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The Pet Insurance Industry Is Poised for Growth, but Obstacles Remain

Once the provenance of elite racehorses and show dogs, pet insurance has risen from humble beginnings into a multibillion-dollar industry.

In order to better understand the future of pet insurance, it may help to take a look at where it came from. Pet insurance dates to 1890, when Swedish insurance agent Claes Virgin wrote a farm insurance policy for livestock and horses. The first policy for a dog was written in 1924 in Sweden, followed 20 years later by policies in Britain. The first policy was issued in the United States in 1982 for Lassie, the TV and movie collie. In 1997, all dogs and cats became insurable in the United States.

A decade later in 2007, National Pet Insurance Month was created to raise awareness of the importance of pet insurance. One last steppingstone in our walk down memory lane is the 2007 founding of the North American Pet Health Insurance Association, (NAPHIA), an organization that provides education, marketing, and other support and promotes professional standards and ethical conduct in the industry.

Since those early days, the popularity of pet insurance has grown exponentially. According to NAPHIA, upward of 6.25 million pets were insured across North America in 2023. They report that the 2023 total premium insurance policy volume in the US surpassed $4 billion, a more than 150% jump from 2018.

According to independent marketplace and AAHA Preferred Business Provider Pawlicy Advisor, most plans cover events such as accidental injuries, unexpected illnesses, chronic disease, dental illnesses, and surgery, while some cover alternative treatments such as physical therapy and acupuncture, breeding and pregnancy expenses, and end-of-life care, euthanasia, and cremation or burial. Plans do not typically cover pre-existing conditions, pet supplies, elective surgeries, vaccinations, boarding, or personal liability claims.

Where to Now?

Market research and consulting firm Grand View Research reports that the global US pet insurance market is expected to grow at a compound annual growth rate of 17.5% from 2024 to 2030, to reach an estimated $10 billion market size by 2030.

They credit factors such as the rise in pet ownership, introduction of pet insurance in markets that are yet to be fully explored, escalating costs of veterinary care, and the continuing trend of treating pets like family members as leading causes for that continued growth.

One factor feeding that growth is the number of pet owners in the US, which has increased, especially during the COVID era. The American Veterinary Medical Association (AVMA) reports that the percentage of households that own at least one dog increased from 38% to 45% between 2016 and 2020, then leveled off by 2022. In their 2022 AVMA Pet Ownership and Demographics Sourcebook, they state that in 2020, at the height of the COVID pandemic, people who worked remotely were eight times as likely to acquire a pet.

While the statistics point to a rosy future for the industry, there are factors to consider alongside the numbers.

Forbes Advisor conducted research that included asking dog owners the primary reasons that they are unlikely to purchase pet insurance. They say that the perceived cost garnered the highest response, with 42% stating they believed pet insurance to be too expensive. Twenty-four percent of owners didn’t think they would actually need it, and 21% didn’t believe insurance was worth the expense. The remaining respondents either didn’t understand the product or didn’t understand how to procure coverage.

The Forbes research reports that 89% of dog owners estimate that the cost of pet insurance is higher than it actually is. They say that 11% of dog owners correctly estimated an average cost below $50 a month, and that 76% of dog owners overestimate the cost of pet insurance by at least three times the average price.

Other Considerations

According to the NAPHIA 2024 State of the Industry Report, one of the barriers to growth in the pet insurance industry is the veterinarian’s level of comfort with recommending a product.

The report found that 39% of veterinarians stated that pet insurance is not worth the money, 35% reported that it was a hassle for them and their staff, and 19% felt it was a hassle for the pet owners. Forty-two percent of veterinarians stated that pet insurance has too many exclusions, 40% felt it was not their job to sell insurance, and 15% said they had a bad experience with insurance in the past.

Research is mixed regarding the impact of pet insurance on veterinarian visits. One study states that owners who have pet insurance spend more money at the veterinarian, but not specifically that they visit more frequently. A team of researchers published their results, “The Impact of Pet Health Insurance on Dog Owners’ Spending for Veterinary Services” in the journal Animals.

“While owners with pet insurance spend more at the veterinarian, they may be likely to utilize services in one visit, as opposed to spreading it throughout the year on multiple visits,” the study said. “Among the factors that do impact the number of visits, we found that a wellness plan, expenditures on non-health-related areas, where the pet sleeps at night, past illnesses, and perceived risk of future illness had a positive impact. Factors such as a dog’s age and lower education levels had a negative impact on the number of visits.”

