Australian general insurers are set for a lean year according to analysts who believe the industry will be hit by falling profits and further job cuts.

Australian-based business analyst Ibisworld has released a report, Keeping out of trouble: Opportunities for 10 industries under the pump, which notes the twin effect of increasing insurance claims combined with falling investment income.

“Insurers’ bottom lines continue to take a battering as higher claims weaken underwriting profitability and the financial crisis continues to vaporise investment earnings,” the report said.

Despite a general trend toward rising premium rates, lower revenue and higher claims are forecast to drive general insurance industry profitability down to 6.2% this financial year, six percentage points lower than 2006/07.

Ibisworld has forecast financial year general insurance industry revenue to decline 1.8% as growth in premiums is offset by a further decline in investment income.

The firm expects local employment across the health and general insurance industries to decline by 2.6%, or almost 1100 jobs across both sectors.

“Operators within both of these industries have undertaken significant headcount reductions in order to cut costs, and there are more job cuts to come,” the report said.

Despite those figures, Ibisworld Senior Analyst Richard Jeremiah says the general insurance industry continues to perform relatively well.

“It’s tough to make a dollar, but nothing is out of step,” he told insuranceNEWS.com.au. “There’s nothing there that is a longer-term issue – it’s just a combination of soft market conditions and bad investments that have been a bit of a disaster, but the insurers always get through it.

“These conditions just exacerbate the cyclical nature of the general insurance industry, but for the rest of financial services it’s been a big problem.”

Ibisworld claims disciplined pricing and “sensible cessation policies are a priority for general insurers, with a return to adequate pricing paramount to increased industry profitability. General insurers must continue to cut administrative expenses.”