The insurance industry expects rate increases across all lines this year, according to the latest JP Morgan/Taylor Fry General Insurance Barometer.

But insurers face competition from overseas companies, while the internet gives consumers opportunities to shop around, the report says.

Staff issues are brokers’ main worry, with 100% of survey respondents concerned about employee retention and a lack of new blood in the industry.

Fewer catastrophes last year reduced the industry’s combined ratio for domestic lines to 89% from 98%, and for commercial to 98% from 106%.

Respondents forecast the overall ratio will improve to 90% this year from 98%, although they were questioned before January’s disasters.

JP Morgan Insurance Analyst Siddharth Parameswaran says the industry expects it will still have a reasonable year.

Household premiums are predicted to rise 12% this year and domestic motor will increase by 4%.

Compulsory third party (CTP) is expected to rise 6% in NSW and 7% in Queensland.

In commercial lines, they expect fire and industrial special risk (ISR) to rise by 7%, commercial motor by 4%, public and product liability by 3%, professional indemnity by 3% and directors’ and officers’ cover by 4%.

Workers’ compensation in WA is expected to rise by 4% and rates for Tasmania and NT could increase 6%.

Mr Parameswaran says last year’s improved ratios mark a deterioration in long-tail lines, where low interest rates can make a substantial difference to returns if premiums are not increased.

Brokers reported public and product liability as their most profitable class last year, followed by CTP and fire/ISR. Workers’ compensation and domestic motor vehicles were the least profitable classes.

Mr Parameswaran says low interest rates abroad are bringing foreign insurers to Australia.

“Although investment yields are falling here, at least they are positive,” he said.

Taylor Fry director and Senior Actuary Kevin Gomes says the internet is growing as a distribution channel at a faster rate than insurers expected and presents a challenge because consumers can compare quotes.

He says although improved data collection offers scope for significant improvements in underwriting, it can also undermine insurers’ edge. “Other institutions may know more about their customers than they do.”