Missouri's Requirements Regarding Variable Material Combinations
Remember factorials? Brush off your 9th-grade math book, because [Missouri recently began requiring that companies report the total number of form combinations that are possible, given all the text bracketed as variable material.]
We have received several inquiries regarding our experience and recent e-mail list exchanges have suggested there is much confusion out there. However, it's not as daunting as it may sound. The number indicated should represent the number of TYPES of insurance (on the life side), or types of PLANS (on the health side), being offered, according to a representative of the Missouri Department of Insurance, Financial Institutions, and Professional Registration. So, for example, on a variable annuity contract with lots of bracketing of the usual items on the specifications page, it's a "1" because it's a variable annuity with a particular set of charges that happen to be variable. One type of insurance.
A variable annuity contract with six optional riders, each of them bracketed? Still a "1." Still a variable annuity. It is not the number of items bracketed that they care about, but whether additional types of products are created by the use of bracketing.
Of course, it may not be as hard as it sounds, but it isn't completely easy either. There is room for error. The variable annuity with the six riders could be identified as a "6" (although we believe the Department would prefer a "1"). But let's say five of the riders address tax-related issues, and one offers Guaranteed Minimum Withdrawal Benefits. A reasonable person could identify this as "2" types of insurance being offered: a plain VA and a VA with GMWB.
Ok, so what if you're wrong? No worries. The number designation is not a compliance issue. The Department is not presently regulating the assigning of the number of combinations; it's just requiring that it be calculated. However, because of this new requirement, they do seem to be looking more carefully at variable material, so other problems are coming to light for some companies.
We specifically asked if an explanation accompanying the number might be helpful for the reviewer? Answer: No, just the number, please.
By way of context, the Department is using the information it collects to identify trends. The rule was inspired by the overwhelming amount of bracketing on health policies being filed recently, where it’s clear that a wide variety of plans, offering a wide variety of benefits, is being offered through one "form." So, be careful with variable material, prepare it well, and assign the number of types/plans of insurance as accurately as possible, but do not lose sleep over whether this new requirement will result in your file being closed. All else being correctly done, it will not.
