Personally, like it has in the human medical world, I think pet insurance is increasing vet costs too. Used one clinic for years and they had reasonable (if slightly high due to being a 24 hour facility) costs. On year they suddenly start advertising pet insurance, and "for some reason" every service "covered" by the insurance went up in price.

Medical insurance distorts the market by disconnecting the payer from the costs. It will do the same in veterinary medicine if it hasn't already.