Annualized life-insurance premium sales fell 23% in the first half of the year, the steepest slump since 1942, as consumers coped with the recession by cutting back on insurance, or gravitating to the less-expensive products, according to a sales survey.

The rate of decline in the second quarter slowed from the quarter before, giving "reasons to be hopeful" that sales will improve, said Ashley Durham, a senior analyst at Limra International, which released the figures Monday.

Life insurers have been battered the past year by billions of dollars in investment losses and write-downs amid the slumping stock market. Variable life insurance products, which are sensitive to equity market levels, slumped the most of all life insurance products, and variable annuity products took the biggest hit among annuities in the first half of the year.

Industry-wide life insurance premium sales fell 20% in the second quarter after a 26% drop in the first, said Limra.

Policy counts continued to drop, down 4% in the second quarter and 6% in the first half. Every product declined in the most recent period except universal life, which increased 8% in terms of policies sold, though the total face amount dropped 11% in the second quarter. Universal life is generally purchased with ongoing premiums that earn interest. Face amounts of all types of life insurance policies sold dropped in the first half.

Variable sales suffered most, down 50% in the second quarter and 55% in the first half. Whole life and term life insurance again were the most resilient, both posting sales declines in the low single digits in both periods.

The pattern was the same for annuity sales, which fared better for fixed annuities than for variable.

Limra said that 40% of companies were able to increase their total individual life sales in the second quarter over the previous year. Yet in the first half, the policies that were sold were slightly smaller.

The data come 10 days after Limra said quarterly individual annuity sales dropped 11% to $60.5 billion and were off 9% from the first quarter. The drop put the first half's decline at 3% to $126.8 million, with the 39% jump for fixed annuities nearly offsetting the 24% drop for variable annuities. Still, Limra research director Joe Montminy noted variable-annuity sales rose from the first quarter as sales "have a tendency to follow the stock market."

Variable annuities had been among the biggest concerns for the life-insurance industry as the stock market slumped because such policies carry guaranteed minimum returns. Without a rebound, observers were worried if annuity sellers would be able to make good on the policies without falling into dire straits.

-By Joan E. Solsman and Lavonne Kuykendall, Dow Jones Newswires; 212-416-2291; joan.solsman@dowjones.com