The Competition and Markets Authority’s (CMA) reforms to the UK veterinary sector are set to reshape the pet insurance market but are unlikely to result in lower premiums, according to Defaqto.
The intervention follows concerns over rising veterinary costs, which have increased significantly in recent years amid growing market consolidation and limited pricing transparency. The CMA’s measures are designed to improve consumer choice and visibility of costs, and pet owners are also expected to benefit from potential savings.
However, Defaqto has warned that the overall impact on insurance pricing will be more nuanced. Any reduction in claims severity is likely to be modest and offset by wider structural trends within the veterinary market.
Stephen Kennedy, director of Defaqto’s market pricing business, said: “Greater transparency and the introduction of capped prescription fees should help reduce certain day-to-day treatment costs. However, it is important to recognise that these reforms are unlikely to materially reduce the overall cost of veterinary care.
“In many cases, the changes will simply redistribute costs rather than remove them. As pricing becomes more visible pet owners will gain a clearer understanding of the true cost of advanced treatments which have increased. This is likely to drive continued demand for comprehensive insurance cover, which in turn could place upward pressure on premiums.”
Defaqto also noted that while the CMA’s focus on transparency may increase competitive dynamics over time, structural factors within the market, including the high level of corporate ownership and limited choice in some regions, may restrict the extent to which pricing competition develops in the short term.
As a result, insurers are expected to continue pricing against a backdrop of elevated treatment costs.
From an insurer perspective, the increased availability of standardised pricing data represents a significant opportunity. Improved access to consistent and comparable cost information across providers could support more granular underwriting and enable insurers to refine their pricing models based on geographic and provider-specific variations.
Mr Kennedy added: “The long-term impact of the CMA’s reforms is unlikely to be lower premiums, but rather a shift towards more sophisticated, data-driven pricing strategies. Insurers will be operating in a more transparent market, where understanding competitor pricing and cost dynamics will be critical to maintaining a competitive position.
“While the CMA’s intervention marks an important step towards greater transparency and improved outcomes for pet owners, our analysis suggests it will lead to a more complex and data-rich pricing environment for insurers, rather than a meaningful reduction in the cost of cover.”
