Brokers optimistic over demand for insurance
A NEW survey on insurance brokers has revealed high confidence levels of retaining and attracting new business even though economic and political uncertainty remains high.
The brokers were also concerned about the wave of regulations which are also affecting insurance companies as regulators tighten oversight over the financial services sector.
The latest CIB Broker Confidence Index (BCI) showed that confidence levels among insurance brokers had risen on the back of renewed optimism companies and consumers were unlikely to cut back on their insurance needs despite the current economic challenges.
The BCI is based on a recent survey of 335 brokers from both large and small companies.
It said broker confidence about business conditions had increased by four percentage points in the third quarter compared with the preceding period.
The survey also revealed that broker confidence in attracting new business over the next 12 months had risen by rising nine percentage points in the third quarter.
Insurance normally suffers during economic downturns as consumers particularly cut budgets, which results in high lapse rates, when policies are no longer paid up or are cancelled altogether.
Douglas Donnelly, the CEO of CIB Insurance Administrators, said the high confidence levels among brokers was a positive sign that the industry would not be affected by low demand for insurance products.
The survey revealed that consumers and companies were not planning to cut back on their insurance needs despite the current economic uncertainty, he said.
Ian Kirk, the CEO of Santam, South Africa’s largest short-term insurer by market share, has however warned in a recent interview that insurers were under pressure to raise premiums in order to protect margins.
Mr Donnelly said brokers were still confident about both retaining and attracting new clients during the next year.
"It is very pleasing to note that brokers are growing increasingly confident in their own businesses despite the myriad signs that the economy is weakening," Mr Donnelly said.
But uncertainty about the economy was still a concern, he said.
"There clearly remains some unease among brokers about the impact of the economy and the current political situation on their businesses," Mr Donnelly said.
At least 7.5% of the brokers said political issues were the biggest challenge in 2013, up from just 2.8% previously.
"While this is still a relatively small percentage of those surveyed, it should be noted that this is also the highest recording on this answer since the survey began in the first quarter of last year, indicating that brokers are growing increasingly concerned about the long-term impact of current political turmoil," said Mr Donnelly.
"We hope that after (the African National Congress conference in) Mangaung some of these fears may be allayed," he said.
Mr Donnelly said it was crucial that the government took note of the fears of brokers and companies which were growing increasingly concerned about the impact of civil unrest, labour disputes and continuing political infighting on corporate South Africa.