The enthusiasm for the pet insurance market, once seen as a future growth driver by insurers, has rapidly diminished in recent months. The lack of standardized veterinary fees has left insurers grappling with loss ratio risks, while regulatory interventions have led to product uniformity, weakening consumer interest in signing up.
According to a report by Aju Economy on July 2, some major property and casualty insurers are currently experiencing losses in their pet insurance products. This is attributed to the accumulation of contracts that were aggressively priced during the initial market entry phase.
As a result, these insurers are reassessing their strategies for the pet insurance sector. There is a noticeable shift towards a more conservative approach to product management, moving away from the aggressive marketing tactics of the past. Even advertising and marketing costs aimed at attracting new customers are now viewed as burdensome. Lotte Insurance halted sales of its pet insurance products last year.
While the number of new pet insurance contracts has been increasing alongside the steady rise in pet-owning households, the enrollment rate remains stagnant at around 2% compared to the total number of pets, indicating a slow adoption rate relative to market growth.
Industry experts cite the non-standardization of veterinary fee structures as the primary risk hindering growth in the pet insurance market. Significant variations in treatment costs for the same conditions across different veterinary clinics complicate insurers' ability to calculate appropriate premiums and loss ratios.
According to a survey by the Ministry of Agriculture, Food and Rural Affairs, the initial consultation fees for pets (weighing 5 kg) range from a minimum of 1,000 won to a maximum of 61,000 won, reflecting a staggering 61-fold difference. In such a price-volatile environment, insurers find it challenging to assess risks based on a specific average, ultimately leading to higher premiums based on relatively high treatment costs.
Furthermore, regulatory guidelines aimed at managing loss ratios, such as a one-year reinsurance cycle and a minimum deductible of 30%, have also limited the level of coverage, reducing the appeal of products for both consumers and insurers. Insurers are finding it increasingly difficult to secure stable long-term profits, while consumers face higher deductibles, diminishing their perceived value of coverage.
Industry insiders agree that for the pet insurance market to thrive, there needs to be a standardization of veterinary fees, a revision of treatment codes, accumulation of medical data, and digitization of claims processing.
An industry representative stated, "The biggest obstacle to activating pet insurance is the differing fee structures among veterinary clinics. For insurers to predict loss ratios and set appropriate premiums, a control tower for managing and standardizing veterinary fees must be established."
* This article has been translated by AI.
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