Any pet owner who has been hit by sticker shock at the vet’s office understands why pet insurance is a booming business.
Pet health insurance purchases have been up over the last several years, dramatically expanding premiums for the inland marine coverage. Through the first three quarters of 2024, pet insurance premium came to just over $3.4 billion, meaning the full-year total could reach $4.5 billion, according to AM Best’s new market segment report, Mixed Early Pet Insurance Results but Inland Marine Remains Strong.
Based on reporting from the North American Pet Health Insurance Association (NAPHIA), pet health insurance premium more than doubled from 2019 to 2023, from $1.6 billion to $3.9 billion, with at least 20% growth per year.
The demand for this protection is unsurprising when looking at veterinary costs.
According to figures from the American Veterinary Medical Association (AMVA), veterinary prices have increased steadily over the last few years – 8.24% between August 2023 and August 2024, 9.81% from July 2022 to July 2023 and 7.3% from July 2021 to July 2022. The percentage of U.S. households that own dogs and cats has increased steadily from 1991 to 2024. Last year, the AMVA reported U.S. households owned 87.9 million dogs and 73.8 million cats – and dogs accounted for about 81% of vet practice revenue.
Profitable Pet Insurance Breaks From Inland Marine
Beginning in 2024, insurance company quarterly and annual financial statements started separating pet insurance from the rest of the inland marine premium and loss data. Although full-year data for pet insurance won’t be available until March 2025, third-quarter 2024 reporting provides a solid idea of what to expect, according to AM Best.
Pet insurance accounts for about 10% of inland marine insurance. The loss ratio for pet insurance through the first nine months of 2024 was higher than for the rest of inland marine insurance. With pet insurance premium and loss totals reported separately in 2024, inland marine direct premiums written will appear to have declined year over year in 2024. However, if pet insurance is included, inland marine DPW through the third quarter of 2024 rose 6.9% compared to 2023.
The top 10 pet insurers account for 90% of the pet insurance market, making it a highly concentrated market. Five of the top 10 write no other inland marine coverage, and two other top-10 companies report pet insurance makes up over 97% of their inland marine premiums. The market is even more concentrated at the group level because National Casualty Company (#2) and Veterinary Pet Insurance (#9) are both part of the Nationwide Property and Casualty Group.
Direct combined ratios are mixed, with close to an equal number on either side of the 100 breakeven point. Of the eight companies that retained at least some of the inland marine insurance business, four have a combined ratio above 100 and four, below.
Challenges may lie ahead as the sector copes with rising vet care costs. Nationwide, the leading pet insurer in the U.S. and a pioneer in the sector, dropped about 100,000 pet policies last spring, citing inflation in the cost of veterinary care.
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A video discussion with Graham and David Blades, associate director, Industry Research & Analytics, AM Best, is available at http://www.ambest.com/v.asp?v=inlandmarine0125.
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