Excessive competition and soft market are the number one worry for Australian brokers, a new report has shown, and the rates are expected to only get worse over the next two years.
The 2014 JP Morgan-Taylor Fry General Insurance Barometer has found three-quarters of brokers are worried about the effect of an excessively competitive rates environment, up from just 43% the previous year.
Staff retention has also grown in concern, with almost two-thirds of brokers worrying about it.
The report found an average reduction of 6% in rates for commercial lines, with fire and industrial special risks recording one of the largest falls, of 12%.
“The industry is expecting negative commercial rate trends for both 2015 and 2016,” the report states.
“The 2015 outlook for the Australian economy appears relatively weak, with similar sub-par growth trends observed in 2014 likely to be seen in 2015.
“For Australian insurers this should mean weaker growth prospects and increasing competitive and claims pressures.”
The report’s researchers say that insurance companies must keep innovating to find new risks to insure.
“Examples of growth into new areas include growth in cyber insurance and pet insurance,” they say.
“It is notable that both these are being pioneered by overseas insurers operating here either through their Lloyd’s or domestic licence. As such, the large domestic insurers are largely not partaking in that new growth at the moment.”