Brokers confident about business conditionsWednesday, April 25, 2012
Brokers have confidence levels of 61% for the outlook of the economy over the next 12 months, results from the CIB Broker Confidence Index for the first quarter of 2012 show.
This is a decrease of 1% when compared to the last quarter of 2011.
In the Broker Confidence Index (BCI) category of biggest opportunities for the short-term industry during the next 12 months, 31.7% of brokers cited the economy, an increase of 5.6% from the previous quarter. This was tied with access to new demographic markets, with 31.7% of brokers also seeing this as an opportunity for the short-term industry.
According to Douglas Donnelly, CEO of CIB Insurance Administrators, these are positive signs as results indicate that brokers foresee that the South African economy will show gradual improvement over the next 12 months.
The survey also revealed that brokers remain confident that business conditions for the local insurance industry will improve over the next 12 months, recording confidence levels of 63% in the first quarter of 2012, which is on par with the confidence levels recorded in the fourth quarter of 2011.
The first quarter survey also revealed that brokers' confidence levels with regards to retaining their existing client base decreased by 2% since fourth quarter of 2011 by recording confidence levels of 78%.
Donnelly says that there was also a 2% decrease in confidence levels with regards to attaining new business over the next 12 months.
"Despite the slight decrease in confidence when it comes to retaining existing clients, the levels remain rather high. In the current economic condition, brokers recognise 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."
When asked where they thought the bulk of their business would originate from in the next 12 months, most brokers cited individuals (consumers) with 67.6%, followed by SMMEs and corporates with 19.8% and 12.4% respectively.
Donnelly says that brokers seem to think that the biggest challenge facing them over the next 12 months will be complying with new legislation and regulations, which accounted for 47.8% of those surveyed in the first quarter of 2012, an increase of 8.9% from the last quarter of 2011.
"This is probably due to the fact that the Financial Services Board (FSB) regulatory exam deadline has not been shifted, as was expected by many brokers. As all exams will need to be completed by June 2012, this looming deadline is causing some uncertainty amongst brokers. Brokers who fail to pass the exam will find it challenging to continue servicing existing clients and sourcing new clientele as they will now be measured against accredited brokers who have passed the regulatory exams.
"Despite new regulations and some caution with regards to the economy, brokers continue to be upbeat about business conditions in South Africa. The consistent confidence levels are a good indication for the short-term insurance industry and is reassuring for the remainder of 2012," concludes Donnelly.
by Business LiveBack