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Profitability paramount as life offices squeezed

Profitability is more than ever the number one issue for UK insurance companies as the market becomes fiercer, according to a report into the insurance industry.

Threats from overseas insurers and the squeeze on pension profits following stakeholder, means life offices will have to cut back on operating costs to survive, according to the report entitled, Insurance Companies, by market researcher Key Note.

The report anticipates fewer and bigger players as companies merge and take over competitors to take on global rivals in a market which sees the UK without an entry in the top six world insurance companies.

CGNU and Prudential rank ninth and 10th in order of market capitalisation but are dwarfed by their US, German, Dutch and French competitors, according to the report.

Scottish Equitable group public affairs manager Scott White says: “The common view is that there are too many companies chasing the same business and the fallout is bound to continue.”

The report also predicts that the second round of consultation on polarisation will be nothing but a formality and forecasts that multi-tied agents will be selling a full range of financial services products by next summer.

In a section headed, An end to polarisation, the report says: “There is now to be a third category, called &#39multi-tied agents&#39,” and goes on to say: “The creation of this third category has proved controversial….Therefore, the FSA has agreed that, with the exception of pensions,the implementation of the rules will be delayed for around a year while it consults interested parties.”

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