The pet insurance market offers providers a potential £2.5bn in untapped premiums, according to Defaqto.

The Defaqto report made the estimate after recent figures revealed that 48% of dogs and 69% of cats uninsured in the UK.

Data extracted from Defaqto Matrix shows that the average annual cat insurance premium is currently £155.20 while for dog insurance it is £339.11.

As a result, Defaqto estimated that the potential premiums available to providers for uninsured cats and dogs amounted to over £1.2bn and £1.3bn respectively.

Defaqto's report on the pet insurance market also indicated that the number of pet insurance policies on the market and number of providers operating in the sector had increased significantly since 2008.

The study found that the number of cat insurance policies on the market had grown by 27% over the last three years, from 204 in 2008 to 278 this year.

It also found that the volume of dog insurance policies had increased by 29%, from 214 to 300, over the same period. In relation to this growth, the number of providers operating in this sector had increased by 14% since 2008 - from 74 three years ago to 86 currently.

Mike Powell, Defaqto's insight analyst for general insurance, said: "Pet insurance still appears to be an attractive market for providers to enter, and offers real opportunities for providers wishing to grow their personal lines offering in terms of untapped premiums.

"In addition, it is a product area that arguably many see as completing the suite of personal lines offerings, which is evidenced by the growth we have seen in the number of policies available and providers operating in the sector."

He continued: "On the flip side, the choice available to consumers in terms of the volume of products and the types of cover available has complicated a product that in reality should be straightforward to market and sell."

Powell concluded: "In terms of taking advantage of the potential within the pet insurance sector, simplicity is the way forward for providers. New entrants should seek to support product launches with consumer education and, given the potential for consumer detriment from providers exiting the market, ensure that they are in the sector for the long haul."

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