Pet Insurance in North America, 4th Edition—Blog Entry



David Lummis



As the pet market analyst for Packaged Facts, I started covering this market in 2003.  Wow.  Talk about a market that’s come a long way—and yet still has a long way to go.  Back in 2000, the market was valued at under $50 million, with almost all of those sales coming from a single company, Veterinary Pet Insurance (which founded the market in 1980).  In the fourth edition of our report, released on Monday October 18, 2010, sales were at $354 million, with a dozen companies established in the North American market.

If that sounds like phenomenal 10-year growth it’s because it is, at approximately 600%.  But get this:  This figure still represents less than 1% of the 180 million-plus dogs and cats in North America.  That means (doing a little very rough math) that if the level rises to 10%, we’ll be looking at a market worth $3.5 billion, and with 25% of dogs and cats insured, a market worth nearly $9 billion.  This isn’t out of the question, since about one-quarter and one-half of dogs and cats are insured in the United Kingdom and Sweden, respectively.  There’s a lot going in the North American market right now too, including major insurance companies weighing in as underwriters, such as Aon with Healthy Paws, Aetna with Pets Best, and Berkshire Hathaway subsidiary Central States Indemnity Co. of Omaha with PurinaCare.

Still, marketers have their work cut out for them in dealing with the lingering impact of the recession.  In Packaged Facts’ September 2010 consumer survey, among those who did not have pet insurance, 42% cited as the reason “don’t want additional bill” and 37% said they “don’t want to spend the money for it.”  With economic recovery slow at best, this reticence does not seem likely to change overnight.  Packaged Facts does not expect consumers to throw open their pocketbooks any time soon, but rather to continue to practice moderation.  Thus value will remain a major marketing theme in 2011 and 2012 as pet insurance companies strive to communicate the benefits of their products and keep the pricing options as attractive as possible.  Expect to see more zero- (and other very low) deductible plans, following in the footsteps of Trupanion and, more recently, VPI (via its new Feline Select Plan).

That said, the level of competitive activity is at an all-time high, and with so many irons in the fire I’m not ruling out a “big boom” in the North American pet insurance market.  Such growth will, however, depend on the ability of marketers to move from what appears to be a stage of market cannibalization (and perhaps some retrenchment, even) to one of more uniform growth via an expanded consumer base.  One possible catalyst to higher-level growth would be the entry into the market of another mega-retailer, such as PetSmart (via its Banfield units) or Walmart, the latter of which is reportedly planning a Canadian launch as a Western Financial white label (although neither company could confirm this).

One thing’s for sure, given the currently very low level of pet insurance penetration and very high level of competitive activity—about a half dozen companies have entered the field just since 2004, including PetFirst, Pets Best, Embrace, Fetch/Petplan USA, Trupanion, PurinaCare, and Healthy Paws—the North American pet insurance party is likely just getting started.

~David Lummis, Senior Pet Market Analyst, Packaged Facts