Quarterly survey from CBI and PWC predicts a stronger premium income in the coming months
General insurers continue to be optimistic but are not as bullish as they were in the previous quarter of 2009, according to a joint survey by the CBI and PWC. The level of bullishness has deteriorated because premiums did not live up to the previous quarter’s forecasts where more than 60% of respondents had predicted premium growth. However, respondents to the survey predicted a stronger premium income in the coming months.
“This tentative optimism reflects the fact that while some insurers are reporting rising premium rates they are not hardening as fast as has been hoped and others are not seeing any increase in rates,” said the survey.
Andrew Kail, UK insurance leader at PWC added: “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.”
The survey also revealed that brokers’ profitability grew this quarter, but at a much slower rate than predicted in March’s CBI/PWC survey. However the increase in profitability is expected to gather pace over the next quarter as the number of employed fall at their slowest rate over the five quarters of decline.
Recruitment plans have also reversed for the general insurance industry, bringing the insurance sector in line with other financial service institutions, which continue to cut jobs. About 34,000 jobs were lost last year, while 17,000 were lost in Q1 and 15,000 in Q2 of this year.
Overall optimism in the financial services sector has returned for the first time in two years. This increase in confidence came despite the decline of business income during the three months to June. Optimism sprung from profitability and business rates declining more slowly. However the survey warned this does not necessarily signal a return to pre-crisis confidence levels.