UK general insurers and brokers are planning cost-cutting programs and layoffs after profits and business volumes fell for the second consecutive quarter, according to a survey of the financial services sector.

The survey, undertaken by the Confederation of British Industry and PricewaterhouseCoopers (PWC), says confidence among general insurers is at its lowest since June 2008, and brokers since September 2009.

PWC UK Insurance Leader Mark Stephen says attracting new customers is now a priority for insurers. “Many are looking to reduce their headcount for the first time in over a year.”

Only life insurers recorded any positive news, with robust profits and volumes rising for the seventh consecutive quarter. But even that is considered “below normal”.

“An increase in business volumes and profitability has done little to reassure life insurers as predictions for new business remain low,” Mr Stephen said.

The parlous state of the UK economy is expected to further reduce the levels of new business written by life insurers.

“Cost-cutting is also taking priority, with operating costs and numbers employed expected to fall further over the next three months,” Mr Stephen said.

That sentiment is repeated in the results from general insurers who are paying out increased claims from this year’s natural disasters but not recouping anything from increased premiums.

“The last quarter has been tough for general insurers, as the expected improvements in premium income and the much hoped-for rate rises have not materialised,” he said.

“This is despite the recent run of natural catastrophes which, combined with the increasing value of claims, has put strain on the sector’s profits.”

The problems with declining business volumes and profits are compounded by underperforming general lines such as motor insurance.

“It remains to be seen whether the government’s intention to ban referral fees will help reverse this trend,” Mr Stephen said.