UK general insurers feel mildly optimistic after business volumes and premium incomes gained over the northern summer, according to a survey.

“Although retail business did not perform as hoped, there has been a tangible improvement in commercial lines,” the report by PricewaterhouseCoopers and the Confederation of British Industry says.

“Demand is also expected to improve across every customer segment during the coming quarter.”

Costs fell for a third consecutive quarter as insurers focused on efficiency, while a second consecutive decline in claims value also lifted profitability.

But claims are predicted to resume their growth, while prudential and conduct regulations have pushed compliance to the top of the agenda.

A growing majority of respondents expect competition to limit their business, and new entrants are identified as an increasing threat.

“Faced with this mixed outlook, general insurers are the only major sector of financial services planning to reduce their capital expenditure,” the report says.

Despite investment cuts, general insurers are developing new products and are increasingly willing to explore strategic alliances.

Life insurers expect premium income and investment income to rise and are optimistic that profitability will improve before the end of the year, according to the survey.

“In contrast to the gloom of June’s survey, life insurers are feeling much more upbeat about their business situation.”

The survey was conducted between August 19 and September 5.