New index reveals SA brokers losing confidence in 2013Friday, May 10, 2013
Results from the CIB Broker Confidence Index (BCI) for the first quarter of 2013 have revealed that brokers are losing confidence in the wider economy and specifically in the business conditions for the local insurance industry.
The BCI - which measures the confidence levels of insurance brokers on a number of issues concerning the South African economy and insurance industry - revealed that confidence levels on the outlook for the South African economy over the next 12 months fell to 59% in the first quarter of the year compared with 61% in the same period a year earlier.
According to Jon-Jon Smit, Sales Director at CIB Insurance Administrators (CIB), the results are not a surprise given the volume of negative news that has occurred in South Africa this year. “At the end of 2012 we saw waves of strikes across a number of industries and this seems to have carried through into the current year. These strikes have a significant impact on the local economy and it is no surprise that brokers too are concerned about the impact that this may have on the wider economy.”
The survey also showed that brokers’ confidence that business conditions for the local insurance industry will improve over the next 12 months has fallen – specifically, to a measure of 60% in the first three months of the year. This is as compared with 63% for the same period last year. “For brokers who specialise in domestic insurance in particular, the worsening economy is likely to be a major concern. This is reflected in other data collated in the survey that shows the impact of direct insurers is once again a major source of unease.”
Data revealed that 31.9% of brokers cite legislation and regulation as the biggest challenge for insurance brokers in South Africa over the next 12 months, down from 47.8% a year ago. However, 28.3% cited direct insurers and 30.1% said the economy compared with just 19.1% and 25.2% respectively in 2012.
The first quarter survey did have some positive news with brokers recording a confidence level of 79% on the retention of existing clients over the next 12 months, marginally higher than the 78% recorded last year. “This is a very high figure and is in fact the highest since the fourth quarter of 2011. In the current economic conditions, brokers recognise that it is easier to retain existing customers than to acquire new business. This in turn is good news for consumers, as they should see increased service and better pricing from brokers and insurers,” says Smit.
Brokers also recorded a confidence level of 72% on the likelihood of attaining new clients over the next 12 months, unchanged from a year earlier.
When asked where they thought the bulk of their business would originate from in the next 12 months, most brokers cited individuals (consumers) with 64.6%, followed by SMMEs and corporates with 23.0% and 11.5% respectively.
“Despite some concern about the economy, the majority of brokers do continue to be relatively upbeat about business conditions in South Africa, which is a good indication for the short-term insurance industry and is reassuring for the remainder of 2013,” concludes Smit.Back