Life insurance companies could struggle for profitability, a survey by the Confederation of British Industry has revealed.
The 101st Financial Services Survey, carried out with PwC, looks into the state of Britain’s financial sector.
It found there is overall negative feeling within the life insurance industry about its profitability.
A high percentage of firms also felt statutory legislation and regulation, as well as adequate systems capacity, would likely limit their ability to increase their level of business over the next 12 months.
This led the report to conclude: “Business volumes grew strongly in the three months to December and are expected to grow at a similarly robust pace in the three months to March.
“However, rising costs cause profitability to fall, with no recovery expected.”
Total operating costs have increased sharply across the life insurance industry at a time when they were expected to be flat.
There has been speculation about the future business models of some life insurance companies with the move away from annuities in the pension industry.
Overall the majority of financial services firms reported rising business volumes in the three months to December.
Profitability appears to have stayed high with 62 per cent of firms reporting that profits had increased and 10 per cent saying they fell.
Rain Newton-Smith, director of economics at the CBI, said: “The upswing in growth among financial services firms continues on a solid footing, with overall optimism, business volumes and profits up.”
Mark Dodd, a partner in London-based Holden and Partners, said: “With premiums becoming more expensive there will be a squeeze and that will be a problem for certain providers.”