UK life insurers, general insurers and brokers intend to invest heavily in IT, including blockchain and emerging technologies, according to the latest CBI/ PwC Financial Services Survey.
All three sectors expect staff costs to reduce, suggesting a continued move towards automation - using technology to streamline processes and play a vital role in ongoing cost reduction programmes.
The industry sees opportunities for future growth but optimism is tempered by ongoing margin pressure, the survey shows.
"The UK insurance market should feel optimistic as it is a successful and resilient market and technological development brings many opportunities for growth,” said Jim Bichard, UK insurance leader at PwC. “Nonetheless, many challenges remain," he admitted.
Concerns about changes to the premium discount rate at the end of February meant the UK’s general insurers had a bearish first quarter in 2017, with industry players seeing rising values of insurance claims.
"General insurers will have to adapt to the Ogden rate changes coming into force but technology provides them with a great opportunity to get closer to their customers," Bichard said.
General insurers plan to continue spending money on marketing as they strive to differentiate themselves amid continued competition from peers and new entrants, according to the survey. New entrants are of particular concern as they do not struggle against the legacy technology systems underpinning incumbents’ cost pressures, allowing start-ups to bring new customer friendly products to market quickly.
The survey shows life insurers remain relatively bullish, with respondents expecting business volumes to increase and profitability to remain positive. Nevertheless, there is much to remain cautious about with operating costs expected to rise and uncertainty about demand and business prospects likely to limit capital expenditure in the coming year.
UK life insurers intend to invest heavily in technology over the coming year, pushing towards new, digital products as the lines between life insurers and wealth managers become increasingly blurred.
This investment can also be linked to long term strategic cost saving initiatives to ensure the industry remains fit for future growth.
"Life insurers need to continue working to identify their future role in a mature but changing long term savings market and bring truly innovative products to market in what is an increasingly crowded space," Bichard commented.
Trends in the general and life insurance sectors are often played out in the broking sector. Brokers are overall optimistic but, for the first time since December 2015, are predicting a decline in fee commission and premium incomes.
"The broking community has so far done a good job of maintaining margins in a tough rating environment. However, the fear of fee commissions and premium incomes declining could show that brokers are beginning to question how long this can be sustained for," Bichard said.
CBI, PwC Financial Services, Jim Bichard, Ogden rate, Blockchain, Technology, Insurance, UK