Insurers planning more job cuts

Insurers are planning more job cuts this year, with conditions in the UK insurance market expected to remain tough, according to the latest CBI/PwC financial services survey.

In the last quarter, general insurers recorded very marginal growth in premium income and in business volumes, but they expect this will improve faster in the coming quarter, the survey said.

The value of investment income was much lower for the second successive quarter, while average costs were higher, so the impact on profitability was more negative than expected.

The number of staff employed was reduced for the third quarter running. The trend in the value of insurance claims in the past year was higher than its long-run average for the sixth consecutive quarter, it added.

Howard Scott, insurance partner at PwC, said: “Intense competition in the retail market, especially in home and motor insurance, coupled with the recent run of natural catastrophes and increasing value of claims, continues to put pressure on general insurers’ profits.

“Insurers’ hopes for the early part of 2012 rest on growth in commercial lines and an anticipated recovery in business with overseas customers.”

He added: “General insurers continue to plan further headcount reductions in response to the tough market conditions.”

Brokers’ profits to fall

Brokers’ profitability fell back after an unexpectedly strong fall in the volume of business and value of premium income, according to the survey.

Total operating costs fell, but the decline in volumes was sufficiently steep to push average costs per transaction up strongly.

“Profitability is expected to fall again, with volumes and premium income, next quarter, but to do so at a much slower rate,” it said.

It added brokers plan less investment in the year ahead on premises, vehicles, IT systems and marketing.

The outlook for the insurance sector came against a backdrop of optimism in UK financial services, as the volume of business grew for the seventh quarter running and at the fastest pace since June 2007, in the three months to December.