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Insurance sector upbeat despite fall in business volumes

Life insurers are developing products to cover more life stages

The insurance sector remains positive compared to financial services overall, despite a fall in business volumes.

This is according to the latest CBI/PwC Financial Services Survey, which suggests opportunities to improve customer service and capitalise on merger and acquisition deals are boosting levels of optimism. 

Broking has been bolstered by the growth potential from closer customer relationships, but in general insurance business volumes fell against expected growth and in the next three months will drop further. 

This could signal concerns that improvements in broking services might not translate into business for general insurers, the report said.

Jim Bichard, insurance leader at PwC UK, said the survey reveals a game of two halves.

“On the one hand you have more than decent growth in broking volume and profitability. This underlines the importance of the intermediary role that the broker plays in owning the customer relationship, which is integral to success,” he explained.

“By contrast, business volumes in life insurance fell and of course there are Brexit challenges, and this comes from both the second-order effects on their customers, and the overall impact of the UK leaving the EU, on the confidence of the wider market.”

Bichard said brokers are likely to focus on winning new customers and growing the domestic market. In life insurance, he expects heavy investment in IT to try to reduce operating costs and boost profitability.

Hiring levels in broking fell in response to a need for cost savings, and in general insurance and life insurance, headcounts are also flat and expected to fall, although there is an upturn in training investment. 

Life insurance is looking to diversify its offering to develop and cross-sell products covering more life stages. It is also the only sector in financial services that is looking to international markets for growth opportunities, according to the poll of 79 firms.