, leading to recommendations that firms provide customers with clearer information about the products they purchase in order to minimise policies being acquired that ill-suit a consumer’s needs. When it assessed the impact of its rule change last year, the FCA calculated pet insurance customers had saved an average of £6m a year through the reforms.
All pet owners FT Money consulted for this article admitted they had purchased pet insurance without really understanding it.
“I genuinely don’t know if my policy will cover me enough,” says Anji Gopal, a banker turned osteopath. “It is possibly the hardest thing I have ever had to try and understand, and I have two degrees, one in econometrics. The whole thing is very obtuse.”
One newcomer to the pet insurance market is intent on demystifying the process. Waggel, founded by Andrew Leal and Ross Fretten, is a London based insurtech company building a digital-only niche in a marketplace where just 10 insurers underwrite the majority of all British pet insurance policies and 79 per cent of individuals, according to Google data, use comparison sites to choose pet insurance.
To attract new customers, Waggel pitches the virtues of product transparency and clarity. “Pet insurance is complicated at the best of times. So we did away with the myriad of confusing policies and only offer a single policy, which is a lifetime policy,” Mr Leal says.
He argues that the incumbent companies sow mistrust among their customers by placing restrictions on coverage in order to reduce the price. These include unknown excesses and limitations on coverage. “This ultimately leads to resentment down the line when customers find out about these restrictions,” Mr Leal says.
A trend for adopting rescue pets may encourage more people to sign up to pet insurance. Eleanor Brampton, head of marketing and fundraising at Wild At Heart Foundation, a rescue charity in London, says: “We’re starting to see a more general societal shift towards rescue dogs. People are learning to appreciate that a rescue dog, particularly a ‘mutt’ from overseas, is an utter one-off.”
Rising veterinary expenditure is another factor driving pet owners to sign up for coverage. “As vet care gets better and utilises technology more and more, vet bills will continue to increase. With bills getting higher, people will need to take out cover to protect themselves from vet bills that can go into the thousands,” Mr Leal of Waggel says.
The decision to insure a pet is as personal as deciding which pet to own and is subject to each person’s animal and financial rationale. Given the financial strain of the pandemic on wallets worldwide, however, few will want to leave themselves exposed to the unwelcome surprise of a huge vet bill.
Nick Johnstone is a freelance writer; he insures his four year old rescue dog through LV=, pays £46 per month and has made no claims