Growing pet ownership in China drives demand for pet insurance

Underwriters slow to recognise demand as ownership growth soars among Chinese families

PUBLISHED : Monday, 03 February, 2014, 4:11am
UPDATED : Monday, 03 February, 2014, 4:11am

The growing number of dogs and cats kept as pets in Hong Kong and on the mainland will lead to an increase in demand for pet insurance, according to a study by reinsurer Munich Re.

While pet owners showed interest in insurance cover they complained that too few insurers offered cover for their four-legged friends.

Hong Kong government statistics show that about 10 per cent of households in the city have pets, with a total of 247,500 dogs and 167,600 cats. A Munich Re spokesman said the number of dogs in Hong Kong rose by 25 per cent between 2006 and 2011, while the number of cats increased by 65 per cent.

Meanwhile, the pet population on the mainland has increased to 30 million, making it the world’s third-largest pet market after overtaking Japan, with 22 million, in 2012, the Munich Re study showed.

The reinsurer sells pet insurance in Europe but not in Asia.

Stephan Haverkamp, a senior underwriter at Munich Re, said the mainland’s pet population was likely to rise given that only 10 per cent of households had a pet, compared with 50 per cent in the United States.

“We see China’s pet insurance market in an early stage of development,” he said. “That means market penetration is still low.”

Haverkamp said he expected pet owners on the mainland would soon catch up with the global trend of spending more money on their dogs and cats and subsequently become more aware of pet insurance products.

Four years ago, when pet owner Wong Man-chiu was interviewed by the South China Morning Post, he did not have pet insurance because he believed the policies had too many exclusions. But soon after he bought pet insurance and has just received payment on a claim for HK$6,000 in surgical costs for a recent eye operation for his nine-year-old Samoyed dog, Oscar.

“I felt the insurance policy was a must for my dog as he gets older,” he said. “Oscar is part of my family and I want him to get insurance cover just like myself, my wife and my two sons. I purchased a policy for him when he was six years old.

“You need to buy the cover when your pet is young as the insurer will not sell any policy when your dog or cat gets to be about eight or nine years old as the insurer would only renew an existing policy [at that age].”

Wong purchased a policy from insurer Blue Cross that cost HK$2,810 a year initially but increased to HK$3,510 when Oscar turned eight. It covers HK$220 per clinic visit for up to 20 visits a year and up to HK$16,000 in surgical fees.

It also covers HK$600,000 of third party liability and a HK$250 advertising fee in case the pet is stolen or lost.

“I would encourage other pet owners to get insurance cover,” Wong said. “When my dog was young, he did not need to see the vet very often. But as he gets older, he has to get medical treatment more often. The medical costs for dogs and cats in Hong Kong is very high, and is not much different from the medical costs for humans.”

Hong Ng, a director of accounting firm BDO, has three cats, with the oldest one aged 15. Another one died recently at the age of 21.

“Old cats often have kidney problems and they need to take a lot of medication,” he said. “Medical costs are expensive for your pets when they are old. If there is insurance cover, it will help.”

Ng had wanted to buy pet insurance but his insurance agents did not offer cover. 

Besides Blue Cross, Manulife also distributes pet insurance products for Royal & Sun Alliance, which is the underwriter.

“I think the insurance companies should make it easier for pet owners to get cover for their pets,” Ng said. “If it is easy to get cover, I would be willing to pay for my cats.”

Haverkamp said not many insurance company offered pet insurance because it was still a niche product with limited premium volume and high administrative costs.

“In the early stages of pet insurance, a lack of experience and insufficient statistical data meant that there were usually errors in product design and marketing,” Haverkamp said. “Over time, claims expenses escalated dramatically due to pet health cost inflation and cases of fraud.”

He expected that pet insurance would increase in the next few years with the increasing trend of keeping pets in Asia.

“Nowadays, pet owners are spending more and more on their four-legged friends, in terms of gourmet food, jewellery, fashion, wellness hotels and hairdressing,” he said.

In 2012, Chinese pet owners spent about US$1.3 billion on pet care, and sales have been growing by roughly 10 per cent each year since 2008, he added.