Insurance premiums are finally marching upwards to avoid a soft market “bloodbath” according to the annual JP Morgan Deloitte General Insurance Industry Survey.

After years of falling premiums, rising compulsory third party (CTP) and weather-related claims and investment losses stemming from the global financial crisis, insurers have struck back with across-the-board price hikes, signalling an end to nearly a decade of soft pricing.

Financial discipline is back in personal and commercial lines, with insurers pushing premium increases of 8% and 4% respectively in 2009.

“In 2001, rates turned after the bloodbath,” Deloitte actuarial partner Elaine Collins told insuranceNEWS.com.au. “Now we are seeing rates turn before that happens.”

“Profitability collapsed” for insurers in 2009, and while 2010 should see balance sheets back in the black, JP Morgan senior insurance research analyst Siddarth Parameswaran warns competition and continued weakness in the global commercial insurance rates cycle would temper any rate increases.

“This is a real turn in the cycle, since there have been premium decreases in a majority of classes for a number of years,” Mr Parameswaran said.

“The more moderate increases in commercial market rates reflect some financial discipline in the industry, which was willing to respond to the impact of the financial crisis and reduced reserve releases before they were reflected in significant losses.”

Commercial premium rises were felt keenly in commercial motor (up 10%) and directors’ and officers’ (up 6%). Workers’ compensation in WA bucked the trend falling by 6%, while rates in Tasmania, the NT and the ACT fell by 5%. However, premiums are tipped to rebound strongly in 2010.

In personal lines, the largest increases were seen in householders and CTP classes. Queensland CTP rocketed by 14%, more than double the forecast, while CTP in NSW rose 10%, 6% more than expected.

Insurers are expecting momentum from CTP premium rises in 2009 to spill into 2010 as they attempt to staunch haemorrhaging losses. The combined ratio (a measure of profitability) for CTP in NSW was 125%, a loss of $125 for every $100 in received premium. Queensland CTP and householder lines were also poor performers, with combined ratios of 108% and 101% respectively.

Losses in CTP lines were also masked by significant reserve releases in long-tail lines, Ms Collins says.

“Superimposed inflation trends in liability classes appear limited at the moment. However, claim trends in motor have been impacted by the low Australian dollar, leading to increased inflation,” she says.

Combined ratios for domestic classes were 102% on average, while commercial classes were marginally profitable at 95%.

Among the most unprofitable lines of commercial insurance were directors’ and officers’ (109%), WA workers’ compensation (100%), fire and industrial special risks (99%) and commercial motor (99%).

The insurance industry’s combined ratio in 2009 was 101%, up 7% from the previous year.