In other research, Nationwide Insurance collaborated with veterinary industry analytic firm VetSuccess on a study that assessed almost 10 million pets, served by close to 2,000 veterinary practices. They reported that pet owners who purchase pet health insurance are more likely to bring their pets in at the first sign of trouble and to follow their veterinarian’s treatment advice.

Among their findings, the study found that those with pet health insurance:

• Spend more on veterinary care. Revenue per patient increases 92% for insured dogs versus uninsured dogs. For cats, revenue increases 76% versus those with no pet health insurance.
• Visit their veterinarians more often. For dogs, that’s 4.2 annual visits per insured patients versus 2.4 visits per patient for uninsured pets. For cats, yearly veterinary visits were 2.5 visits versus 1.8 for cats with no insurance.
• Approve surgical procedures more often.  Insured dogs are 51% more likely to receive surgical treatment, with a 17% increased spend. Insured cats are 20% more likely to receive surgical treatment, and 38% more is spent on those procedures.
• Stick with their veterinary practice. After three years, 81% of insured dog owners are at the same clinic versus 46% of uninsured dog owners. For cats, 69% of insured cats are at the same clinic in three years versus 33% of uninsured cats.

Despite these findings, the rising costs of care are influencing how policy renewals are handled. Earlier this summer, Nationwide announced that it will drop as many as 100,000 pet insurance policies over the next year, citing the rising cost of going to the veterinarian as a major reason for their decision.

A recent Consumer Price Index from the Bureau of Labor Statistics indicates that the price of veterinarian services increased 7.6% over the past year. Along with this, however, there has continued to be growth in the pet insurance business; the pet insurance sector in the US and Canada saw an almost 22% increase in revenue in 2023, according to the NAPHIA 2024 State of the Industry report.

In the Trenches

Along with all the data, veterinary practices are in the trenches every day, providing care for animals and managing the role of pet insurance in their business dealings.

Michelle Hall, LVT, is practice manager at Hayden Pet Medical Center in Hayden, Idaho. She relates that while their practice doesn’t bill the insurance company, they work with clients, such as keeping an alert on a file if a client is on a specific insurance, in order to track special needs that insurance may require.

“Our policy is to have the client pay for services rendered and let the client receive the reimbursement check,” she says. “This keeps our protocol the same for all insurances. Most veterinary clinics do not have the staff, money, or time to have a dedicated insurance person.” She anticipates that as the veterinary industry imitates the human healthcare industry, this practice will change.

As for the future of pet insurance, Hall says, “As the economy skyrockets, pet owners will have to consider other options for paying for pet healthcare.” They currently have a large client base who uses a health and wellness credit card, “Therefore, we have a CareCredit portal in our practice management system. I see the same thing happening with insurance.”

Bill Cicero is Hospital Director for Wheat Ridge Animal Hospital in suburban Denver and is responsible for the overall operation, financial health, and growth of the hospital. He says that his practice is a proponent of pet insurance, for a variety of reasons.

“It helps alleviate the financial component of the treatment equation, allowing an owner to focus solely on what is best for them and their pet,” he says. “At a time where the scope of treatment options has grown so large, owners have a lot more information to digest when their pet requires care. Pet insurance largely removes the financial constraint from the situation so they can make the best decision possible. This, I feel, results in more positive outcomes.”

Cicero relates that there is little consistency across the range of insurance providers. “This can make it challenging to accept them all as it carries a high administrative burden,” he says.

He says that Wheat Ridge Animal Hospital tries to accept as many insurance carriers as possible and that they will continue to do so. Along with this, the practice offers pet insurance to its employees, and they are happy with what it provides for staff and their pets.

“I think more could be done to educate people about insurance options and how beneficial they can be,” Cicero says, noting that he has done so with his own family members.

On the surface, the future of the pet insurance industry appears bright. Owners can plan ahead for the financial impact of some pet care and take comfort in the safety net that insurance can provide. Veterinarians whose clients use pet insurance may see an increase in visits, compliance, and, potentially, revenue. While there are mitigating factors to the glowing data forecasts including some owner and veterinarian resistance and a need for further education, the future trend for the pet insurance industry appears on the whole to be positive.