Brokers plan cutbacks as confidence falls

Brokers are planning a year of cutbacks after confidence fell for the second quarter running due to a decline in business volumes and profitability.

The latest CBI/PwC Financial Services Survey claims broker’s business volumes fell for the first time since March 2010 and are expected to fall again next quarter.

“Profitability fell for the second quarter running after a robust performance over the previous three quarters while average operating costs rose sharply, which is expected to continue next quarter,” the survey said.

“Numbers employed fell sharply and are expected to be flat next quarter. Insurance brokers are planning to cut back on capital expenditure in the year ahead.”

It was a similar story for general insurers who are expected to axe jobs after optimism fell to the greatest extent in the last quarter since June 2008.

It blamed a fall in business volumes which it said were “well below the norm”.

“Profitability decreased for the second quarter running due to stagnant or declining fees,” the survey said.

“Numbers employed also fell, contrary to expectations and are predicted to dip again next quarter. Capital expenditure is expected to be flat over the next twelve months.”

Mark Stephen, UK insurance leader at PwC, said: “The last quarter has been tough for general insurers as the anticipated improvements in premium income and the much hoped-for rate rises have not materialised.

“This is despite the recent run of natural catastrophes which, combined with the increasing value of claims, has put strain on the sector’s profits. A number of lines of general insurance business, including car insurance, remain unprofitable and it remains to be seen whether the Government’s intention to ban referral fees will help reverse this trend.

“Attracting new customers is now the priority and many insurers are looking to reduce their headcount for the first time in over a year.”