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What is meant by “actuarial risk” in pet insurance?

There is a wide choice of pet insurance policies on offer for our pets, including dogs, cats, and rabbits. Even birds and reptiles can now be covered by an exotic insurance policy. There is such a wide range of pet insurance options available that choosing the best policy for your pet can be a difficult decision. 

How pet insurance works

Like other insurance policies, such as car insurance, a pet insurance policy will last for 12 months before it needs to be renewed. Each year a premium is set that is usually paid monthly and, if a claim is made, the excess will need to be paid before any claims are settled.  

Some benefits of having pet insurance,

  • Provides peace of mind that you will be able to afford veterinary treatment if your pet becomes unwell or injured.
  • It can make referral and specialist treatments more widely available to more pet owners.
  • Third-party liability cover is often included in case your pet harms another person or damages their property.
  • If your pet goes missing, many insurance policies will help with the costs of finding your pet. 
  • It may cover boarding costs if you end up in hospital. 
  • If you travel with your pet abroad, you may be covered for veterinary treatment while you are away.

Pet insurance policies differ greatly in the cover they offer, so the benefits and exclusions of each policy needs to be carefully considered before a policy is chosen. 

What is actuarial risk in insurance?

Actuarial risk is a prediction of the possibility of a claimable event occurring and the probability of the event happening. So, for pet insurance this is the risk of a pet becoming ill and needing veterinary treatment, resulting in a claim being made. This calculation is used to help set policy premiums. And, if calculated accurately, policies will be minimal risk thus providing business security and stability for customers. This ensures insurance companies have a stable return, so they have sufficient income to pay out all policyholders’ claims, preventing the company from running out of money and being unable to pay out.

How pet insurance companies use actuarial risk

Pet insurance companies, like most other types of insurance, use actuarial risk to determine the policy costs for each individual customer. This is assessed based on the individual’s circumstances as it determines the amount of risk for the pet being insured. 

Factors that may affect your pet insurance premiums


Some pedigree breeds will commonly develop specific health conditions making these breeds more expensive to insure. Insurance premiums can also be affected by owning a larger dog breed, as some large breed dogs are at risk of developing certain orthopaedic (joint) issues. In addition, medication and surgical treatments are more expensive compared to treating a smaller breed dog.  


As pets get older, they are more likely to develop health conditions and require veterinary treatment. This can result in increased premiums as insurance companies expect an increase in pet claims as pets age. Some insurance companies will also introduce a percentage that owners need to contribute towards veterinary treatment once their pet reaches a certain age.  


This can have an impact on some pet insurance premiums as females seem to suffer from fewer illnesses than males. Males are thought to be at a greater risk of fighting and requiring veterinary treatment for their injuries. 


Where you live can affect the price of your insurance depending on the average cost of veterinary treatment in your area. Also, whether you live in an urban or rural area may alter the risk of incidents happening.

Access to specialists 

We now have access to referral centres and specialists throughout the UK; which is great for improving the availability of advanced treatments for our beloved pets. However, this does result in higher veterinary fees for treatments, which can affect premiums. 

Considerations when deciding on a pet insurance policy 

There are many different types of pet insurance policies available, so when choosing the best pet insurance policy for your pet it is always sensible to take time to read all the policy’s details.

How pet insurance policies can differ:

Range of veterinary fees covered 

Each policy will have a maximum amount they will pay out on veterinary fees. There are different policy types including, accident only, fixed-time policies, maximum benefit, and lifetime policies. This means that your policy may only cover accidents or may only pay for a condition for a fixed time limit (usually 12 months) unless you have lifetime cover, which renews every year for ongoing conditions.  

Some insurance companies will cover some dental procedures, and alternative treatments, such as hydrotherapy or acupuncture, and may even contribute towards prescription diets. 

Waiting periods 

When taking out a policy, it is common for insurance companies to implement a waiting period, so for the first 10 to 14 days claims for illnesses are not covered. Some will provide cover for accidents that occur within this time, while others may remove this waiting period if your pet is covered by an existing policy until the new policy starts. 

Pre-existing conditions 

Usually, any illnesses or injuries that your pet has had before taking out your new pet insurance will not be covered by your insurance policy. This will be listed on your policy as an exclusion, so your insurance company will not pay out for any claims linked to this condition. However, some insurance companies may remove this exclusion if your pet has not needed treatment for this condition during a specified time period. 

Pet insurance will also not pay towards the cost of routine preventative treatments, such as vaccination or neutering surgery. Many will also not provide cover for breeding or breeding-related claims. 

When choosing a pet insurance policy for your pet it is important to make sure that it provides the cover you need. The right policy will provide you with peace of mind that your pet can access the veterinary treatment they may need if they become unwell and will continue to provide the cover they need as they get older. 

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