Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Pet Insurance Industry
Transcript
- Lucas: So it's mid-2026, and one of the quietest demographic forces reshaping the economy right now is this: households are spending more on their pets than ever before, and a huge chunk of that new spending is going to pet insurance. Luna: I've seen the headlines — pet insurance is booming. But is there a direct line from falling birth rates to that boom? Lucas: I think there is. Look at the numbers. The U.S. pet insurance market wrote about one point two billion dollars in premiums in 2019. By last year, 2025, that figure had more than tripled to over four billion. Annual growth rates have been above 25 percent for four years running. Luna: That's faster than electric vehicles, faster than streaming — it's one of the top growth categories in consumer spending. Lucas: Exactly. And when you ask why, the demographic answer is pretty clear: people are having fewer children, or having them later, and they're transferring that caregiving instinct — and that budget — onto pets. If walking through the economy with us has made something click, by the way, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it's a small thing that makes a huge difference for us. And it keeps the show ad-free, which we love. Lucas: Alright, back to it. So the average pet insurance premium in the U.S. is now about sixty-eight dollars a month for a dog, thirty-five for a cat — up from about forty-five and twenty-five five years ago. That's partly because more people are buying comprehensive wellness plans, not just accident coverage. Luna: And those wellness plans basically cover routine care — vaccinations, dental cleanings, even acupuncture for dogs. That's a very 'pet as child' approach. Lucas: Exactly. Ten years ago, pet insurance was mostly about emergency surgery — your dog swallows a sock, you get reimbursed. Now, the fastest-growing product is the 'whole pet' plan that covers checkups and preventive care. That's a demographic shift in mindset. Luna: And the companies are responding. You've got Trupanion, which has been around for twenty-five years, and then newer entrants like Pumpkin and ManyPets that came in with more marketing-savvy, digital-first approaches. Lucas: Pumpkin launched in 2020 and by 2024 had over a hundred thousand pets insured. ManyPets, which started in the UK, entered the U.S. in 2020 and now has over half a million policies. They're both unprofitable — they're spending heavily on customer acquisition — but the market is growing so fast that investors are willing to fund the land grab. Luna: But the legacy players aren't standing still. Nationwide, which is the largest pet insurer in the U.S. by market share, has been expanding its wellness offerings and even launched a microchip-based enrollment program with veterinary clinics. Lucas: And that brings up an interesting structural point. Pet insurance has much lower penetration in the U.S. than in other developed countries. Only about three to five percent of U.S. pet owners have insurance. In the UK, it's around thirty percent. In Sweden, it's over fifty percent. Luna: So there's a huge runway. And if birth rates keep falling, that runway gets longer as more households treat their pets as family members. Lucas: Right. The key demographic driver is the rise of child-free households — couples who choose not to have children. According to Census data, the share of women aged forty to forty-four who have never had children has doubled since the 1990s to about seventeen percent. That's millions of households with high disposable income and no human dependents. Luna: And those households spend disproportionately on pets. There's a 2023 survey from the American Pet Products Association that found child-free households spent forty percent more per pet on veterinary care than households with children. Lucas: That's a staggering gap. And it's not just child-free couples — empty nesters whose kids have left home are also upgrading their pet spending. They have the income and the time, and the dog becomes the new project. Luna: So the pet insurance industry is basically riding two demographic waves: fewer children means more pet-centered spending, and an aging population means more empty nesters with cash. Lucas: Exactly. And there's a third wave: millennials and Gen Z are delaying marriage and kids. The median age of first marriage in the U.S. is now thirty for men, twenty-eight for women. That's up from twenty-six and twenty-four in 1990. Those unmarried years are prime pet-owning years. Luna: And pet insurance is sticky. Once you enroll, the renewal rates are above eighty percent for most carriers. So the customer lifetime value is high. Lucas: Yeah, that's what makes the economics work for insurers. They can spend two hundred to three hundred dollars to acquire a customer because that customer will pay premiums for eight to twelve years. And premiums are rising — partly because veterinary costs are inflating at about six to eight percent annually, well above general inflation. Luna: Veterinary costs are a whole other story. Advanced treatments like chemotherapy for dogs, hip replacements, and MRI scans are becoming routine. Those procedures can cost five thousand to fifteen thousand dollars. Insurance makes them accessible. Lucas: And that's exactly the value proposition. Without insurance, a five-thousand-dollar vet bill is a financial shock. With insurance, it's a copay. So as veterinary medicine advances, pet insurance becomes more necessary — and that drives adoption. Luna: But there's a tension here. If premiums keep rising faster than inflation, at some point the market might hit a ceiling. You'll have price-sensitive owners who drop coverage. Lucas: That's a real risk. The industry's loss ratios — that's the percentage of premiums paid out as claims — have been creeping up. For some carriers, it's above eighty percent, which means they're barely profitable on an underwriting basis. So they have to raise premiums, which could slow growth. Luna: But so far, growth hasn't slowed. The North American Pet Health Insurance Association reported that in 2025, the number of insured pets in the U.S. hit 5.5 million, up from 3 million in 2020. Lucas: That's nearly doubling in five years. And if you look at the demographics, the tailwinds are still strong. The number of households without children is projected to continue growing. The Census Bureau's 2025 population estimates show that one-person households now make up twenty-nine percent of all households — a record high. Luna: And single-person households are the most likely to own a pet? Actually, data shows that couples are more likely than singles, but singles are a growing segment. Lucas: Right, couples are still the top pet-owning household type. But the key is that households without children — whether single or coupled — are the fastest-growing segment. And they have the highest propensity to insure their pets. Luna: So if you're an investor looking at this space, who are the public companies to watch? Lucas: Trupanion is the most direct pure play. They went public in 2014, and their revenue has grown from about one hundred million dollars to over one billion by 2025. But they've struggled with profitability — their underwriting losses have been persistent. The market is pricing them as a growth story, not a value story. Luna: And then you have the larger insurers like Nationwide and MetLife that offer pet insurance as a line of business. For them, it's a small but fast-growing piece of their overall portfolio. Lucas: There's also a wave of startups — Pumpkin, ManyPets, Fetch by the Dodo — that are venture-backed and aiming for IPO in the next few years. The question is whether they can achieve scale without burning through all their capital on marketing. Luna: And there's a regulatory angle too. Pet insurance is regulated as property and casualty insurance in most states, but there's been discussion about creating a separate category with specific disclosure requirements, especially around what is and isn't covered. Lucas: Yeah, consumer advocates have raised concerns about opaque policy language — some plans have annual limits, per-incident caps, or waiting periods that surprise customers. The National Association of Insurance Commissioners adopted a model regulation in 2023, but not all states have adopted it. Luna: So the industry is still maturing. But the demographic trend is clear: fewer kids, more pets, more insurance. Lucas: And I think the most interesting question for the next decade is whether pet insurance becomes as ubiquitous as health insurance is for humans. In Sweden, it basically already is. If U.S. penetration ever reaches thirty percent, that's a multi trillion dollar industry. Luna: That seems like a stretch — but even moving from three percent to ten percent over the next ten years would be enormous. Lucas: Absolutely. And it's all driven by the quietest demographic force there is: the decision to have fewer children. That decision ripples through pet spending, through insurance, through veterinary medicine. It's a great example of how demographics shape markets in ways you don't see until you look at the numbers. Luna: Well, we'll be watching. And in the meantime, if you're a pet owner, maybe check if your dog is covered. Lucas: Or your cat. It's not just dogs anymore. Cats account for about fifteen percent of pet insurance policies now, and that share is growing. Luna: Right, cats get sick too. But they're less likely to eat socks.