Global credit crunch not affecting Life Insurance

It appears that it's not all doom and gloom for the entire financial services industry as the global credit crunch continues to bite. Despite credit card applications being declined in record numbers and mortgage products suffering dramatic drops in sales, life insurance sales are not only remaining stable but are actually rising.

With little or no exposure to sub-prime assets, life insurance companies are more than capable of withstanding the current financial uncertainty, and indeed look set to benefit from it. The industry as a whole has reported positive net growth over the last financial year.

Helping the insurance companies' cause is the apparent demise of the mortgage market. Because the number of mortgage products available within the UK has dramatically dropped and lenders have severely tightened their lending criteria, financial brokers are now being forced to seek other ways to ensure a steady flow of commissions to their businesses, and so they are turning to life insurance.

However, they are not cleverly creating a new market for life insurance products but merely picking up on the increased demand for life cover, ironically caused by the credit crunch. The uncertain financial landscape is forcing more people to consider how their nearest and dearest would fare should the worst happen to the major salary earner. As a result more people are taking out new life policies to ensure their families will be financially secure if they die.

According to financial analysts Forbes.com the only real threat to the thriving life insurance sector could come in the form of the customer base being unable to keep up payments because of increasing living costs and other financial obligations, such as rising mortgage and credit repayments.

And it is those rising costs that are causing concern for the rest of the economy. Savings levels are reducing as less cash is available after paying above inflation increases in council tax, utility bills and fuel costs. In recent research carried out by the Post Office almost 5million Britons said that the disproportionate rise in day-to-day living costs meant that they didn't have enough money left to put into savings accounts.

However, many experts stress that in times of economic uncertainty putting money aside for a rainy day is even more important than when the economy is booming. Only one in ten of the population, according to Nationwide, admits to putting away the right amount of money each month.

So, with belts tightening life insurance companies will be hoping that paying the monthly premium is considered one of the most important financial commitments by the majority of their policy holders, and put above all else with the exception of housing costs, otherwise the global credit crunch might just impact on the industry after all.

Andrew Regan is an online, freelance author from Scotland. He is a keen rugby player and enjoys travelling.