Herman Schoeman‚ Guardrisk's managing director‚ said insurers that best managed their operational efficiency would emerge as the best performers.
He said the short-term insurance sector's performance would be affected by muted economic growth - projected to be between 2% and 3% in 2013. Margins were also expected to remain under pressure.
The sector was also expecting an improved claims environment‚ which last year was affected by storm damage in various provinces around the country and the fire that ripped through St Francis Bay in the Eastern Cape.
Consumer lapse rates are expected to continue to be stable despite concern about high household debt levels.
"The local short-term sector recorded a relatively modest premium growth in 2012 and margins remained under pressure‚ mainly due to the cost of necessary inputs‚ especially labour and systems‚ and the evolving regulatory environment‚" said Schoeman.
"Until the last quarter of 2012‚ when hail storms (accompanied by torrential rain and severe winds) hit Gauteng and a fire ripped through St Francis Bay in the Eastern Cape‚ the claims environment had been fairly stable‚" he said.
He said regulatory pressure on unsecured debt was expected to increase which meant that the unsecured lending bubble could come under pressure‚ which would affect the significant credit protection insurance sector.
The beleaguered motor book and the industry's attempts to make motor insurance more affordable was still a challenge and would continue to be so for some time to come‚ said Schoeman.
"We will only see this changing as‚ and if‚ the partnership between the transport sector and the authorities strengthens‚ through road safety‚ stricter enforcement for traffic violations and more stringent licensing of vehicles‚" he said.
Schoeman says the insurance sector is watching, with some excitement, the growing alternative energy market.
This sector had taken off in recent months - at least eight projects are currently on the go - and further development was expected in the coming months.
"In fact‚ alternative energy would create an entirely new insurance market‚" he said.
Schoeman said regulatory compliance would continue to impact on costs as insurance companies were forced to implement various financial and non-financial changes in order to comply with the new Solvency Assessment Management (SAM) rules.
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