Insurance outlook positive

General insurance volumes fell in the last three months, as did income values, leading to a marginal decline in profitability. But optimism rose and business volumes are set to grow, the CBI/PricewaterhouseCoopers survey revealed.

Andrew Kail, UK insurance leader at PricewaterhouseCoopers said:

“General insurers continue to feel positive about their outlook however business levels are down when compared to last quarter’s as planned rate increases are not being seen at the levels predicted. Previous plans to increase recruitment have been reversed, bringing the sector in line with other areas of financial services sector.

“Modest spending on regulatory compliance is a surprise, given the requirements of Solvency II. Despite cost reduction measures, some insurers now expect profitability to fall as the cost of claims will probably increase as the impact of the recession bites."

“Life insurers report the most positive results in sentiment for five years, after seven consecutive quarters of negative outlook. Business however, remains subdued for now.

“The industry is hoping for a recovery in fortunes following recent rises in the equity markets and some positive news on the housing market. Expense reduction and customer retention are still the order of the day and there is nothing in the survey results to suggest an upturn in business has yet materialised.”

Insurance brokers nudging ahead

The CBI survey found insurance broker’s profitability grew in the current quarter, but at a much slower pace than in March’s survey, which had been a very strong period.

“The increase in profitability is expected to gather pace over the next quarter. Numbers employed fell at their slowest rate over their five quarters of decline so far, and a further easing in the pace of deterioration is expected in the next three months” the survey said.