Insurance premiums are forecast to rise this year, with gains in domestic and commercial classes, according to the latest JP Morgan Taylor Fry General Insurance Barometer.
Domestic classes are expected to increase 3%, in line with gains last year, with NSW compulsory third party (CTP) to jump 13% and motor and home tipped for 4% increases.
Queensland CTP rates are expected to slide 15% due to scheme changes.
In commercial classes industry players expect a 2% rise, after rates fell 1% last year, according to the annual survey of major underwriters and brokers.
“Underlying pressures on combined operating ratios [last year] are leading to premium rate increases in domestic and commercial classes,” JP Morgan Insurance Analyst Siddharth Parameswaran said.
“Australian insurance companies may receive slight tailwinds from the economic cycle for growth and profit prospects, and potentially economy-led upward pressure on premium rates and interest rates.”
Inflation, and to what extent this is offset by the other factors, remains a key risk, he says.
The overall combined operating ratio improved to 92% last year from 94%, but the headline figures hide an underlying deterioration after claims in 2015 were driven higher by catastrophes.
In domestic classes the combined operating ratio improved slightly to 90% from 91%, while in commercial insurance classes the ratio moved to 101% from 106%.
Combined operating ratios were still too high for the industry not to act on pricing, JP Morgan and Taylor Fry say.
“Our findings show that concerns of insurers and brokers are remaining fairly consistent since 2015, with competition, rates and capacity the main concerns,” Taylor Fry Principal and Senior Actuary Kevin Gomes said.
Article source: http://www.insurancenews.com.au/local/premiums-tipped-to-rise-as-commercial-markets-turn