LifeCos’ problems: cyclical or secular?

I love those surveys with ‘balance’ questions – for example if 65% of people think Ken Livingstone is an annoying twerp and 35% don’t, you have a balance reading is 30%.

You don’t often get balance readings of +/-98%, implying almost total unanimity of opinion (99% think yea, 1% nay) on a subject. But the latest  CBI/PricewaterhouseCoopers financial services survey  has come up with such a finding for the Life Insurance industry as regards business optimism.

That’s a negative 98%, by the way, up from -69% a quarter ago, who think that right now hell is the destination with a handbasket the chosen mode of transport – from ‘pessimism to downright despair’ as the report puts it.

‘Investment and housing market uncertainties threaten their business from all sides. In addition to these challenges, the sector is having to invest more on compliance, so it is small wonder that reductions in staffing and capital expenditure are on the cards.’

The list of challenges is endless; investment portfolios look wobbly; term and protection insurance will be dragged down by a stagnant property market; investment bond sales look endangered by the CGT changes, and so on.

All doubtless true. However the implication is that before the credit crunch reared its ugly head, everything was tickety-boo in the Life industry. And that simply wasn’t true.

Good times or bad times, the model was broken and the nonsense of paying huge bribes to drag business from one Life company to another was madness personified.

The madness might have been hidden by rising markets, but any company thinking Nirvana is at hand when mortgage offers come back on the table and the FTSE stays north of 6,000 for a month is deluding itself.