But investment in technology will continue to put pressure on profitability, PwC/CBI survey finds
Confidence about growth and the business environment in general increased for insurance brokers in the second quarter of 2015, according to the latest quarterly CBI/PwC Financial Services survey.
The CBI/PwC survey polls financial services firms about their attitudes to key trends in their sector and subtracts the negative responses from the positive ones to give a net percentage score.
If the net score is positive, it means the number of positive responses outweighed the number of negative ones. The bigger the number, the stronger the sentiment in either direction.
The score for business volume among insurance brokers was +20% in the second quarter, up from +13% in the first quarter, indicating that brokers are currently more confident about growing their business than they were three months ago.
The score for general business optimism among insurance brokers was +32%, up from +14% in the first quarter.
However, brokers seem less confident about future growth,. The score for expected business volume over the next three months fell to +14 in the second quarter from a much more optimistic +53% in the first quarter.
Also, brokers expect total operating costs and investment in technology and staffing to continue rising. As a result their expectations for profitability were more muted.
The score for overall profitability over the next three months among brokers was +20% in the second quarter, down from +40% in the first quarter.
PwC insurance London market and broking leader Jim Bichard said: “Brokers continue to invest heavily in technology in order to replace old core systems, increase speed and efficiency and provide data analytics that customers increasingly expect.
“This will continue to put pressure on profitability in the near term.
“As the new systems bed in, alongside an expanding physical footprint, brokers hope to see profitability start to improve through accessing both new and existing customers as well as providing additional value through insights.”
Optimism about growth and market conditions also increased for general insurers
The current volume score for general insurers was +7% in the second quarter, a big swing from -18 in the first quarter.
Insurers are also optimistic about future growth in volumes. The volume score for the next three months was +70%, up from +62% in the first quarter.
PwC UK insurance leader Jonathan Howe said: “For general insurers, [the growth in business volumes] may reflect the continued growing confidence in the economy felt by consumers.”
The score for overall business confidence for general insurers was +48% in the second quarter, up from +12% in the first quarter.
The survey also shows that general insurers are not very optimistic about current profitability, but are expecting a boost in the next three months.
The score for business profitability over the next three months was +23% in the second quarter, up from -5% in the first quarter.