The latest financial services survey from the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC) shows business volumes and income falling over the past three months, with profitability declining for the first time since June 2009.
However, for life insurers, business volumes increased for the eleventh consecutive quarter and at the strongest rate since June 2011.
Firms also reported a significant increase in the value of new business but downward pressure on premiums in the quarter to June, and growing total and average costs had a negative impact on profits.
Life insurers are nevertheless expanding their employment, and plan stronger investment on marketing and IT in the coming year.
General insurers saw a fall in business volumes and reported that premium income was a little lower compared with the previous quarter, which alongside a rise in average costs helped to push down profitability.
In addition, the trend in the value of insurance claims during the past year was up, and firms expect this to be the case looking forward.
Turning to brokers, business volumes, employment and profitability increased and all three are predicted to do so again next quarter.
Brokers also plan to invest more in the year ahead on IT systems and marketing expenditure.
PwC’s UK insurance leader, Mark Stephen, comments: “As the requirements of Solvency II and RDR drives up headcount, and the shortage of actuarial talent drives up wages, insurers will have to develop simpler, more transparent products with lower management charges to capitalise on volume growth.”