Pet Insurance - Double Digit Growth Points To A Potential Opportunity For Independent Agents

Pet-State-of-the-Industry | Agency Checklists — The annual State of the Industry Report is compiled by the actuary consultants Willis Towers Watson

Fun fact: Pet Insurance has been around since 1900

While pet insurance has been around for over 120 years, it actually did not arrive on U.S. shores until 1982 when the first pet insurance policy was sold to cover TV”s Lassie. Since then, the industry has grown to now encompass 20 different companies offering various insurance coverages for your pet. As a result of this growing industry, the North American Pet Health Insurance Association conducts an annual survey which it then compiles into to its State of the Industry Report.

Pet Insurance has enjoyed an annual growth rate of 23.4% over the past five years

NAPHIA-Facts | Agency Checklists — Source NAPHIA

Despite the global pandemic, the NAPHIA says that the pet insurance market saw continued growth for the sixth-consecutive year with total premiums sold exceeding $2.174 billion. This amount represents an increase of more than 26% year-over-year as compared to the $1.717 billion in in-force premium logged in 2019.

“Last year, we saw the stay-at-home and work-from-home measures introduced during the pandemic create even closer bonds between pet owners and their pets,” said Kristen Lynch, Executive Director of NAPHIA. “We believe these strong human-animal relationships are driving pet owners’ desire to address financial uncertainty by mitigating unexpected veterinary costs, contributing to our record 2020 results, in a year that also saw new pet purchases and adoptions reach record levels.”

In addition to a six-year double digit growth trend in in-force premiums, the U.S. pet insurance market also saw a marked increase in the total number of pets insured. Results show that approximately 3.45 million pets nationwide were insured by their owners as of December 2020, an increase of 22.5% as compared to the over 2.81 million pets insured in 2019.

In terms of premiums, total U.S. premium volume (as reported by NAPHIA members) totalled $1.99 billion by the year-end of 2020, a 27.5% increase over 2019. Over the past five years, pet insurance premiums have averaged an annual growth rate of 23.4%. The following are some other metrics highlighted in this year’s State of Industry Report:

$1.99 billion USD – total premium volume
3,101,956 – total number of pets insured
Majority of insured pets reside in California (19.2%), New York (8.7%) and Florida (5.8%)
82.9% of insured pets were dogs versus 17.1% cats
The average accident and illness premium for dogs was $599.03/year or $49.92/month (figures in USD)
The average accident and illness premium for cats was $341.35/year or $28.44/month (figures in USD)

“2020 was another year of double-digit growth for our industry, with the U.S. experiencing an average annual growth rate of 24.2% over the past five years (2016-20), while Canada’s annual growth rate was 15.2% over the same period,” said Rick Faucher, President of NAPHIA’s Board of Directors and CEO of The Connected Pet Company. “With only a fraction of the potential market realized, we are confident the North American pet health insurance market can continue on this steady pace of growth for the foreseeable future.”

In particular, Mr. Faucher also noted that introduction of new products and increased in claims also were further evidence of the maturation of the U.S. pet insurance marketplace.

“While 2020 presented growth-related challenges for our members in areas such as hiring and training new staff to process the increased volume of enrollment and claims, it also provided validation that our industry is strong, resilient and poised for sustained growth,” added Faucher.

What types of pet insurance are there?

There are a few different coverages currently available for pets. The following is a list of each of the types as outlined in the NAPHIA report:

Accident Only: Foreign body ingestion, lacerations, motor vehicle accident, ligament tears, poisoning, etc.
Accident & Illness: Accident benefits plus illnesses such as cancer, infections, digestive problems, etc.
Insurance with Embedded Wellness: Comprehensive plans that may include vaccinations, early screening diagnostics, consultations for proper nutrition, dental care, etc.
Endorsements: Riders such as wellness or cancer endorsements.

american bulldog sleeping of black background. | Agency Checklists

Average pet insurance premiums

An annual premium for an Accident & Illness policy for your dog cost approximately $594.15 in 2020, while a monthly installment plan cost approximately $49.51. For an Accident Only plan, the annual price was $218.13, while the Monthly plan was $18.17.

Premiums for cat insurance are priced a bit lower, with an annual plan for an Accident & Illness policy costing approximately $341.18, and a monthly plan $28.48. The premium for an Accident Only policy is $133.61 annually, while a monthly instalment is $11.13.

What types of pets are insured?

Unsurprisingly dogs make up the majority of insurance pets in the Unites States, with last year seeing a +22.5% increase year-over-year in insured dogs. While cats are the second most popular pet to be insured, in terms of insurance their numbers fall far below dogs. For example, in 2020 82.9% of dogs were insured versus 17.1% of cats. In total, the report says that approximately 3,101,956 pets were insured in 2020. The following table highlights the growth of insured dogs and cats from 2017 until 2020.

	Dogs	Cats	Combined	Total Pets
2020	+ 22.5%	+ 26.7%	23.2%	3,101,956
2019	+ 16%	+ 20.4%	+ 16.7%	2,517,122
2018	+ 17.6%	+ 19.8%	+ 18%	2,156,448
2017	+ 17.3%	+ 18.7%	+ 17.5%	1,828,126

Data source: NAPHIA

Massachusetts is a top-ten state for pet insurance

For those independent agents, or insurers for that matter, interested in learning whether pet insurance is a popular option here in Massachusetts, the NAPHIA has ranked Massachusetts as number six on its list of the top ten states for Pets and and Gross Written Premium. the following is a chart listing the complete list:

U.S. – Top 10	PETS	GWP
1. California	19.2%	21.1%
2. New York	8.7%
3. Florida	5.8%
4. New Jersey	5.5%
5. Texas	4.8%
6. Massachusetts	4.7%
7. Pennsylvania	4.7%
8. Washington	4.0%
9. Colorado	3.4%
10. Illinois	3.2%

Data source: NAPHIA.

The NAIC created the Pet Insurance Working Group in 2020

In 2020, the NAIC announced that it was creating a new working group charged with the goal of creating a model law in order to “create a stronger regulatory framework for pet insurance across the United States.”

To see the current state of the model law, a March 4, 2021 revised version can be accessed on the NAIC website here:

Thoughts on why pet insurance may be a good bet for an independent agent

Pet insurance, like cyber insurance, seems like a natural extension to help build-out coverage for your homeowner, whether they rent or own. It is just another opportunity for an independent agent to help their insureds as a trusted advisor. And, unlike health insurance for humans, pet insurance also falls squarely within the Property & Casualty sphere with many insurers now offering pet insurance plans.

For those interested in seeing what Pet insurance plans are available in Massachusetts, the Division of Insurance says there are 17 insurers currently approved to offer individual pet health insurance plans in Massachusetts: