Pet insurance is one of the few growth segments of Japan’s mature non-life insurance market. The Japanese pet insurance market is likely to continue expanding for the foreseeable future.
While the total number of pets in Japan has remained flat, the pet insurance market is growing, with the penetration rate increasing from approximately 2% in 2007 to 15% in 2020 and 21% in 2024.
Factors contributing to growth include market penetration rates that remain low, the growing tendency to view pets as family members and the ongoing increase in pet medical expenses driven by inflation.
This outlook is set out in a paper titled “Trends in Japan’s Pet Insurance Industry” by Mr Tomohiro Miyao, Managing Executive Officer and General Manager, and Mr Seito Achiha, Senior Analyst, both of the Financial Institution Rating Department of Japan Credit Rating Agency. The paper is published in Toa Reinsurance’s “Japan’s Insurance Market 2026” report,
The writers say that the industry’s leading companies are likely to be the primary beneficiaries of market growth. Their distinctive business model for payment at the point of care is not easy for other companies to replicate quickly, which creates a significant barrier to entry. Furthermore, basing increased policy sales solely on price competitiveness would likely prove unprofitable.
Given these factors, significant shifts in market share are unlikely, and the current oligopolistic structure dominated by the industry leaders is unlikely to change in the near future.
Pressures
Meanwhile, the competitive landscape is becoming increasingly challenging for small-amount and short-term insurance providers and other small and medium-sized enterprises. This gives rise to the possibility of future business alliances and corporate consolidation.
Compounding these competitive pressures is a fundamental operational hurdle: rising loss ratios across the industry. Pet insurance aggregates small-value policies, so the law of large numbers generally applies and helps reduce income and payout volatility. However, changes in the external environment such as increased insurance payouts due to infectious disease outbreaks or rising medical costs driven by inflation could lead to higher loss ratios. Cost per medical treatment continues to rise, which has kept upward pressure on loss ratios. Furthermore, changes in the portfolio of policies in force resulting from the rising age of insured pets significantly impact claim payouts and loss ratios.
Another challenge is that the responsibilities of pet insurance companies in resolving social issues related to pet health and animal welfare are likely to increase. Failure to adequately address the issues of pet abandonment, euthanasia, and breeding and sales under substandard conditions could damage the reputation of the entire pet industry and reduce the number of pets and their owners.
Pet insurance companies need to ensure their own growth by doing more than simply underwriting risk. They must energetically resolve pet-related social issues in fostering the industry’s sustainable development. M