Optimism, confidence and overall business volumes in the UK insurance sector increased in the three months to December as profitability rose for the fifth consecutive quarter, according to a poll
The latest CBI and PricewaterhouseCoopers Financial services survey found that the entire financial service sector is now more upbeat as the UK economic recovery takes root. PwC said this was beginning to feed through to the sector, with optimism rising to its highest level since the Retail Distribution Review (RDR) was introduced last year.
Jonathan Howe, PwC's UK insurance leader, said: 'Optimism is at a real high, and they have seen a large upsurge in business volumes. Profitability started to grow again, and despite growing marketing and operating costs growth is expected to continue.'
Howe explained that the industry was showing strong signs of recovery compared to low profitability concerns of previous quarters. 'Business volumes continue to grow and there's no suggestion that this will falter,' he added.
PwC said it was 'promising' to see optimism among life insurers climb faster than at any time over the past decade. The firm noted that as confidence increases, life insurance companies have allowed operating and market costs to rise. Despite this, the consultancy firm highlighted that profits rose for the first time in a year.
Life insurers continue to invest heavily in IT and compliance to improve efficiency and enhance distribution channels, which is vital to growth following the introduction of the RDR at the start of last year.
The firm noted that regulatory compliance remained a key driver of recruitment.
Howe continued: 'Profitability rose at its fastest rate since March 2008. However the sector remains focused on cost control and headcount, reflecting caution over new entrants and increased competition. IT and compliance will no doubt drive investment, to avoid aging systems and to cope with increased regulatory pressures and the revival of Solvency II.'
General insurers saw business volumes grow, although the sector remained cautious in terms of spending and staffing levels, the poll found.
Insurance brokers saw business volumes increase at their fastest rate in four years, while profits fell sharply because of increased costs. However, this is expected to recover in the next quarter, PwC said.
