Insurance premiums tipped to jump as claims rise and profits sink

Insurance premiums for professional indemnity insurance, directors and officers insurance, workers compensation and commercial vehicle insurance are tipped to rise after a horror year for the sector.

The forecasts, contained in a report by accounting firm Deloitte and investment bank JP Morgan, come as the insurance sector struggles to recover from a disastrous 2009 financial year, when industry profits fell due to increased claims, catastrophes and increased competition.

Commercial insurance lines (including building, vehicle and director’s insurances) are tipped to see an average rate rise of 6%, while personal lines (vehicle and home and contents insurance) are tipped to climb 7%.

This follows an average 4% jump in commercial premiums in 2009 and an 8% jump in personal premiums.

JP Morgan senior insurance research analyst Siddharth Parameswaran says the increase in commercial premiums was felt most at the small and medium end of the business market.

He says the new increases for 2010 mark a real change in the sector’s pricing cycle, which has helped business customers over the past few years.

“This is a real turn in the cycle since there have been premium decreases in a majority of classes for a number of years. We do believe however that this will be tempered by increased competition in personal lines, and a continued weakness in the global commercial insurance rates cycle.”

The biggest increases will be seen in directors and officer’s insurance (tipped to jump 9% this year) and professional indemnity insurance (tipped to jump 8%).

Industry actual and expected premium rate movements: