The disaster that is surrounding the life insurance sector shows little signs of slowing down, as new figures released revealed that policies have dropped by 40% in the first half of 2009.

The latest data, circulated to member companies by the Irish Insurance Federation (IIF), follows April’s statistics from Life Strategies that displayed a 45% decline in life insurance purchases for the first quarter.

However, the new numbers do appear more positive because they ignore the nose-diving 'investment only' business, which is not measured by the IIF, but which is measured by Life Strategies.

Lump sum hit hard

The negative results come as the investment-conscious and the out-of-pocket continue to give life insurance products a wide berth.

Lump-sum life insurance products were the single worst hit so far this year, with sales plummeting nearly 67% to just over €443 million, even though life insurers attempted to persuade investment-shy consumers into cash and other secure funds.

The second biggest drop in the market was in regular premium pensions, where sales were down almost 44% to €215 million, mirroring the sharp decline in job creation, as well as the 'wait and see' attitude adopted by employees who have no pensions or future savings.

However, the life industry still managed to generate premiums with a yearly total of €494 in the first half off the year, despite the fall off.

Tom Barry, a life Insurance boss, said that the life sector will be able to cope with the drop and the recession: "If you run a shop and if you don't sell something this week you don't make any money.

"Life insurance companies aren't like that. We have a big store of old business, we have millions of assets under management, so our starting position is not zero. New business is required, but not required in the very short term."

Tax that is taxing

Despite this positivity, the insurance industry has yet to report sightings of green shoots, and any chances of a recovery this year will not be helped by the ongoing arguments over a soon to be introduced 1% levy on all life insurers’ sales.

Barry commented on the levy: "Applying the levy to us and not to other companies offering financial products creates an uneven playing field and we'd like to see that sorted out."

However, he insists that even if investment products from insurance companies are subject to the 1% levy and those offered by stockbrokers and banks aren't, insurance companies won't pull out of the investment markets, as it just creates a tougher challenge.

"It's a 1% levy the return from an investment could be much higher than that so you have to see it in that context. There'll still be a market there, it'll just be tougher".

Ending on a positive note, Barry stated that he refused to become another victim of the economic crisis, and is ignoring the IIF’s prediction that the outlook for insurers is 'bleak' and that their futures are 'at stake.'

"Tax changes and pension legislation changes can have short-term effects, but the long- term effect is that we have an ageing population and more pensions are required. The growth will come," he confidently stated.