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The prospect of economic recovery is lifting the spirits of UK financial services companies, including insurers, the survey notes. "With optimism rising and jobs and profitability growing, this is an encouraging quarter for the financial services sector", said Stephen Gifford, CBI Director of Economics.
Optimism among financial services companies has now risen for the fourth consecutive quarter and is at its strongest since 1996, the survey finds. Despite a fall in business volumes in the third quarter of this year, expectations for the rest of 2013 are upbeat, with strong increases in business, income and profits predicted.
While banks saw business volumes fall, modest improvements in volumes were behind the improving mood of general insurers. Even life insurers-who have struggled with lower demand for cover-are now more positive, PwC said. Life insurers' business volumes rose rapidly in the third quarter, after declining in the first half of the year.
"General insurers are faced with a mixed outlook for the next quarter-robust growth in business volumes and an improvement in demand is expected, but there remains caution over predictions of a future rise in compliance and claim costs", said Jonathan Howe, PwC's UK insurance leader.
Insurers, like other financial services providers, are increasing spend to deal with rising regulatory and compliance costs. Regulation is thought to be one of the big drivers behind an expected increase in recruitment in the sector, PwC said. Spending to combat cybercrime is also likely to rise over the coming year, it said.
"The increasing requirements of the new regulator push the conduct agenda back to the top of the board's priority list. The sector should use this as a reminder of the need to focus on changing customer needs and the opportunity that this brings", said Mr Howe.
Link to full survey © PwC