U.S. patent application number 11/969301 was filed with the patent office on 2008-05-01 for methods and systems for providing an insurance policy with an inflation protection option.
Invention is credited to Dennis O'Brien.
Application Number | 20080103839 11/969301 |
Document ID | / |
Family ID | 39331430 |
Filed Date | 2008-05-01 |
United States Patent
Application |
20080103839 |
Kind Code |
A1 |
O'Brien; Dennis |
May 1, 2008 |
Methods and Systems for Providing An Insurance Policy With An
Inflation Protection Option
Abstract
This invention provides methods and systems for providing an
insurance policy having an inflation protection option that is
computed at least partially based on information useful in offering
a long term care insurance policy to an individual and at least
partially based on the option for the individual to purchase
additional coverage at a subsequent premium that is computed based
at least partially on the individual's age at a date, which date is
other than the date the option to purchase the additional coverage
is offered, such as the date the policy issued.
Inventors: |
O'Brien; Dennis; (Austin,
TX) |
Correspondence
Address: |
Brown Raysman Millstein Felder & Steiner LLP
900 Third Avenue
New York
NY
10022
US
|
Family ID: |
39331430 |
Appl. No.: |
11/969301 |
Filed: |
January 4, 2008 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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10191737 |
Jul 8, 2002 |
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11969301 |
Jan 4, 2008 |
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Current U.S.
Class: |
705/4 |
Current CPC
Class: |
G06Q 40/08 20130101 |
Class at
Publication: |
705/004 |
International
Class: |
G06Q 40/00 20060101
G06Q040/00 |
Claims
1. A computer implemented method of providing a long term care
insurance policy having a first maximum coverage amount for daily
benefits or aggregate claims, the method comprising: obtaining an
individual's age; selecting a rate of increase; and computing with
a computing device a first insurance premium for a long term care
insurance policy for the individual based at least partially on the
individual's age, the selected rate of increase, and an available
option, offered on specified occasions after issuance and the
option staying available for purchase through expiration of the
long term care insurance policy, for the individual to purchase an
additional maximum coverage amount proportional to the selected
rate of increase, by paying a subsequent premium computed based at
least partially on the individual's age at a date other than the
date the available option is exercised.
2. A computer implemented method of providing inflation protection
for a long term care insurance policy issued to an individual at a
first insurance premium and offering a first maximum coverage
amount, the method comprising: computing with a computing device a
subsequent insurance premium that is based at least partially on
the individual's age at a date the policy issues and a selected
rate of increase; and offering, on specified occasions after
issuance and staying available for purchase through expiration of
the long term care insurance policy, the option to purchase, at the
subsequent premium payable if the option is exercised, an
additional maximum coverage amount proportional to the selected
rate of coverage increase, wherein the subsequent premium is
computed based at least partially on the individual's age at a date
other than the date the option is exercised.
3. A computer implemented method for providing an long term care
insurance policy, the method comprising: obtaining at least one
item of information useful in providing a long term care insurance
policy to an individual; and computing with a computing device a
first insurance premium based at least partially on the at least
one information item, a first coverage amount, and based on an
option available on specified occasions after issuance and the
option staying available for purchase through expiration of the
long term care insurance policy for the individual to purchase an
additional coverage amount at a subsequent premium computed based
at least partially on the individual's age at a date other than a
first date on which the available option is exercised.
4. The method of claim 3, wherein obtaining at least one item of
information useful in providing an insurance policy to an
individual comprises obtaining at least one of: a personal
attribute; a policy limitation; and a rate of increase.
5. The method of claim 4, comprising computing the first insurance
premium based at least partially on the obtained personal
attribute, the personal attribute comprising at least one of: an
age; a gender; and a risk based classification.
6. The method of claim 4, comprising computing the first insurance
premium based at least partially on the obtained policy limitation,
the policy limitation comprising at least one of: a maximum daily
benefit; a maximum aggregate claims payable; a deductible; a
benefit period; and an elimination period.
7. The method of claim 3, comprising offering the long term care
insurance policy at the computed first insurance premium.
8. The method of claim 7, comprising issuing the long term care
insurance policy covering the individual and offering the option to
purchase the additional coverage.
9. The method of claim 3, comprising computing the first insurance
premium at least partially based on the available option that
allows the individual to purchase an additional coverage amount,
which option is offered at predetermined intervals.
10. The method of claim 9, wherein the option to purchase an
additional coverage amount offered at predetermined intervals
comprises being offered annually.
11. The method of claim 10, comprising computing the first
insurance premium based at least partially on the individual being
offered to purchase an additional coverage amount comprising at
least one of: increased maximum daily benefits; and increased
maximum aggregate claims.
12. The method of claim 3, comprising computing the first insurance
premium at least partially based on a lack of restrictions on the
available option that while the policy is in effect would affect
the individuals ability to purchase an additional coverage
amount.
13. The method of claim 3, wherein the first insurance premium is
computed as a fixed premium.
