The question of pet insurance has made the mainstream media recently, as vet fees continue to rise and owners find cover becomes unaffordable when a cat or dog reaches a certain age. However, Defaqto have studied recent data and seen a fall in premiums, here’s the word;
The latest Pet Insurance Pricing Index from Defaqto’s Market Pricing Business shows that premiums continued their downward trajectory in Q1 2026, extending the declines seen at the end of last year.
The data shows that Lifetime premiums fell by -4.7% during Q1 2026, following the -2.3% decrease seen in Q4 2025. The development confirms that the brief stabilisation seen in mid-2025 has given way to a more sustained period of price competition.
Sustained declines reshape annual and longer-term pricing trends
On a 12-month view, premiums are now firmly in decline. Average prices have fallen by -8.2% over the past year, with Q1 marking a clear shift from the alternating quarterly movements seen throughout 2025 to a more consistent downward trend.
While this signals short-term relief for consumers, the longer-term picture remains more complex. Previous data shows that, despite recent reductions, premiums – particularly at higher cover levels – remain materially above 2023 levels, reflecting the earlier phase of market repricing.
Price reductions seen across all segments
The Q1 data points to a broad-based softening in pricing across the pet insurance market, with declines evident across virtually all major segments. Reductions were seen at every level of vet fee cover, although the steepest falls continue to be concentrated at higher cover limits, extending a trend that has developed over the past year.
This downward pressure is also reflected across product types, with Lifetime, Maximum Benefit and Time-Limited policies all seeing price decreases, led by more pronounced cuts within the Lifetime segment during the quarter.
Across the market as a whole, the consistency of these movements is notable. Prices have fallen regardless of pet type or geography, with both cats and dogs experiencing similar levels of reduction and premiums easing across all UK regions. While regional differences have begun to widen slightly, this appears to be driven more by underlying claims cost dynamics than any divergence in competitive intensity.
Competition intensifies as pricing pressures diverge from costs
Competitive intensity accelerated further in Q1, with the number of Lifetime quotes available on price comparison websites rising by 42% to more than 200 on average, highlighting the scale of competition facing insurers.
At the same time, insurers are increasingly relying on product design to offset rising claims costs. The proportion of policies incorporating co-payments has climbed to 41%, up from under one-third at the start of 2025, signalling a clear shift towards higher customer contributions.
This growing competition sits in stark contrast to underlying cost dynamics. Veterinary inflation has risen by around 37% since 2023, far outpacing premium movements, while regulatory changes such as the CMA’s reforms are expected to add further complexity rather than materially reduce costs, leaving insurers under sustained pressure to balance pricing competitiveness with profitability.
Frances Luery of Defaqto, said:
“What we are seeing now is not a short-term correction, but a sustained period of downward pressure driven by increased competition and greater visibility of pricing. However, this trend sits against a very different underlying reality. Claims costs – particularly driven by veterinary inflation – remain elevated, and insurers are increasingly relying on product design, such as co-payments and excess structures, to manage that gap.
“Looking ahead to the rest of 2026, we expect this tension to intensify. While competitive pressures are likely to keep pricing subdued in the near term, the current trajectory is unlikely to be sustainable indefinitely. As the year progresses, we anticipate a gradual shift towards stabilisation, with selective upward pricing adjustments emerging as insurers seek to restore margin and rebalance portfolios.”
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