The year 1998 has been a busy one for new product development and related legislation in the life and health insurance arenas. Much of this activity will lay the groundwork for what’s ahead in 1999.

One of the most interesting developments is the preparation to begin use of the new Annuity 2000 Mortality Table. Adopted by the National Association of Insurance Commissioners, with a suggested effective date of Jan. 1, 1998, this table will affect future payout benefits in annuities and in settlement options under life policies.

Insurers have been permitted to use the new table throughout 1998, but most have spent the year preparing to apply it, starting in 1999. Hence, as we move forward, we’ll see more and more insurers using the table.

This is significant, because Annuity 2000 is based on more current mortality rates than those in 1983 Table "a" and therefore reflects the longer life expectancies of persons in the United States. This should result in lower monthly incomes per $1,000 of amount applied than insurers offer under annuity plans and life settlement options using the older table.

Another development that received attention in 1998 and promises the same in 1999 is Internet marketing. Ground rules for this are still in their infancy, since regulators have not, by and large, focused on the new technology. But one hard and fast rule does exist: Advertising requirements for other media (print, radio and television) shall apply to marketing on the Internet.

Some of the unresolved Internet-related issues include electronic signatures, security, and definition of the type of marketing.

Briefly, the acceptance of electronic signatures is still problematic and goes hand-in-hand with issues surrounding secure transmission over the Internet. Some of the questions we are hearing are:

• If an agent is not involved in the transaction, is the product subject to the mass marketing rules?
• If an agent is involved, is the transaction considered an individual sale, rather than mass marketed sale, even though there is no face-to-face contact between agent and applicant?
• Will new regulations come into play for Internet sales? (Watch 1999 for new developments here.)

On the health side, stand-alone critical illness insurance products are proliferating. The most popular market for these seems to be the workplace. But progress varies by state.

At this writing, for instance, Connecticut, Georgia, Iowa, Pennsylvania and Utah will not accept the "single payment" concept for this product. In addition, Massachusetts’ Non-Group Health Insurance Law appears to bar the product, since the coverage does not fall in a permitted category. And New Jersey will not allow specified disease type policies. All the other states will accept this product concept, but there is considerable variation among them regarding the acceptance of waiting periods, survival periods and limitations of the cancer benefit (if cancer is covered).

As for new mandated coverages, in 1998, the focal point for health insurers in most states was mandated diabetes management, including coverage for training of diabetics (diet and medication) and non-prescription supplies (blood test machines and strips). Managed care plans also encountered a new mandate, one requiring them to give women the right to see both obstetrician-gynecologist and their primary physician.

In another area, a trend seems to be developing among health insurers to cover preventive care and healthy life style services as part of the cost containment strategy, even though these services are not mandated.

On the life side, variable product development has been lively. The new variable annuities often include a waiver of surrender charge provision; this waives the surrender charge if the owner is terminally ill, or, in some cases, in a nursing home. In some states, the regulatory impact of this waiver benefit is that the insurer must put up an extra reserve if it holds the cash surrender value as the reserve.

Regulatory requirements for equity indexed products have not changed over the past year, but I believe scrutiny of these products will be more thorough in the future due to the effect of the stock market volatility on already approved products. This volatility in performance caused a decrease in the participation rates of many products. How consumers will receive this has yet to be determined.

Looking to 1999, regulatory issues will probably focus on Internet sales and initiatives on how to provide health insurance for the growing number of uninsured. Consumer complaints regarding managed care will also focus the attention of regulators, as will disclosure issues for equity-indexed products.