14. The method of claim 3, comprising: selecting a rate of
increase; and computing the first insurance premium based at least
partially on an available option for the individual to purchase
additional coverage proportional to the selected rate of
increase.
15. The method of claim 14, wherein the obtained rate of increase
is selected from a group of rates of increase comprising: a rate
that is equal to the consumer price index; and a rate that is
greater than the consumer price index by one or more selectable or
given percentages.
16. The method of claim 4, comprising computing the first insurance
premium computed based at least partially on the available option
for the individual to purchase an additional coverage amount at a
subsequent premium computed based at least partially on the
individual's age at a date the long term care insurance policy
issues.
17. A computer implemented method of providing inflation protection
for a long term care insurance policy issued at a first premium and
providing a first coverage amount, the method comprising: computing
with a computing device a subsequent insurance premium that is
based at least partially on the individual's age at a date, other
than the date an option to purchase an additional coverage amount
is exercised; and offering to the individual, on specified
occasions after issuance and the option staying available for
purchase through expiration of the long term care insurance policy,
the option to purchase the additional coverage amount at the
subsequent insurance premium payable if the option is
exercised.
18. The method of claim 17, wherein the subsequent insurance
premium is computed based at least partially on the individual's
age at a date the long term care insurance policy issued.
19. The method of claim 17, wherein the option to purchase the
additional coverage amount is offered at a predetermined time
interval.
20. The method of claim 17, wherein the additional coverage amount
offered at the subsequent insurance premium is proportional to a
selected rate of increase.
21. A computer implemented method of providing inflation protection
for a long term care insurance policy having original maximum
coverage amounts of maximum daily benefits or maximum aggregate
claims, the method comprising: obtaining an individual's age;
selecting a rate of increase; selecting a time interval for making
periodic offers through expiration of the long term care insurance
policy to purchase the additional coverage amount at an additional
premium; computing with a computing device an original insurance
premium for the long term care policy comprising an option to
purchase the additional maximum coverage amount to be offered in
accordance with the selected time interval and the selected rate of
increase, the original premium computed based at least partially on
the individual's age at a date the policy issues and not on the
individual's age at a date the option is exercised, the original
maximum coverage amounts, the selected rate of increase, the
selected time intervals for making periodic offers to purchase an
additional coverage amount, and the option to purchase additional
maximum coverage at an additional premium payable if the option is
exercised, wherein the option stays available for purchase through
the expiration of the long term care insurance policy; offering, to
the individual at the original premium, the long term care policy;
and computing the additional premium for the purchase of the
additional coverage amount based at least partially on the
individual's age at the date the policy issued and the selected
rate of increase.
22. A computer implemented method for providing a long term care
insurance policy having original coverage amounts and containing an
option to purchase an additional coverage amount, the method
comprising: obtaining an individual's age; selecting a rate of
increase; selecting a time interval for making periodic offers
through expiration of the long term care insurance policy to
purchase an additional coverage amount at an additional premium;
selecting a first date other than the date offered to purchase an
additional coverage amount, the first date used in determining the
individual's age for the purpose of computing the additional
premium; computing with a computing device an original insurance
premium based at least partially on the individual's age at the
first date, the original coverage amounts, the selected rate of
increase, the selected time interval for making periodic offers to
purchase the additional coverage amount, and the option to purchase
the additional coverage amount at an additional premium payable if
the option is exercise, wherein the option stays available for
purchase through the expiration of the long term care insurance
policy; and offering the long term care insurance policy comprising
the option to purchase additional coverage amounts in accordance
with the selected time interval, the selected rate of increase, and
the individual's age at the first date.
23. The method of claim 1, comprising computing the first insurance
premium based at least partially on a personal attribute, the
personal attribute comprising at least one of: an age; a gender;
and a risk based classification.
24. The method of claim 1, comprising computing the first insurance
premium based at least partially on a policy limitation, the policy
limitation comprising at least one of: a maximum daily benefit; a
maximum aggregate claims payable; a deductible; a benefit period;
and an elimination period.
25. The method of claim 1, comprising offering the long term care
insurance policy at the computed first insurance premium.
26. The method of claim 25, comprising issuing the long term care
insurance policy covering the individual and offering the option to
purchase the additional coverage.
27. The method of claim 1, comprising computing the first insurance
premium at least partially based on the available option that
allows the individual to purchase an additional coverage amount,
which option is offered at predetermined intervals.
28. The method of claim 1, comprising computing the first insurance
premium at least partially based on a lack of restrictions on the
available option that while the policy is in effect would affect
the individuals ability to purchase an additional coverage
amount.
29. The method of claim 1, wherein the first insurance premium is
computed as a fixed premium.
30. The method of claim 1, wherein the selected rate of increase is
selected from a group of rates of increase comprising: a rate that
is equal to the consumer price index; and a rate that is greater
than the consumer price index by one or more selectable or given
percentages.
Description
CLAIM OF PRIORITY
[0001] The present application is a Continuation application,
relating to and claiming priority to U.S. patent application Ser.
