U.S. patent application number 13/854516 was filed with the patent office on 2013-11-14 for system and method for pool risk assessment.
The applicant listed for this patent is Genworth Financial, Inc.. Invention is credited to Rebecca Conway JUSTICE, David KIM, Sena KWAWU, Robert LIN.
Application Number | 20130304669 13/854516 |
Document ID | / |
Family ID | 32988106 |
Filed Date | 2013-11-14 |
United States Patent
Application |
20130304669 |
Kind Code |
A1 |
KIM; David ; et al. |
November 14, 2013 |
SYSTEM AND METHOD FOR POOL RISK ASSESSMENT
Abstract
A system and method for assessing risk is provided. The method
comprises determining an investment index associated with
investment by an insurance company in an insurance pool. Next, the
method comprises determining a return index associated with an
expected return to the insurance company from participating in the
insurance pool; and determining a benefit index based on the
investment and return indices. The system for assessing risk
comprises an assessment module for assessing risks associated with
an insurance company's participation in an insurance pool based on
at least one of: an investment index associated with the costs of
participating in the insurance pool, and a return index associated
with the benefits of participating in the insurance pool.
Inventors: |
KIM; David; (Webster,
NY) ; LIN; Robert; (Lynchburg, VA) ; JUSTICE;
Rebecca Conway; (Lynchburg, VA) ; KWAWU; Sena;
(Lynchburg, VA) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Genworth Financial, Inc.; |
|
|
US |
|
|
Family ID: |
32988106 |
Appl. No.: |
13/854516 |
Filed: |
April 1, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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10393272 |
Mar 21, 2003 |
8412600 |
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13854516 |
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Current U.S.
Class: |
705/36R |
Current CPC
Class: |
G06Q 40/06 20130101;
G06Q 40/025 20130101; G06Q 40/08 20130101 |
Class at
Publication: |
705/36.R |
International
Class: |
G06Q 40/06 20060101
G06Q040/06 |
Claims
1-37. (canceled)
38. A method for assessing risk, the method implemented on a
computing device using a tangibly embodied computer readable
medium, the method comprising: determining, by the computing
device, an investment index associated with investment by an
insurance company in an insurance pool, the insurance pool being
constituted by member insurance companies each respectively
contributing a predetermined amount of respective capital to the
pool, and the investment, of said insurance company, being the
respective capital contributed by said insurance company;
determining, by the computing device, a return index associated
with an expected return to the insurance company from participating
in the insurance pool; and determining, by the computing device, a
computed index based on the investment and return indices.
39. The method of claim 38, the computed index is a benefit
index.
40. The method of claim 38, the return index comprises the product
of a total casualty index, the insurance company market share
index, and a policy amount index.
41. The method of claim 38, the computed index comprises the
difference between the investment and return indices.
42. The method of claim 38, further comprising entering into the
insurance pool if the computed index is greater than predetermined
value.
43. The method of claim 38, further comprising the step of
refraining from participating the insurance pool if the computed
index is less than a predetermined value.
44. The method of claim 43, wherein the predetermined value is
based on the expected costs of not participating in the insurance
pool.
45. The method of claim 38, the investment, return, and benefit
indices are determined by an assessment module.
46. The method of claim 38, the risk assessed is based on at least
one region.
47. The method of claim 46, at least one region comprises a high
risk region.
48. The method of claim 38, at least one of the investment index,
the return index, and the computed index is determined using
stochastic modeling/simulation.
49. The method of claim 48, the stochastic modeling/simulation
comprises Monte Carlo simulation.
50. A method for assessing risk, the method implemented on a
computing device using a tangibly embodied computer readable
medium, the method comprising: determining, by the computing
device, an investment index associated with investment by an
insurance company in an insurance pool, the investment index
reflecting an amount of capital paid by an insurance company to
participate in the insurance pool, and the insurance pool being
constituted by member insurance companies each respectively
contributing a predetermined amount of respective capital to the
pool, the amount of capital being the respective capital paid by
said insurance company; determining, by the computing device, a
return index associated with financial activity of the insurance
pool, the return index reflecting an amount of capital from the
insurance pool; and determining, by the computing device, a
computed index based on the investment and return indices, the
computed index comprises the difference between the investment and
return indices; and the return index calculated based on the total
casualty index, the insurance company market share index, and a
policy amount index.
51. The method for assessing risk of claim 50, the return index
comprises the product of the total casualty index, the insurance
company market share index, and the policy amount index.
52. The method for assessing risk of claim 50, the return index
associated with financial activity of the insurance pool is in the
form of an expected return to the insurance company from
participating in the insurance pool.
