On a grey, rainy day in Sydney last week, insurance analysts gathered in a plush investment bank boardroom and tried to smile as they delivered their first media briefing for the year – but the news was as resoundingly glum as the weather.

“Profitability is expected to deteriorate in the coming years for Australian insurers, in part driven by soft premium rates providing downward pressure on growth,” Taylor Fry Senior Actuary Kevin Gomes said while launching the latest JP Morgan/Taylor Fry General Insurance Barometer.

The big drops are in commercial rates, which fell 6% last year and are forecast to slip 4% this year. In fire and industrial special risks insurance – the main property cover for business – there were reductions of 12% last year.

Rates for public liability fell 6% and professional indemnity 5%.

Taylor Fry Consulting Actuary Sharanjit Paddam says insurers face challenging times.

“From an insurer’s point of view, it’s looking very tough,” Taylor Fry Consulting Actuary Sharanjit Paddam told the meeting. “Your big growth segments have been slowing down.”

JP Morgan Senior Insurance Analyst Siddharth Parameswaran says despite strong profits last year, Australia’s insurance industry has reached a turning point and faces rising competition and claims pressures, prompting weaker growth prospects and premium rate reductions.

The only good news this year is for consumers, who may see premiums fall from the high levels reached after the Queensland floods and cyclones of recent years.

Personal lines rate growth is expected to slow to 1% this year from 2% last year. This compares with growth of 8% in 2013.

Despite this, the report predicts the industry’s combined operating ratio will remain steady at 87%.

In personal lines, the ratio improved last year to a “very strong” 86% from 89% in 2013.

Commercial classes deteriorated to 91% last year from 90%.

While last year saw strong profitability driven by previous rate rises and a benign catastrophe period, overall lapse rates were high at 20%, due to the internet offering consumers more choice, Mr Parameswaran says.

Low investment yields are another continuing concern. Ten-year bonds today return 3%, compared with 4.5% a year ago.

“From some insurers, we are seeing an increased appetite for risk assets, and it’s just because they can’t get the yields they used to,” Mr Parameswaran said.

Investment income expectations have reduced “significantly” from previous years, when this stream formed “a huge part” of insurers’ profits.

Unsurprisingly, competition tops the list of industry concerns.

Some 69% of underwriters consider competition, rates and excess capacity as their leading worry, up from second place last year, when it trailed behind regulation.

About 75% of brokers say excessive competition on rates is their key concern, up from 43%.

Mr Paddam says increased competition is coming from overseas banks and also reinsurance sources such as the new direct insurance partnership between the local arm of Berkshire Hathaway and Steadfast Group, which may worry groups such as Suncorp.

Technology is a major concern for 50% of underwriters, double the percentage of 2013.

On the upside, Mr Gomes says technology’s biggest impact is the potential for policies to cover new risks, including cyber threats, transport sharing companies such as Uber, home sharing and drone aircraft.

Insurance products, ratings, distribution and claims management are all affected by technology, the report says.