Despite strong profits last year, the Australian insurance industry is at a turning point and now faces weaker growth and premium rate reductions, according to the latest JP Morgan/Taylor Fry General Insurance Barometer.

Increasing competition and claims pressures are driving the downturn, the annual report on the state of the general insurance industry says.

JP Morgan Senior Insurance Analyst Siddharth Parameswaran says previously strong rate trends in personal lines – especially in home insurance – are now falling away, while commercial rates will deteriorate in the next couple of years.

“We think profitability has peaked about now and on an underlying basis, we think the industry faces some tougher times,” he said.

“We think growth is likely to really come off from here,” he said, adding that the last half of last year was “about as good as it gets”.

“Personal lines rate growth was 8% in 2013 and is down to 2% now,” he said.

Commercial rates fell 6% last year, and the barometer forecasts a further 4% fall this year.

Both insurers and brokers forecast lower rate growth, with three-quarters of the brokers surveyed saying excessively competitive rates are their key concern.

Also see ANALYSIS