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Growth in life insurance beats expectations

by: Thomas Smith
  • 06/10/2014
  • 0
Growth in life insurance beats expectations
For the fifth consecutive quarter optimism improved among life insurers, amid a rise in profitability and business volumes, research has found.

Optimism improved in the three months to September among life insurers despite predictions of future falls in business volumes and profits in the next quarter, the PwC financial services survey found.

Life insurers said that launching new products and services was becoming a more important part of their growth strategy in the year ahead.

Jonathan Howe, PwC’s UK insurance leader said: “Life insurers are increasingly optimistic, despite predicting weaker business for the coming quarter. The sector’s confidence probably reflects the UK’s improving economic performance, but they should watch out for renewed pressure on income streams from a potential rise in interest rates.”

Average commissions, fees and premiums fell for a third consecutive quarter, however the income from them rose, it is expected to fall in the next three months.

Total operating costs were flat and are expected to remain flat in the next quarter, although average costs grew and are predicted to continue growing.

Employment in the sector grew in the previous quarter, against expectations, although a fall is predicted for the next quarter as staff costs continue to rise as a proportion of total costs though the rate of increase is slowing.

Investments in IT are expected to be considerably higher in the year ahead with capital spending on land and buildings also expected to rise.

A shortage of staff remains the factor most likely to limit expansion in the year ahead, with systems capacity and regulation also being limiting factors.

Howe added: “The biggest area of interest for life insurers is the predicted expenditure on regulation, reflecting the twin demands of Solvency II and the increasing FCA focus on the sector. Aligned to this is the increase in technology spend.”

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