Their Financial Services Survey, also shows that overall optimism in the insurance industry fell in the last quarter of 2016, highlighting growing concerns about a threat from new entrants and competition from other areas of financial services.
These fears have led to continued investment in technology to acquire new customers and improve efficiency as insurers experience rising claim costs and falling profits.
PwC UK insurance leader, Jim Bichard, said: “UK insurers have told us they view competition from both new and established players as a bigger challenge than Brexit in the year ahead.
“Although optimism has been dampened as a result of wider geopolitical and economic uncertainty, these results show insurers are dealing with many business issues, of which Brexit is just one.”
“Investment in technology has been an ongoing trend in the industry and, by increasing efficiencies and reaching new customers, insurers are hoping to stave off competition.”
“Availability of talent continues to be on the minds of insurance professionals; partnering with new entrants and start-ups is one way in which we see insurers accessing the diverse skill-sets they need to thrive in this ultra-competitive market.”
The survey involved collecting views from 103 firms between November and December last year, with 10% saying they were more optimistic about the overall business situation compared with three months ago.
However, 45% of respondents said they were less optimistic, giving a balance of -35% - the lowest recorded since the global financial crisis in 2008.
There was also a fall in business volumes in the last quarter, with 19% of firms saying they were up while 17% said they were down, giving a balance of +2% compared to +34% seen in the previous quarter.
Despite this, growth in business volumes is expected to pick up in the first quarter of 2017, with 29% of firms expecting them to rise, and 22% believing they will fall, giving a balance of +7%
“Uncertainty has contributed to the low levels of optimism reported by many financial services companies, particularly by the banks,” PwC UK financial services leader, Andrew Kail, said.
“However, the clarity on the UK position from the Prime Minister's speech is welcome, not least the commitment to a period of phased implementation.
“Financial services companies face many challenges to their business models from competition, regulation, technology and Brexit and, as a consequence, are having to take some big decisions about their future strategy.
“While companies are relatively positive about short-term business volumes and profitability, they continue to need to make significant investments to protect their future.
“The first quarter of 2017 and beyond will see many start to fine tune and activate their Brexit contingency plans as the reality of life outside the single market and the EU begins to dawn.”