No. 10/191,737 entitled "METHODS AND SYSTEMS FOR PROVIDING AN
INSURANCE POLICY WITH AN INFLATION PROTECTION OPTION" having a
filing date of Jul. 8, 2002.
COPYRIGHT NOTICE
[0002] A portion of the disclosure of this patent document contains
material, which is subject to copyright protection. The copyright
owner has no objection to the facsimile reproduction by anyone of
the patent document or the patent disclosure, as it appears in the
Patent and Trademark Office patent files or records, but otherwise
reserves all copyright rights whatsoever.
BACKGROUND OF THE INVENTION
[0003] This invention relates generally to methods and systems for
providing an insurance policy with inflation protection. More
particularly, the methods and systems of the present invention
provide an insurance policy such as for long term care (LTC) with
an inflation protection option that allows individuals, e.g., the
insured, to purchase additional coverage to offset the effect of
inflation on insurance policy limitations.
[0004] Insurance policies typically include coverage limitations
such as maximum coverage for a given period of time or for a given
event. LTC policies, for instance, which insure against the costs
associated with care or supervision needed to assist an insured
with activities of daily living that may result from long term
illnesses or disabilities, normally include maximum coverage
limitations such as maximum payable daily benefits and maximum
aggregate claims payable for any given time period or event. A
problem associated with policies such as LTC policies that include
maximum coverage limitations is that maximum coverage limitations
are determined or specified at the time the policy is purchased.
However, inflation may out-pace the maximum coverage limitations
thereby leaving the insured in an increasingly underinsured
position over time.
[0005] The insurance industry, at least with respect to LTC
policies, has adopted two approaches to address the effect of
inflation on maximum coverage limitations: a level premium funded
percentage increase ("Level Premium") approach and a guaranteed
additional amounts of insurance at attained age rates ("Guaranteed
Additional Amounts") approach.
[0006] With respect to the Level Premium approach to inflation,
maximum coverage limitations are automatically increased annually
at a fixed rate throughout the duration of the policy. The rate at
which the maximum coverage limitations are increased is usually
specified by the insurer and typically ranges between 1% and 5%,
the most common rate of increase being 5%. The rate of increases
may be applied as a simple rate increase or as a compounded rate
increase. A simple rate increase entails adding to the maximum
coverage limitations a percentage of the original maximum coverage,
where the percentage corresponds to the specified rate of increase.
Compounded rate increases increase the maximum coverage at the
specified rate of increase compounded annually. The additional
coverage under the Level Premium approach is funded with a fixed
additional premium above a premium for a similar policy without
inflation protection.
[0007] This approach, however, has several shortcomings. In periods
of high inflation, for instance, the specified rate of increase may
be outpaced by inflation thereby leaving the insured in an
underinsured position. In periods of lower inflation, where the
rate of inflation is less than the specified rate of increase, the
insured will essentially be forced into being overinsured.
Additionally, Level Premium policies lock an insured into paying
the fixed additional premium for the duration of the policy without
the flexibility of being able to opt out from an increase and
thereby out from the additional premium for any year. Moreover, the
fixed additional premium for the duration of the policy is
disproportionately inflated early in the term of the policy as
compared to the risk to the insurer in order to compensate for an
increasing risk as the insured ages. This is disadvantageous to an
insured that, for example, terminates coverage prior to the
completion of the term of the policy.
[0008] With respect to the Guaranteed Additional Amounts approach
to inflation, an insured is granted a right to receive an option to
purchase additional coverage that is offered at specific intervals
in the duration of the policy. Maximum coverage is typically
increased at a rate of increase that is either fixed, e.g., 1%, 2%,
etc., or based on the consumer price index (CPI), and the increases
may be applied either as simple rate increases or as compounded
rate increases. Inflation protection under the Guaranteed
Additional Amounts approach, however, normally includes several
limitations on the continued right to purchase additional maximum
coverage. An insured, for instance, may lose the right to receive
the option to purchase increases in the coverage limitations after
declining a certain number of offers. The additional coverage under
this approach is funded by an additional premium that is computed
based on the insured's attained age at the time the offer to
purchase additional coverage is made.
[0009] The Guaranteed Additional Amounts approach has other
shortcomings as well. Since the additional premium is computed
based on the insured's attained age and since the risk associated
with long term care increases as the insured ages, the additional
premium for the additional coverage becomes increasingly more
expensive for each successive offer. This drawback is especially
unfavorable to an insured that may be on a fixed income or
otherwise cannot afford higher premiums beyond a certain monetary
limit. Such an insured, therefore, may lose inflation protection
altogether because he is not able to pay for additional coverage
and may decline a certain number of offers.
[0010] A need therefore exists for methods for providing inflation
protection for insurance, such as LTC insurance, that is effective,
cost sensitive, and otherwise solves the problems associated with
the existing methods just described.
[0011] This need is also not addressed by existing tools for
analyzing and administering LTC policies. For example, U.S. Pat.
