A record 4.4 million pet owners took out insurance to protect their animals last year, according to the Association of British Insurers (ABI).
The total number of people with pet insurance is 1.7 million higher than a decade ago.
Insurance helps pet owners cover the costs of treatment if their pet falls ill or is injured, and the average claim cost in 2023 was £668, while the average premium paid by customers per pet was £389.
The average premium per pet in 2022 was £372.
During 2023, pet insurance payouts topped the £1 billion mark for the second year in a row, at £1.2 billion, averaging £3.2 million per day.
The ABI said some claims can run into thousands of pounds.
For example, claims for surgery to correct a cruciate rupture in a dog often cost between £3,000 and £5,000.
Another common knee problem seen in cats and dogs, patella luxation, can cost £2,000 to £4,000 to treat, and the bill for treating a cat or dog with diabetes is typically around £1,300.
Jonathan Purvis, senior policy adviser, general insurance at the ABI, said: “With a variety of pet insurance policies available, it is important to get the best policy for your needs, not just based on price.
“You should always read your policy carefully, so that you understand exactly what you are covered for.”