Optimism fell among life insurers remained flat during the second quarter of 2017 but business conditions - such as business volumes, profits and hiring - remained strong.
The latest CBI/PWC financial services survey - carried out before the UK general election - showed a strength in underlying business activity, implying that the continued pessimism reflected geopolitical and economic uncertainty rather than weak business performance.
This decline in optimism was not universal, with insurance brokers feeling more optimistic than they did at the beginning of 2017.
Employment levels and investment in staff training rose significantly for life insurers, general insurers and brokers last quarter.
All three also intend to significantly increase their IT spending in the coming 12 months in the hope of long term cost savings.
Insurers expect a slowdown in their spending on regulation over the coming year. Spending on compliance will still be substantial but insurers polled did not expect it to increase at the same pace as last year.
Jim Bichard, UK insurance leader at PWC, said: “Insurers are going through significant changes as they prepare to transform their business models. This has driven an uptick in hiring and training the staff needed to implement new technologies and strategies.
“To the extent that insurers have any discretionary spend, we are clearly beginning to see this money invested in technology directly impacting customer engagement, such as distribution and marketing.
"Artificial Intelligence and robotics will become more of a priority a few years down the line and it’s good to see an emerging understanding of the potential of these emerging technologies.
"For now though, insurers, especially those in the life sector, are focused on streamlining their back office.
Commenting on the findings, Scott Gallacher, chartered financial planner of Leicester-based IFA Rowley Turton, said: "Given the continued march of regulation, or red tape as many would see it, and worries about factors such as Brexit and Trump, it is perhaps not surprising that insurers are somewhat pessimistic."
Steve Carlson, Chartered financial planner at Caerphilly-based Caerphilly Wealth Management, said: "No matter what the short to medium term economic outlook is, people will still have long term needs to protect their assets and their lifestyle - that much hasn’t changed in decades.
"The effects of technology (especially advances in medical science) and how insurers cope with that will be of far greater importance as it is uncharted territory for all of us."
stephanie.hawthorne@ft.com