No. 6,014,632, entitled "Apparatus and Method for Determining
Insurance Benefit Amounts Based on Groupings of Long-Term Care
Patients with Common Characteristics," hereby incorporated herein
by reference discusses systems for providing LTC insurance coverage
with variable maximum benefit limitations that are based on the
severity of the health conditions that require long term care.
International PCT Application WO 02/15457, entitled "Computer
Program and Method for Determining the Economic Impact of Long-Term
Care," hereby incorporated herein by reference, provides for a
computer program that assists the user in analyzing the insured and
uninsured impact of a hypothetical fact scenario on an individual's
personal assets. International PCT Application WO 01/50306,
entitled "Decision Support System and Methodology With
Multi-Dimensional Analysis," hereby incorporated herein by
reference, provides systems that allow users to determine the
actual and expected results for long term care insurance based on
data provided to the system. International PCT Application WO
01/69504, entitled "System and Method for Long Term Care Insurance
Administration," hereby incorporated herein by reference, provides
a computer based insurance administration system specific to LTC
polices for use in processing applications, administering claims,
automated billing, etc. The systems and methods discussed in these
documents, however, do not address inflation protection and the
problems associated therewith.
SUMMARY OF THE INVENTION
[0012] It is therefore an object of this invention, among other
things, to provide methods and systems that provide an insurance
policy with an inflation protection option without some or all of
the drawbacks and shortcomings discussed above. Particularly,
methods and systems for providing a long term care (LTC) policy
with an inflation protection option that allows an insured to
purchase additional coverage at a subsequent premium that is at
least partially based on the insured's age that is other than the
insured's attained age at the time the offer to purchase the
additional coverage is made.
[0013] This may be achieved by offering an insurance policy, such
as an LTC policy, with an inflation protection option at a first or
original insurance premium computed at least partially based on
information useful in assessing a risk to insure the individual and
at least partially based on an option that allows the individual to
purchase additional coverage at a subsequent or additional premium,
the subsequent premium is computed based at least partially on the
individual's age at a predetermined date, which age is other than
the individual's age at a date the option to purchase the
additional coverage is offered, such as the insured's age at the
date the policy issued. The information may be obtained by a
variety of individuals, such as by insurance agents,
representatives of the insurance company, human resources employees
of a company, etc. Useful information may include personal
attributes, policy limitations, and a rate or rates of increase.
The option to purchase additional coverage may be offered
periodically, such as annually. The additional coverage includes
increases in maximum coverage limitations, such as an increased
maximum daily benefit, an increased maximum aggregate claims
payable, etc. The first insurance premium may also be based on the
lack of any restrictions on the available inflation protection
option that may effect the individuals ability to purchase
additional coverage, at least while the policy is in effect.
[0014] This may also be achieved by providing inflation protection
for an insurance policy, such as an LTC policy, which involves
issuing an insurance policy at a first insurance premium to cover
an individual at a subsequent insurance premium computed based at
least partially on the individual's age at a predetermined date
that is preferably not the individual's age at a date the option to
purchase additional coverage is offered, such as the individual's
age at the date the policy issued. Offers to purchase additional
coverage may be made at periodic intervals, such as annually, and
the additional coverage may be proportional to a selected rate of
increase.
[0015] Although the insurance policy discussed herein will
generally be a LTC policy, those skilled in the art will understand
that the present invention may be applied to a variety of insurance
policies that have coverage limitations that are adversely affected
by inflation.
BRIEF DESCRIPTION OF THE DRAWINGS
[0016] The invention is illustrated in the figures of the
accompanying drawings which are meant to be exemplary and not
limiting, in which like references are intended to refer to like or
corresponding parts, and in which:
[0017] FIG. 1 is a flowchart of a method of providing an insurance
policy with inflation protection according to a preferred
embodiment of this invention;
[0018] FIG. 2 is a flowchart of a method of providing inflation
protection for an insurance policy according to a preferred
embodiment of this invention; and
[0019] FIG. 3 is a diagram of a system useful in providing an
insurance policy with inflation protection according to a preferred
embodiment of this invention.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0020] Referring to FIG. 1, a method of providing an insurance
policy, such as a long term care (LTC) insurance policy, with
inflation protection, according to a preferred embodiment, begins
with obtaining information useful in providing LTC insurance to an
individual, step #102. This includes obtaining at least one
attribute personal to the individual, step #104, which includes
characteristics that distinguish or otherwise describe the
individual, such as the individual's name, age, gender, a
risk-based classification or classifications, etc. Some personal
information such as age and gender are used in computing LTC
premiums and are usually required. A risk-based classification may
include, for example, whether or not the individual is overweight,
has a chronic health condition such as high blood pressure, or has
a history of adverse medical events such as a stroke.
[0021] Obtaining information useful in providing LTC insurance to
an individual, step #102, in one embodiment, includes obtaining
information regarding policy limitations, step #106. Policy
limitations are generally terms of an insurance policy that limit
the scope of coverage, which for LTC policies include limitations
with respect to the maximum daily benefits, maximum aggregate
claims, a deductible, a benefit period, an elimination period, etc.
