The mortgage market crisis could hurt life insurance and annuity product performance, a LOMA researcher warns in a new report.

In addition to cutting demand for new life policies, the crisis increases the likelihood that life policyholders will borrow against policies, let policies lapse or sell policies through life settlements, Jean Gora, research manager at LOMA, Atlanta, writes.

Consumers facing household financial trouble also will be less likely to buy new annuities, contribute to existing contracts, or leave money in the contracts, Gora writes.

Continuing investment market turmoil could cause hedging costs to skyrocket, and a return to high inflation rates could cause customers to flee from fixed-rate products, Gora writes.

But Gora notes that stable-value sub-accounts in 401(k) products could do better if individual participants suffer losses in stock or bond sub-accounts.

American Council of Life Insurers, Washington, has not heard member companies reporting that they are seeing any of the trends Gora has described, according to ACLI spokesman Whit Cornman.

“Traditionally, during tough times people have turned to stable vehicles such as life insurance,” Cornman says.

The factors having the biggest effect on the economy and on spending are the rising cost of gas, food and the rising cost of transporting goods to market, and not from the mortgage market turmoil, according to Frederick S. Townsend, president of the Townsend Independent Actuarial Research Alliance, Wolcott, Conn.

Rising costs are hurting lower-income consumers more than they are hurting the higher-income consumers who typically buy life and annuity products, Townsend says.

“People who are buying variable annuity or universal life insurance products have money to spend,” Townsend says.