Employers' liability (EL) rates must rise in order to avert another EL crisis, the ABI has warned.
Nick Timothy, ABI policy advisor, said last week that rising claims inflation alongside softening rates would plunge the market further into unprofitability unless rates increased.
He said: "Unless something happens [to stabilise claims inflation] there will be a need for a premium increase. The market will have to change its behaviour."
Claims inflation is estimated to be hovering around 10% year on year, while insurers' rates appear to be either stagnant or decreasing. The EL market's combined operating ratio was 104% in 2004.
Zurich admitted it lowered premium rates in 2005, but said the market should move forward together to avert the massive rate hikes witnessed in 2001 and 2002.
Norwich Union said its EL rates were "neutral" in 2005.
Biba head of technical services Peter Staddon said: "I would get really annoyed with the insurance industry if rates don't rise and we end up with another situation like 2002/2003.
"Insurers will keep reducing rates to maintain market share. What is needed are risk-based premiums which aren't happening. Insurers should stop cutting rates. They are not replenishing their reserves."
Community Broking Group's chief executive, Martin Lewis, said: "You only have to go back three or four years to see where businesses were facing real issues in getting EL cover. It could happen again."
Joe Monk, an actuary with Lane Clarke & Peacock, warned the insurance market not to risk being "complacent" about rate increases.