In one embodiment, the individual is able to elect to include or
exclude particular limitations, and is able to, for some or all of
the limitations, specify the amount or select from a group of
amounts applicable to particular limitations. For example, the
individual is able to specify a particular maximum amount for the
maximum daily benefits or for the maximum aggregate claims, or
select from a group of maximum amounts therefor. The individual is
also able to specify or select a particular deductible that will be
applied before the insured's claims are paid. A deductible is
generally a threshold amount that the insured is responsible for
above which threshold amount the insurer is responsible. The
deductible can be specified in such terms as a daily amount, a per
claim amount, etc. Similarly, individuals are able to elect, and/or
specify or select an applicable benefit period and/or elimination
period from a group thereof. A benefit period is a time period,
e.g., 30 days, 60 days, 6 months, 1 year, 5 years, etc., in which
covered expenses incurred therein will be the responsibility of the
insurer. An elimination period, much like a deductible, is a
threshold period of time in which expenses incurred are the
responsibility of the insured. In another embodiment, all of the
policy limitations are specified or dictated by the insurer.
[0022] Obtaining information useful in providing LTC insurance to
an individual, step #102, in one embodiment, also includes
selecting a rate of increase for an inflation protection option,
step #108. The inflation protection option grants a right to the
insured to receive periodic offers to purchase an additional
coverage amount at a subsequent premium in order for the insured to
offset the effect of inflation on coverage limitations. The
periodic offers are made available at a first date at predetermined
intervals of time, such as annually, biannually, etc., or at
non-fixed intervals, such as at least once a year, once every two
years, etc. In one embodiment, the offers to purchase additional
coverage are made annually measured from the day the policy issues.
The predetermined time interval may be specified by the insurer or
otherwise selected by the individual. The subsequent insurance
premium is computed at least partially based on the insured's age
at predetermined date, such as the age at the date the policy
issues or some other specified date. However, the predetermined
date is other than the first date which the option to purchase
additional coverage for which the subsequent premium being computed
is made available.
[0023] The additional coverage amount is applied to increase the
amount of at least one of the maximum coverage limitations, such as
maximum daily benefits, maximum aggregate claims, etc. In one
embodiment, the amount of the additional coverage is specified or
selected by the individual at the time the policy is purchased.
Alternatively the amount of the additional coverage is specified or
dictated by insurer. The additional coverage amount is specified as
being proportional to a given or selectable rate of increase or
percentage, e.g., 1%, 2%, etc. Alternatively, the additional
coverage amount is specified as being proportional to a rate of
increase that corresponds to a relevant index useful in determining
a particular rate of inflation. In one embodiment, the relevant
index is the consumer price index (CPI), which can indicate or
gauge inflation in general. Alternatively, the relevant index is
one that is linked to a particular industry, such as an index that
tracks the rate of inflation in a medical services industry. The
rate of increase proportional to a relevant index is specified as
the index or the index plus or minus a given or selectable
percentage. For example, selected rates of increase linked to the
CPI include: the CPI rate, the CPI rate+1%, the CPI rate-1%, the
CPI rate+2, the CPI rate-2%, etc. The additional coverage amount,
e.g., the rate of increase, is applied at a compounded rate.
Alternatively, the additional coverage is applied at a simple
rate.
[0024] The information useful in providing LTC insurance to an
individual obtained at step #102 is input into a computer system,
step #110, such as the computer systems described below. A first
insurance premium to insure the individual is then computed, step
#112. Computing generally denotes determining an amount or a
number, which includes determining, with the use of a computer
system, the first insurance premium using formulas, tables and
charts, statistical data, etc. Alternatively, the first insurance
premium is computed at least in part with the use of a computer
where the computer system is used to generate, for example, tables,
charts, graphs, etc., that are used to determine first insurance
premium. The first insurance premium is computed as a fixed premium
that is set to remain constant for the duration of the policy. It
is anticipated that an insurer may reserve the right to increase
the otherwise fixed premium, thus in such instances the first
premium is computed as a fixed premium with expectation that it
will remain constant for the duration of the policy. Alternatively,
the first insurance premium is computed as a variable premium that
either increases or decreases such that the first insurance premium
may be back or front loaded, respectively. In an alternative
embodiment, a plurality of first insurance premiums are computed,
one for each of a set of predetermined rates of increase, thereby
allowing the individual to view and select a policy based on or
otherwise taking into account the computed first insurance
premiums.
[0025] Computing the first insurance premium includes taking into
account a variety of factors relevant to LTC insurance. In one
embodiment, the first insurance premium is computed or otherwise
determined at least partially based on at least one obtained or
selected item of information useful in providing LTC insurance,
such as a personal attribute, a policy limitation, or a rate of
increase, and at least partially based on the policy including an
inflation protection option such as the one described herein. In
one embodiment, the item of information useful in providing LTC
insurance includes at least one personal attribute, such as the
individual's age, gender, a risk-based classification, etc. In yet
another embodiment, the first insurance premium is computed at
least partially based on the lack of any restrictions on the
inflation protection option that may cancel or otherwise void the
right to receive and or ability to accept subsequent offers to
purchase an additional coverage amount while the policy is in
effect.
