Understanding how an insurer earns explains most of what confuses buyers: why the premium rises every year, and why the brand on the website is not the company on the policy. It also explains why a comparison site can be paid by insurers without costing you anything. None of it is hidden. It is published in rating agency reports and state filings, and this page puts the numbers next to the mechanism.
How do pet insurance companies actually make money?
Pet insurers earn the difference between premiums collected and the sum of claims paid plus operating expenses. Premium arrives monthly. Claims go out unevenly. Expenses, mainly customer acquisition, underwriting and claims handling, come out of the same pool. Whatever is left is underwriting profit. Insurers also earn investment income on the reserves they hold between collecting premium and paying claims, which is a real but secondary line in a business with short claim tails.
The industry is currently profitable on the underwriting side. AM Best reported in August 2026 that the net combined ratio was under the breakeven point in both 2024 and 2025. That is the technical way of saying premiums covered claims and expenses with room left. A year earlier the picture was tighter: on 2024 figures reported via Insurance Journal, combined ratios among top insurers split roughly evenly above and below the 100 breakeven mark.
What is a loss ratio?
A loss ratio is claims paid divided by premiums collected, expressed as a percentage. A loss ratio of 69.1 means 69.1 cents of every premium dollar went out as claims. It does not include the insurer's expenses, which is why a company can post a loss ratio well under 100 and still lose money once acquisition costs are counted.
AM Best's August 2026 figures for US pet insurance, all for 2025:
| Measure | Value |
|---|---|
| Population average loss ratio | 69.1 |
| Loss ratio range, top ten insurers | 57.1 at the low end to 93.3 at the high end |
| Direct written premium | $5.5 billion, up 17 percent |
| Direct written premium growth, first quarter 2026 | up 17 percent year over year |
| Top ten insurers' share of pet premium in the property and casualty industry | 98 percent |
| Market leader | Trupanion, over 20 percent of the market |
Source: AM Best, "US Pet Insurance Plans Show Rapid and Profitable Growth", August 2026. On a 2024 basis, AM Best via Insurance Journal put the top ten insurers at 90 percent of the market, so concentration has tightened rather than eased. Trupanion's structure, including its per-condition deductible, is covered in our Trupanion review.
What does a low loss ratio mean for you as a buyer?
A low loss ratio means less of each premium dollar is coming back to policyholders as claims across that carrier's whole book. A 57.1 loss ratio and a 93.3 loss ratio describe two very different relationships between what customers pay and what they get back.
Read it carefully, though, because the number has more than one cause. A low ratio can come from strict claim handling, from a young and healthy book of pets, from a customer base that chose high deductibles, or simply from pricing with a fatter margin. Nothing in the ratio distinguishes those. It is a book-level average and it predicts nothing about your individual claim.
A very high loss ratio is not the buyer-friendly number it looks like either. Sustained ratios in the 90s signal a book under pressure, and that pressure shows up as rate increases and non-renewals rather than as generosity. Nationwide non-renewed approximately 100,000 policies in spring 2024, citing veterinary cost inflation. That is what a stressed book looks like from the customer's side.
Why do pet insurance premiums go up every year?
Premiums rise because veterinary costs rise and because your pet gets older, and the first factor now outweighs the second. Veterinary services CPI has climbed 55.5 percent cumulatively since 2019, a seven-year average of 6.5 percent a year, the highest of any pet spending category, according to BLS data reported by PetfoodIndustry in March 2026.
Year-by-year veterinary cost inflation from AVMA, reported by Insurance Journal in January 2025, ran 7.3 percent from July 2021 to July 2022. The next year ran 9.81 percent, and August 2023 to August 2024 ran 8.24 percent. Insurers file rates against those numbers, not against last year's premium.
The industry data shows the effect plainly. In 2025, US gross written premium grew 19.7 percent while the number of insured pets grew 9.0 percent, per NAPHIA's 2026 State of the Industry Report. Premium is growing at roughly twice the rate of enrollment, which means existing policies are getting more expensive rather than growth coming mainly from new customers. What you can do about a renewal increase is covered in why pet insurance rates go up, and the full sourced series is on our pet insurance statistics page.
Who actually underwrites your pet insurance policy?
The company that pays your claim is often not the brand on the website. A retail brand handles marketing, quoting and customer service. An underwriter is the licensed insurance company that carries the risk, files the rates with your state, and is legally on the hook for the payout. Three examples make the split concrete:
- ASPCA Pet Health Insurance policies are underwritten by Crum & Forster.
- Embrace policies are underwritten by American Modern.
- Figo policies are underwritten by Independence American, and Trupanion by American Pet Insurance Company.
Then there is a second layer: retail brands that resell another company's pet product under their own name. Progressive's pet insurance is Pets Best, and Costco offers member pricing on Figo. If you buy through a familiar retail or auto insurance brand, the policy, the claims process and the exclusions are the underlying insurer's, not the brand's. That reveal is the whole point of pages like our Progressive pet insurance review, and the full lineup of brands and who stands behind them is in our pet insurance companies directory.
This matters for two practical reasons. Financial strength ratings attach to the underwriter, not the brand. And when two brands share an underwriter, their policies often share exclusions and waiting periods too, so comparing them is less of a comparison than it looks.
Does buying through a comparison site cost you more?
No, because pet insurance prices are filed rates. An insurer files its rates with each state regulator and charges that rate for a given pet profile regardless of the channel you arrived through. There is no version of the policy that is cheaper if you call the insurer directly.
Comparison sites, including this one, are paid by insurers out of marketing budgets that already exist. That creates a real conflict of interest, which is why we publish which insurers pay us, what we earn, and how our rankings are built: see how we make money. The regulatory mechanics behind filed rates are explained in how pet insurance is regulated.
What can you not learn from these numbers?
Here is the limitation worth stating plainly: no public, per-insurer breakdown of claim denials exists. Loss ratios are published by rating agencies at the company level, and nothing in them shows how often claims are denied or why. The NAIC collects exactly that data as market conduct ratios, including claims closed without payment and denial reasons, and publishes no national benchmark values. It has also discontinued the loss ratio from its pet insurance ratio set. No citable industry-wide claim frequency or average claim amount exists either.
So the honest position is this: you can see how profitable the sector is, and you cannot see which insurer treats claims best. That gap is why our reviews are built on policy documents and dated quotes rather than on industry aggregates. The terms in those documents, defined in the pet insurance glossary, do more work in a claim than any company-level statistic. Our own dated premium sampling is pending first quote run.