UK pet insurance premiums continued to fall in the first quarter of 2026, even as underlying claims costs remain elevated, according to the latest Pet Insurance Pricing Index from Defaqto's Market Pricing Business.
The index shoed that Lifetime premiums fell by 4.7% during Q1 2026, deepening the 2.3% decrease recorded in Q4 2025. The figures indicate that the brief stabilisation seen in mid-2025 has now given way to a more prolonged phase of price competition, particularly in the online and aggregator space.
On a 12-month view, premiums are now firmly in retreat. Average prices have dropped by 8.2% over the past year, with Q1 marking a clear break from the alternating quarterly movements seen throughout 2025 and signalling a more consistent downward pattern.
While this shift offers short-term relief for policyholders, Defaqto's data underlined a more complex longer-term picture for insurers and intermediaries. Despite recent reductions, premiums remain materially above 2023 levels, reflecting the earlier phase of market repricing after sharp increases in claims costs and operational expenses.
This suggests the market is moving from an overt repricing phase into a classic margin‑compression phase of the underwriting cycle, as competition starts to erode some of the rate gains achieved over the previous two years.
The Q1 data also pointed to a broad‑based softening in pet insurance pricing, with declines evident across virtually all major segments.
Reductions were recorded at every level of veterinary fee cover, although the steepest falls continue to be concentrated at higher cover limits, extending a trend that has developed over the past year as insurers adjust pricing on more comprehensive products.
Downward pressure is also visible 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, such as variations in local vet fees and treatment patterns, than by any clear divergence in competitive intensity.
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, underlining the scale of competition facing insurers.
This proliferation of products on aggregators is pushing carriers to refine pricing granularity and rating sophistication in order to remain visible and competitive on key comparison journeys. At the same time, it raises the risk of increased churn as consumers react more quickly to price movements.
Insurers are also relying more heavily on product design to manage 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. Co‑pays are being used alongside higher excesses, inner limits on certain conditions and more nuanced underwriting criteria to maintain affordability while protecting loss ratios.
This intensifying competition sits in stark contrast to underlying cost trends. Defaqto’s figures indicate that veterinary inflation has risen by around 37% since 2023, far outpacing premium movements over the same period. That pressure is being driven by higher input costs in the veterinary sector, increased clinical sophistication and a growing willingness among owners to pursue advanced diagnostics and treatments.
Regulatory expectations are adding another layer of complexity. The UK’s competition and conduct authorities have been focusing on transparency, fair value and the way general insurance products are designed, distributed and priced. For pet insurers, this translates into higher expectations on pricing transparency, clearer communication of exclusions and limitations, and more rigorous oversight of whether products deliver fair value over time.
Taken together, these developments are unlikely to deliver immediate cost relief for pet insurers. Instead, they raise the bar on both compliance and communication at a time when pricing pressure is already intense.
In response, many insurers are re‑evaluating both the front‑end design and the back‑end management of their pet portfolios. Trends already visible in the market include more granular segmentation by breed, age and location; the wider use of co‑pays and higher excesses to share inflation risk with policyholders; and tighter underwriting and coverage terms on higher‑cost treatments.
As prices soften and aggregators drive switching, service quality, claims handling and digital experience are also becoming more important differentiators for insurers and managing general agents seeking to protect renewal books.
Commenting on the findings, Frances Luery of Defaqto said that what is being seen in the sector right now is not a short-term correction but a sustained period of downward pressure driven by increased competition and greater visibility of pricing.
“Looking ahead to the rest of 2026, we expect this tension to intensify," Luery said. "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.”