[0026] In one embodiment, the first premium is computed with the
following formula: P = t = 1 t = .omega. - x .times. [ P t + ( N t
) .times. ( 1 + C t ) .times. ( 1 + R ) ( t - 1 ) ] .times. ( L t )
.times. ( V t ) t = 1 t = .omega. - x .times. ( 1 - M - E t )
.times. ( 1 + R ) ( t - 1 ) .times. ( L t ) .times. ( V t )
##EQU1##
[0027] where P=the first insurance premium, annually [0028] t=the
year of duration of the policy [0029] .omega.=contract terminal age
[0030] x=the individual's age at the date the policy issues [0031]
P.sub.t=per policy expenses for year t [0032] N.sub.t=claims
incurred for year t [0033] C.sub.t=percent of claims equal to
expenses for year t [0034] R=assumed average rate of increase
[0035] L.sub.t=expected contract years exposed for year t [0036]
V.sub.t=discount factor for duration of policy from beginning of
year t back to the issue date [0037] M=margin percent [0038]
E.sub.t=percent of premium expenses for year t.
[0039] The variable t is the particular year of the policy's
duration, e.g., year 1, 2, 3, etc. The variable x is obtained from
an individual and the contract terminal age, .omega., is a maximum
age the individual can reach based on assumed mortality tables for
lifetime coverage. For example, based on mortality tables for an
individual that is 62 years old, it can be assumed that the
individual can reach a maximum age of 110 years old. The remainder
of the variables are generally based on statistical data derived or
estimated, and stored in a computer system. For instance the per
policy expenses at year t, P.sub.t, claims incurred at year t
(which may or may not account for inflation), N.sub.t, and percent
of claims expenses at year t, C.sub.t, expected contract years
exposed for year t, L.sub.t, discount factor for duration of policy
from beginning of year t back to the issue date, V.sub.t, and
percent of premium expenses at year t, E.sub.t, may be estimated
based on statistical data gathered while administering the
particular type of policy or similar policies, or otherwise
estimated based on reasonable assumptions. The assumed average rate
of increase, R, is specified or set by the insurer based on its
judgment as to an appropriate rate associated with the offered or
index (such as the CPI) and the margin, M, is based on the business
judgment of the insurer. For example, the variables used to compute
the first insurance premium for an individual having an age 62 at
the date the policy issues and a contract terminal age determined
to be 110, the policy having a 90-day elimination period, a 5-year
benefit period and maximum daily benefits of $120 and $90 for
facility care and home care, respectively, and the rate of increase
applied at a compounded rate, according to the formula provided
above appear in Table A. TABLE-US-00001 TABLE A t Lt Pt Nt Vt Et Ct
1 0.9988 34 80.54 1.00 137.39% 4% 2 0.9411 35 102.60 0.94 8.00% 4%
3 0.9044 36 127.11 0.88 10.31% 4% 4 0.8768 37 155.19 0.82 10.31% 4%
5 0.8572 38 188.32 0.77 10.31% 4% 6 0.8384 39 228.24 0.72 8.00% 4%
7 0.8178 40 275.45 0.68 8.00% 4% 8 0.7954 42 355.63 0.63 8.00% 4% 9
0.7714 43 456.46 0.59 8.00% 4% 10 0.7466 44 554.51 0.56 6.00% 4% 11
0.7209 46 641.34 0.52 6.00% 4% 12 0.6943 47 732.21 0.49 6.00% 4% 13
0.6666 48 843.93 0.46 6.00% 4% 14 0.6379 50 975.26 0.43 6.00% 4% 15
0.6082 51 1142.72 0.40 6.00% 4% 16 0.5774 53 1333.30 0.38 6.00% 4%
17 0.5458 54 1491.74 0.35 6.00% 4% 18 0.5134 56 1709.79 0.33 6.00%
4% 19 0.4804 58 1978.13 0.31 6.00% 4% 20 0.4470 59 2287.46 0.29
6.00% 4% 21 0.4134 61 2628.44 0.27 6.00% 4% 22 0.3800 63 2988.03
0.25 6.00% 4% 23 0.3470 65 3363.15 0.24 6.00% 4% 24 0.3146 67
3743.86 0.22 6.00% 4% 25 0.2832 69 4120.23 0.21 6.00% 4% 26 0.2528
71 4482.30 0.20 6.00% 4% 27 0.2236 73 4997.35 0.18 6.00% 4% 28
0.1958 75 5360.08 0.17 6.00% 4% 29 0.1696 78 5590.11 0.16 6.00% 4%
30 0.1450 80 5707.01 0.15 6.00% 4% 31 0.1224 82 5730.38 0.14 6.00%
4% 32 0.1016 85 5533.45 0.13 6.00% 4% 33 0.0830 87 5379.74 0.12
6.00% 4% 34 0.0664 90 5264.46 0.12 6.00% 4% 35 0.0520 93 5182.80
0.11 6.00% 4% 36 0.0397 95 5129.96 0.10 6.00% 4% 37 0.0295 98
5129.96 0.10 6.00% 4% 38 0.0213 101 5129.96 0.09 6.00% 4% 39 0.0148
104 5129.96 0.08 6.00% 4% 40 0.0099 107 5129.96 0.08 6.00% 4% 41
0.0063 111 5129.96 0.07 6.00% 4% 42 0.0038 114 5129.96 0.07 6.00%
4% 43 0.0022 117 5129.96 0.06 6.00% 4% 44 0.0011 121 5129.96 0.06
6.00% 4% 45 0.0005 124 5129.96 0.06 6.00% 4% 46 0.0002 128 5129.96
0.05 6.00% 4% 47 0.0001 132 5129.96 0.05 6.00% 4% 48 0.0000 136
5129.96 0.05 6.00% 4% 49 0.0000 140 5129.96 0.04 6.00% 4%
Assuming a margin M=17.840% and an assumed average rate of
inflation R=3.00%, the yearly premium P=$1556. The variables and
assumptions may be stored, such as in a variable database, and
accessed by a computer system for the purpose of computing a first
insurance premium or premiums.
