Xiao Du, a 28-year-old accountant living in Qingdao, Shandong Province, is the proud owner of no fewer than six cats and one dog, all of whom she found on the street. "My pets' medical expenses amount to some 6,000 yuan ($873) every year. But my pet insurance does save me a lot of money," she told Beijing Review.

As China's economy grows, people's disposable income increases and their spiritual needs become more prominent. Combined with an aging population and many young people delaying marriage and having children, the growing demand for companionship is bringing about a surge in the country's pet economy—or the economic market related to pets. Furry friends, which can provide emotional support, are often considered part of the family.

According to the 2021 China Pet Industry White Paper produced by consumer research firm iResearch Consulting Group, the urban pet market for dogs and cats had reached 249 billion yuan ($36.2 billion) that same year, registering a year-on-year increase of 20.6 percent. This growth rate significantly exceeded the then 11.1-percent growth rate of urban residents' per-capita consumption expenditure. iResearch also projected China's pet economy would be worth 445.6 billion yuan ($65 billion) by 2023, as a growing number of young, well-educated, high-income millennials were getting ready to own pets. And today, as people pay more attention to their pets' wellbeing, they are seeking new ways to protect them from disease and injury. Pet insurance can meet this demand.

Notably, 89.8 percent of pet owners in China have a college degree or above, compared to only 15.5 percent of the national population. These individuals are more concerned with preventing their beloved animals from getting sick and therefore are more likely to obtain pet insurance to offset any risks.

Chai Mi, a teacher in Xiamen, a port city in Fujian Province, which is one of the country's most livable places, owns a 3-year-old British shorthair cat and is a typical example of this trend. She purchased health insurance for her cat, which suffers from heart disease. A cardiac ultrasound alone used to cost her 400 yuan ($58.2), not to mention the costs of any additional examinations. Chai soon realized getting her pet insured would be the wise thing to do.

Why the hefty price tag?

China's pet healthcare currently has not yet matured to the point of providing satisfying services across the board. In 2021, the industry witnessed rapid growth and, with a market size of 72.7 billion yuan ($10.58 billion), accounted for 29.2 percent of the overall pet economy. However, excessive treatment, high costs and poor services have been known to undermine the growth of the pet healthcare sector and impose financial pressures on pet owners. The high medical expenses, in particular, have led to owners being forced to give up on treating their pets—sometimes even abandoning them altogether.

"Establishing a pet hospital requires large investment and expensive equipment, and the return on investment takes a long time. This puts significant cash flow pressure on a hospital. At the same time, most pet owners, lacking the support of pet health coverage, have to pay the high healthcare costs out of pocket," Wang Zhongqi, chief veterinarian at a pet hospital in Xiamen, explained.

Pet insurance and healthcare complement one another. The former, for one, can help pet owners share risks and costs and in turn promote the development of the latter. Wang added, "On the other hand, hospitals can provide better diagnoses and more optimal treatment plans for pets, all the while increasing their revenue."

Today, more and more pet hospitals are willing to team up with insurance companies and assist pet owners in processing their claims; a win-win-win for all parties involved.

Is it worth it?

Pet insurance comes in different types, including medical, third-party liability and comprehensive protection coverage. Among these, the medical one is the most popular product, with more than 200,000 users searching for the item on Alipay, e-commerce giant Alibaba's digital payment platform and one of China's biggest and most used apps, in February alone.

The popularity of obtaining medical coverage is because pet illnesses are often expensive to treat. According to insurance broker Jack Qi, common ailments can cost an owner up to 1,000 yuan ($145) per vet visit. The premium is generally 399 yuan ($58.1) per year, with a reimbursement level of 60 to 80 percent, a deductible of 200 yuan ($29.1) per claim, and a limit of 1,500 yuan ($218.3) per payout. The insurance companies also create a fast and easy claim process for customers—requiring just the submission of a photo of the bill and the veterinarian's report through the insurer's online platform or app.

For instance, Xiao once spent 1,950 yuan ($283.7) on her cat's treatment at a pet hospital in Jinan City, capital of Shandong. After subtracting the 200-yuan deductible, the remaining 1,750 yuan ($254.6) was reimbursed to her at 60 percent—i.e., 1,050 yuan ($152.8), which she received just three days after submitting the required documents. Without medical coverage, she would have had to settle the original bill, but instead she only spent 900 yuan ($131) on her fur baby.

Pet peeves

Even though pet insurance has gained popularity among pet owners and Chinese insurance giants like China Pacific Insurance (Group) Co. Ltd. and Ping An Insurance (Group) Co. Ltd., the industry is still in its infancy and will have to address several challenges.

When this Beijing Review reporter applied for pet insurance on Alipay, she found that she could register by simply uploading some basic pet information and photos (full-body and facial). After a few taps of the mobile screen, everything was good to go. But it did strike her that the company had no way of verifying the information, meaning some people can successfully apply for coverage by fabricating the necessary information.

Product homogenization is yet another major defect of pet coverage products. It's easy to see how many of the products on offer are identical, as these companies only issue products while their actual coverage model and execution come courtesy of third-party organizations. More importantly, when it comes to pet protection, most insurance companies are still in the observational stages. "Only when the product gains wider market acceptance will they be able to further, and seriously, develop it," Qi told Beijing Review.

For the companies, most of the people who opt to get pet coverage are well-educated and high-income consumers. "As consumer demand increases, more insurance companies will enter the pet market and provide increasingly differentiated and refined products," Qi concluded, adding he was optimistic about the future of the industry.

Copyedited by Elsbeth van Paridon

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