Brokers confident on economy

Brokers remain confident about the outlook for the economy and business conditions over the next 12 months, according to the latest CIB Broker Confidence Index Survey.

The survey - which measures the confidence levels of insurance brokers on a number of issues - found that for the first quarter of 2010 there was a confidence level of 65 percent amongst insurance brokers on their outlook for the economy over the next 12 months - unchanged from the previous quarter.

It also showed a 67 percent confidence level amongst brokers that they would see an improvement in business conditions for the local insurance industry over the next 12 months, down marginally from 68 percent in the fourth quarter of 2009.

Jonjon Smit, sales director of CIB Insurance Solutions, said these relatively confident outlooks were consistent with the more positive economic data that had emerged over the past few months.

"GDP growth is back in positive territory for the first quarter of 2010 following three quarters of negative growth and equity markets performed well in the first three months of 2010.

"I think brokers can feel justifiably confident about the prospects of selling insurance right now."

However, the survey also showed that there were still some concerns amongst brokers about the impact that the tough economic conditions were having on the industry.

When asked about their ability to retain existing clients in the next 12 months, the confidence levels of brokers dropped by four percent in the first quarter of 2010, from 78 percent to 74 percent.

In contrast, broker confidence levels of attaining new clients over the next 12 months increased by one percent to 77 percent.

Smit said that with consumers still feeling the pinch of the recession, policy covers and premiums were being reviewed to the absolute minimum.

"Individuals and businesses are shopping around for the best deals and there is a lot of movement by policyholders between insurers.

"In addition, the direct players and 'aggregator ' type websites are becoming more of a threat to traditional brokers."

This was further backed up by the fact that more than a third of brokers in the latest survey believed that direct insurers would be their biggest challenge in the next 12 months.

When asked where they felt the bulk of their business would come from in the next 12 months, 46 percent of brokers in the latest survey said personal lines, five percent higher than the last quarter.

In contrast, the percentage of brokers who said businesses would make up the bulk of new business was down five percent to 51 percent.

According to Smit, not too much should be read into this as personal lines tended to be a volatile business, with price being the deciding factor for many potential clients.

When asked what they thought the biggest opportunity would be for brokers during the next 12 months, improved systems remained top, above the economy and access to new demographic markets.

"Improved systems have become vital to brokers over the last few years as they have enabled them to streamline their businesses, reduce overheads and focus on their primary role of providing advice to clients."