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General insurers expected value of claims to go pre- flooding surveys.
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General insurers will continue to recruit heavily.
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Life insurers increasingly partnering with start-up companies.
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Brokers focusing on organic growth and investing in marketing following wave of M&A.
The general insurance sector in particular, is pessimistic and expects an increase in the value of insurance claims, following December and January’s UK floods, which PwC estimates will cost the sector up to £1.4 bn.
Brokers continue to see pressure on top line growth and as a result are focusing on improving margins and efficiency. Following a recent wave of consolidation within the sector, brokers are focusing on organic growth. Investment in brand and marketing is increasing as brokers respond to consistently high levels of competition in the sector, following recent M&A activity.
General insurers are beginning to focus less on improving the efficiency of their systems and are now concentrating on expanding capacity and winning new customers. Technology spend will continue to increase, as will investment in staff, with significant growth in employee numbers growing expected to continue.
In line with the general insurance industry, life insurers highlight winning new customers as their main reason for capital expenditure in the next 12 months.
Life insurers increasingly see their main competition as coming from within their own sector. This is surprising, as many industry observers assumed that, following last year’s Pension Freedom reforms, life insurers would come under pressure from other financial institutions, such as wealth managers, asset managers, banks and ISA providers.
Commenting on the life and general insurance sectors Jonathan Howe, UK insurance leader at PwC, said: “We expect start-ups and FinTech companies to be increasingly on the minds of insurance business leaders during 2016 as the industry begins to acknowledge the need to adapt to achieve long-term change and customer engagement. As it stands, life insurance companies prefer to invest in building new in-house capabilities although partnering with start-up companies is becoming an increasingly attractive option.
“Currently, the acquisition of start-up companies is less desirable, with many large insurers unsure of how to successfully incorporate the different cultures and structures found in start-up companies into their existing business.
“It seems that general insurers are now starting to invest in new systems to enable them to cross-sell to existing customers and attract new customers. For a number of years there has been a focus on trying to maintain profits by taking cost out, but we are now seeing an increased industry focus on trying to increase revenue in a demand-constrained market through customer acquisition.”
Commenting on the outlook for insurance brokers Colin Graham, insurance partner at PwC, concluded: “Those who invest now in improving the efficiency of their systems will find themselves in a strong position over the next few years as competition remains intense.
“Brokers are finding competition tough in the sector following the wave of M&A, and investing in long-term brand identity and reputation is a priority for insurance brokers”
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