Pet Insurance Expansion Brings Opportunities and Risks

The U.S. pet insurance market is seeing strong growth, with third-quarter 2024 data suggesting full-year premiums could exceed $4 billion. This marks the first year that pet insurance has been reported separately from the inland marine insurance segment, highlighting its emergence as a significant niche. The segment’s loss ratio has been higher than the broader inland marine market, likely due to increasing veterinary expenses. Despite this, inland marine insurance remains profitable overall, continuing to outperform the broader property and casualty industry.

The report from AM Best notes that pet insurance now accounts for about 10% of the inland marine sector. However, the market remains highly concentrated, with the top 10 insurers controlling 90% of premiums. Some of the largest pet insurers write no other inland marine coverage, and two major companies generate nearly all their inland marine premium from pet policies. The impact of rising veterinary costs is also evident, as Nationwide, the largest U.S. pet insurer, dropped approximately 100,000 policies in 2024 due to inflation.

While pet insurance presents a growing opportunity, insurers must navigate challenges such as escalating claims costs and market consolidation. With consumer demand increasing, the industry will need to balance profitability with affordability to sustain long-term growth.