UK insurers admit to volume slippage & margin pressures

UK insurers have seen volume growth hopes peter out, with a net 52% of surveyed leaders claiming a decline in business volumes over the past three months versus near universal (90% net) claiming volume gains just one quarter prior, a financial services sector survey by  PwC has shown.

Despite that reversal and a continuing strong majority seeing profitability decline, the qualitative industry sentiment measure remains “cautiously optimistic.”

“Insurers remain cautiously optimistic about their business prospects,” survey authors wrote. “A considerable proportion of insurance demand is non-discretionary in areas such as home and vehicle cover. This makes the industry less vulnerable to economic shocks than other [financial service] segments.”

UK insurers see threats to profits. Staffing costs and new pricing regulations figure notably on a risk list that also includes regulatory costs on the eve of IFRS17 and still-to-be-defined ESG reporting.

Economic slowdown could bring further problems and surveyed insurers point to claims cost increases which are common to recessions and possible impact of client insolvencies.

Staffing costs may have found its reflection in the survey's employment metric. A net 64% of the panel claims a dip in 3M employment versus a still-positive reading just one quarter prior.

Only the transformation to digital appears safe. A net two thirds of the panel sees an increase in IT capex over the next 12M, down only mildly from 85% in the prior survey.

“Our survey reveals a significant gap between the front-runners already reaping the benefits of digital transformation and a trailing pack that’s still finding it difficult to make headway,” authors say of the race to efficiencies.

Find the PwC survey summary here.

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