Survey reveals that brokers are losing confidence in SA economy

A recent survey amongst insurance brokers in South Africa has revealed that they are once again losing confidence in the South African economy. The levels recorded are significantly less positive than last quarter’s results.

According to the CIB Broker Confidence Index Survey, which measures the confidence levels of insurance brokers on a number of issues concerning the South African insurance industry, the results for the first quarter of 2011 shows that broker’s confidence in the outlook for the economy has dropped to 61%, down from 66% recorded during the last quarter of 2010.

The survey also revealed that brokers are continuing to lose confidence with regards to business conditions for the local insurance industry over the next 12 months. Confidence levels dropped to 62% during the first quarter in 2011, from 67% recorded during the last quarter 2010. According to Jonjon Smit, sales director of CIB Insurance Solutions, this might be an indication that the South African economy is not recovering as well as many may have thought.

When questioned about their confidence in attracting new business over the next 12 months, brokers revealed that their confidence levels have dropped significantly since the last quarter to 71%, down from 76%. Smit says that this drop in confidence indicates that South African consumers are still struggling financially to keep their heads above water.

“Insurance brokers tend to obtain new customers at the same time as consumers are purchasing items and are therefore looking to insure them. The drop in confidence levels in prospects for the industry and new business suggests that brokers are not expecting a significant pickup in consumer spending.”

Brokers do however seem to more confident of maintaining their current customer book in 2011, with 79% expressing confidence in their ability to retain existing clients, an increase of 1% since last quarter. Smit says that this might be because brokers are realising that current clientele are essential to their businesses and make a more concerted effort to retain these clients.

According to those surveyed, the biggest challenge facing brokers over the next 12 months will be complying with new legislation and regulations. Smit says that the main concern is probably the Financial Services Board (FSB) regulatory exams. “All key individuals and representatives need to complete the first level of the exam, which will cover general compliance, by December 2011. This looming deadline is causing some uncertainty amongst brokers.”