Premiums will rise and underlying profitability should improve in domestic and commercial classes in coming years, according to the latest General Insurance Barometer from JP Morgan and Taylor Fry.

“The insurance industry has just seen a turn in the cycle,” JP Morgan Insurance Analyst Siddharth Parameswaran said. “Underwriters are getting stronger in their rhetoric on the need for rate increases, and have finally matched their words with some action in commercial lines prices.

“We expect stronger action going forward.”

Premiums in commercial classes are expected to rise 5-6% this financial year and the next as the hardening momentum continues, according to survey results.

Commercial rates overall increased 3% last financial year after falling 1% the previous year. 

“While not all commercial classes saw an increase in premiums above inflation, they were largely positive and this trend is expected to strengthen into [this year],” Taylor Fry Principal and Senior Actuary Kevin Gomes said.

Domestic class rates, excluding compulsory third party (CTP), gained 4% last financial year, up from a 3% rise a year earlier.

The combined operating ratio for commercial classes deteriorated to 103%, driven by liability classes, from 101% in 2016.

Domestic combined operating ratios improved to 82% from 90%, mostly driven by CTP classes.

“In some categories, particularly domestic and commercial motors, claims size inflation is causing concerns for profitability,” Mr Gomes said.

“The directors’ and officers’ class also continues to cause concern.”

See ANALYSIS.