Life and general insurers, as well as insurance brokers, continue to be optimistic about their overall business situation, although this has dampened across the board compared to three months ago according to the CBI/PwC Financial Services survey published today. Life insurers see a significant increase in M&A as a driver of growth over the next 12 months. This contrasts starkly with the general insurers, and to a lesser extent brokers, who expect M&A to be at a significantly lower level than previously.
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Alex Finn, insurance partner at PwC, commented:
“The massive regulatory, political and competitive pressures facing the life insurers are forcing the sector to restructure at an unprecedented rate. This is driving both the need for scale to reduce costs and increase efficiency and a focus on the adequacy and sustainability of returns from all areas of their business, inevitably leading to some businesses being exited. There is no sign of this stopping in the near future, unlike in the general insurance sector where there are signs that the high prices seen in the large number of transactions this year, frequently driven by overseas buyers, are rightly leading to greater caution.”
All sectors continue to see information technology as an area where they expect to increase expenditure, with efficiency improvements, regulation, capacity expansion and replacement being the most common reasons. Access to new customers was cited by less than 50% of respondents in the life and general insurance sectors. 40% of insurers intend to spend more this year than last on mitigating “cyber threats” (the remainder spending the same).
Alex Finn, insurance partner at PwC, commented:
“It is surprising that access to new customers is not mentioned more, especially with FinTech developments being a hot topic at the moment. With the survey showing that only 33% of general insurers, 58% of life insurers and 37% of brokers have formed a view on the potential impact of FinTech businesses on their profitability, there is a lot to be done to understand the seismic changes that FinTech will bring to the business models of the industry. Given the increasing number and visibility of cyber events and their growing financial and reputational costs to companies, the real surprise is that only 40% of companies expect to spend more protecting themselves and their customers’ data than they did last year.”
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