[0040] In an alternative embodiment, the first insurance premium is
computed by adjusting a premium for an insurance policy without an
inflation protection option to account for the policy with the
inflation protection option. This is accomplished by first
computing a first insurance premium for a variety of variables,
such as personal attributes, policy limits, rates of increase,
etc., comparing the first premiums to premiums for a policy without
the inflation protection option contemplating the same or similar
variables, and storing on a computer system at least one adjustment
factor based on the ratio of the premiums compared. The adjustment
factors are then used by a computer system that is capable of
computing a premium for a policy without the inflation protection
option to compute a first insurance premium. Alternatively, the
computer system will be used to generate tables, charts, graphs,
etc. of adjustment factors for use in manually computing a first
insurance premium. If for the example discussed above a premium for
a policy without an inflation protection option is $1089 and it has
been determined through statistical analysis or otherwise
determined that an appropriate adjustment factor is 30% over the
base premium, the first insurance premium to cover the additional
risk associated with the particular inflation protection option is
therefore $1089+30%=$1556.
[0041] The first insurance premium or premiums is/are displayed or
otherwise presented to the user, step #114. The premium may be
displayed on a display device associated with a computer system
and/or in a printed version. The display and/or the printed version
include the information input into the system that formed at least
in part the basis for the computed first insurance premiums and at
least one computed first insurance premium. The displayed
information can then be provided to the individual in the form of
an offer to purchase an insurance policy having the inflation
protection option at the computed first insurance premium, step
#116.
[0042] If at step #118 the individual does not accept the offer to
purchase the insurance policy the inputted information is either
saved on the computer system for future reference or deleted, and
the steps in the methods described above can be repeated for the
next individual. If instead the individual to whom the offer was
made accepts the offer, the insurance policy will issue at the
computed first insurance premium, step #120. The steps required to
issue a policy vary depending on the types of users for the
inventions described herein. For example, where the user is the
insurer or a party authorized to act on behalf of the insurer, the
policy will issue automatically or at some predetermined time
thereafter, e.g., 30 days, etc. If however the user is an insurance
agent with limited authority to bind the insurer, the policy will
issue only after first being reviewed and accepted by the insurer.
Similarly, conditions can be imposed by the insurer, such as a
physical, etc., that must be satisfied before the policy issues. In
any event, if the policy issues, policy information, such as the
terms and conditions, the information obtained from the individual,
and any other relevant information, such as contact information,
etc., are stored in an appropriate database, step #122, such as an
insured database.
[0043] Referring to FIG. 2, a method of providing inflation
protection for an insurance policy after the policy issues,
according to a preferred embodiment, begins with retrieving policy
information, step #200, and testing the policy information #202.
Testing generally denotes determining whether or not to offer an
option to purchase an additional coverage amount. In one
embodiment, testing includes determining whether or not the policy
is in effect or has otherwise lapsed, step #204. In another
embodiment, testing includes determining whether or not a
predetermined time period, measured from either the issue date of
the policy or from the previous offer, has been satisfied in order
for a periodic offer to purchase additional coverage to be made,
step #206. The predetermined time period is measured such that the
offer can be made annually, biannually, etc., or at non-fixed
intervals, such as at least once a year, once every two years,
etc.
