Filing of life insurance policy forms, both traditional and innovative, has improved a great deal in the latter part of the century. But, going forward, there may be new hurdles to cross, some involving point-of-sale documents. Before examining the potential trouble spots, it is helpful to understand how filing issues get resolved by reviewing the filing history of the past two decades.

In the early 1980’s, when indeterminate premium, universal life/interest sensitive whole life products were introduced, they were considered "new and unusual" and controversial. That was a key reason why it took months to get the products approved in many states.

Simply put, the regulators were unfamiliar with the "unbundling" of the benefit structure in the policies, and therefore needed time to develop a framework for dealing with it.

Since then, state regulators have developed guidelines, passed legislation, and become more familiar with the product, with the result that the review process was simplified.

When the dust started settling from the UL/ISWL storm, the industry started adding new twists. Examples include variable loan interest rates, interest-indexed provisions, joint-and-last survivor benefits, no lapse provisions, and accelerated death benefit provisions. Once again, we saw a flood of legislation from regulators. And again, getting these products to the marketplace became challenging.

Specifically, states requested advertising materials, a company’s investment philosophy, board resolutions, and various disclosure documents they would not ordinarily review.

Now, as we approach the new millennium, these products ­ with all their twists ­ may be considered the more traditional ones of the era, and they may receive less regulatory scrutiny than in the past. Several states have, after all, simplified the filing process by developing checklists, or publishing guidelines to help companies determine if the forms are in compliance with state requirements before submission.

Other states, such as Colorado and Michigan, exempt the form filing of UL products. And states such as South Carolina, New York and Texas are inviting companies to attend filing workshops and seminars to teach the industry the "right way" to submit these products to their states.

What’s more, we have seen states go online with websites and e-mail addresses, in moves to open up alternative lines of communication between the company and regulator.

Considering all of this ­ the stability of the traditional product lines, and the developing open communication between insurance companies and states ­ one may wonder if anything could hinder the product approval process going forward, thus causing delays in getting a product to the market.

The answer, in a word, is "yes".

As I see it, the documents that are used at point of sale could be the hindrance.

These point-of-sale documents, such as advertising material, applications, and sale illustrations, are receiving greater scrutiny than ever before. Here are some areas of current activity.

Advertising. Although filing requirements for advertising have not changed as much as other rules over the years, several states are known to request review of the sales material upon review of the policy. If the advertising has not been developed at the time of the policy filing, the company should make a note to file its advertising in those states upon completion of the material.

Application for Insurance. Today, we are filing more state variations on life insurance applications (both fully underwritten and simplified) than before.

The problems in this area vary by state. Some states require fraud-warning statements verbatim with statutory language for instance. Others have unique positions on the wording used to phrase an AIDS/HIV question. Medical questions asking about blood disorders may require variations. And some states vary on the wording of the medical authorization and notice of information practice. Also, states may require changes in statements in the past (and previously approved), if the statements no longer conform to the requirements of state statute.

Sales Illustrations. Sales illustrations have become the target of regulatory review since states’ adoption of the National Association of Insurance Commissioners Life Insurance Illustrations Model Regulation.

Several states now require traditional life insurance product filings to include statements in the filing letter regarding the use of the sales illustration with the product, along with the actual submission of the illustration. An illustration actuary must provide certification, with the policy filings, to assure conformity with the Actuarial Standard of Practice for Compliance with the Model Regulation.

And, if an illustration system is not fully developed and tested for compliance by the time the product is ready to be filed, the approval process for the product may be delayed.

While life insurers and insurance regulators look for ways to improve consumer understanding of the life insurance product (whether a "traditional" or a "new and unusual"), we must recognize that new concerns regarding disclosure, application questions (e.g., genetic testing), and solicitation materials may develop.

These new concerns may result in a change to the industry’s current practices, leading to a standard the regulators believe is more appropriate for the particular product being filed.