[0044] If at step #206 the predetermined time period is satisfied a
subsequent insurance premium is then computed, step #208. A
subsequent insurance premium, as discussed above, is computed at
least partially based on the insured's age at a predetermined date,
such as the age at the date the policy issues or some other
specified date. However, the insured's age at the predetermined
date is other than the insured's age at a first date, which is the
date the offer to purchase additional coverage for which the
subsequent premium being computed is made available. In one
embodiment, the subsequent premium is computed at least partially
based on the selected rate of increase. It is reasonably understood
to those skilled in the art that the subsequent insurance premium
may be computed based on statistical data gathered while
administering particular policies or similar policies, or otherwise
estimated based on reasonable assumptions.
[0045] After computing the subsequent premium, the option to
purchase an additional coverage amount at the subsequent insurance
premium is offered, step #210. The additional coverage amount is
proportional to one or more given or selected rates of increase,
such as a 1%, 2%, etc., or proportional to a relevant index, such
as the CPI, the CPI+1, CPI-1%, CPI+2, CPI-2%, etc. If at step #212,
the insured accepts the offer to purchase additional coverage, the
additional coverage will be applied to the maximum coverage
limitations, step #214. Applying additional coverage includes
increasing the maximum coverage limitations, such as the maximum
daily benefits and/or the maximum aggregate claims, in a manner
proportional to the given or selected rate of increase and applied
as either a simple rate increase or as a compounded rate
increase.
[0046] For example, assuming maximum daily benefits of $120 and $90
for facility care and home care, respectively, and a rate of
increase of 3% are either specified or selected, Table A
illustrates the increases applied to the maximum daily benefits for
each option accepted computed both as simple rate increases and as
compounded rate increases. TABLE-US-00002 TABLE A Option Simple
Simple Compounded Compounded Accepted $120 $90 $120 $90 1 123.60
92.70 123.60 92.70 2 127.20 95.40 127.31 95.48 3 130.80 98.10
131.13 98.35 4 134.40 100.80 135.06 101.30 5 138.00 103.50 139.11
104.33 6 141.60 106.20 143.29 107.46 7 145.20 108.90 147.58 110.69
8 148.80 111.60 152.01 114.01 9 152.40 114.30 156.57 117.43 10
156.00 117.00 161.27 120.95 11 159.60 119.70 166.11 124.58 12
163.20 122.40 171.09 128.32 13 166.80 125.10 176.22 132.17 14
170.40 127.80 181.51 136.13 15 174.00 130.50 186.96 140.22 16
177.60 133.20 192.56 144.42 17 181.20 135.90 198.34 148.76 18
184.80 138.60 204.29 153.22 19 188.40 141.30 210.42 157.82 20
192.00 144.00 216.73 162.55
[0047] Referring to FIG. 3, a system useful in providing an
insurance policy with inflation protection includes an agent
interface 302 having a processor 304 and associated computer
memory, a display device 306, and an input device 308. The agent
interface 302 is at least one of a programmable calculator, or a
personal computer or special purpose computer having appropriate
software or otherwise designed to compute or assist in computing
first insurance premiums, subsequent insurance premiums, etc.,
according to the methods described herein. The software, in one
embodiment, is installed locally at the agent interface #102,
thereby enabling a user, such as insurance agent, to input
information, such as information useful in providing an LTC policy,
and to compute or assist in computing a first insurance premium for
an insurance policy having an inflation protection option as
described above. The software is proprietary software designed to
provide the methods described herein or, alternatively, standard
software, such as a spreadsheet or a database program, adopted to
perform the same.
[0048] In an alternative embodiment, the agent interface 302 is
communicatively connected to at least one server 314 over a
communications network 316, such as a local area network (LAN), a
wide area network (WAN), the Internet, the World Wide Web (WWW), a
wireless network, or a combination thereof. The server 314 includes
at least one database, such as an insured database 310, and/or a
variables database 312. The insured database 310 includes policy
information for insured individuals, such as personal data,
coverage limitations, relevant dates, inflation protection option,
etc. The variables database 312 includes data necessary for
computing or otherwise determining the first insurance premium,
such as information related to policy expenses, claims incurred,
percent of claims equal to expenses, rates of increase, expected
contract year exposed, discount factors, margin percent, percent of
premium equal to expenses, etc.
[0049] In one embodiment, the agent interface 302 accesses the
relevant database or databases for the necessary information for
computing or otherwise determining the first insurance premium for
a policy with an inflation protection and may update the relevant
databases accordingly. Alternatively, the agent interface 302 may
transmit data necessary to compute a first premium to the server
314. The server 314 equipped with appropriate software computes the
first insurance premium and communicates the computed premium to
the agent interface 302, causing the agent interface 302 to display
at least the computed first insurance premium. Similarly, the agent
interface 302 accesses the insured database to compute a second
insurance premium and to generate offers to purchase additional
coverage at the computed premium.
[0050] While the invention has been described and illustrated in
connection with preferred embodiments, many variations and
modifications as will be evident to those skilled in this art may
be made without departing from the spirit and scope of the
invention, and the invention is thus not to be limited to the
precise details of methodology or construction set forth above as
such variations and modification are intended to be included within
the scope of the invention.
* * * * *