53. A method for assessing risk, the method implemented on a
computing device using a tangibly embodied computer readable
medium, the method comprising: determining, by the computing
device, an investment index associated with investment by an
insurance company in an insurance pool, the investment index
reflecting an amount of capital paid by an insurance company to
participate in the insurance pool, the insurance pool limited to a
predetermined geographic region, the insurance pool being
constituted by member insurance companies each respectively
contributing a predetermined amount of respective capital to the
pool, the amount of capital being the respective capital paid by
said insurance company; determining, by the computing device, a
return index associated with an expected return to the insurance
company from participating in the insurance pool, the return index
reflecting the amount of capital received by the insurance company
from the insurance pool; and determining, by the computing device,
a computed index based on the investment and return indices, the
computed index comprises the difference between the investment and
return indices; and the return index comprises the product of a
total casualty index, the insurance company market share index, and
a policy amount index; the investment index comprises the product
of a casualty index, an insurance pool market share index, an
insurance company pool share index, and a policy amount index; the
investment, return, and benefit indices are determined by an
assessment module of the computing device; each of the investment
index, the return index, and the computed index is determined, by
the computing device; and the method further including correlating
the insurance pool with corresponding percentage market shares in
the predetermined geographic region.
Description
BACKGROUND OF THE INVENTION
[0001] The present invention relates to a system and method for
risk assessment, and more particularly to a system and method for
risk assessment in connection with insurance pool
participation.
[0002] Risk assessment is a cornerstone of the insurance industry.
An insurance company's success is based, in part, on its ability to
accurately predict, assess, and thereafter assume risk. Assumption
of too much risk may result in the insurance company not having
enough reserve capital to cover its claims, while assumption of too
little risk may result in unrealized business opportunities.
[0003] Risk assessment is particularly troublesome when it comes to
catastrophic events, such as hurricanes, earthquakes, floods,
tornadoes, blizzards, airplane and train accidents, and terrorist
attacks. Other catastrophic events are of course possible.
Catastrophic events are disproportionate and exceptional in
circumstance, and are thus difficult for insurance companies to
assess, much less guard against. Insurance companies are
particularly vulnerable to the high number of insurer claims that a
catastrophic event gives rise to.
[0004] A common industry response to a catastrophic event is to
form an insurance Pool--a collection of member insurance companies
each contributing a predetermined amount of capital to the pool.
The exact amount contributed by each participating member may be
based on the member's market share, irrespective of the actual
exposure suffered by the insurance company as a result of the
catastrophic event. For example, if an insurance company maintains
a 5% market share, then it would have to contribute to the pool 5%
of the total claims arising from the catastrophic event, even
though the insurance company was actually exposed to 1% of the
casualties. Payout from the pool is ideally carried out in a
uniform and distributed fashion, so that the costs or losses
incurred by the members are less than the costs or losses that
would be incurred without participation. Typically, payout is based
on the insurance company's actual exposure. In theory, the pool
enables the member companies to spread out the costs associated
with the high number of claims resulting from the catastrophic
event.
[0005] After the September 11 attacks in New York and Washington,
D.C., however, the efficacy of insurance pools has been questioned.
Many insurance companies formerly associated with such pools have
withdrawn their participation in response to the heavy losses
incurred. As a result, future insurance pools are likely to be
formed with fewer participating companies, and are thus less
attractive to potential participants. The situation is more
pronounced in areas more susceptible to future terrorist attacks,
such as Washington, D.C. and the northeast region of the
country.
[0006] The new realities of insurance pools are such that insurance
companies are more susceptible than ever to disproportionate
losses, particularly from larger, more broad-based catastrophic
events. Presently, however, there is no system or method whereby an
insurance company may assess or determine the expected costs,
benefits and/or risks that result from participating in an
insurance pool.
[0007] These and other problems exist.
BRIEF SUMMARY OF THE INVENTION
[0008] An object of the present invention is to overcome the
aforementioned and other drawbacks existing in prior art system and
methods.
[0009] Another object of the present invention is to provide a
system and method for assessing risk associated with insurance
pools.
[0010] Another object of the present invention is to provide a tool
for assisting an insurance company in assessing the risks, benefits
and/or costs associated with participating in an insurance
pool.
[0011] Yet another object of the present invention is to provide a
system and method for assessing the risks of participating in an
insurance pool based on the costs and expected benefits of
participating.
[0012] According to one embodiment of the invention, a method for
assessing risk is provided. The method comprises determining an
investment index associated with investment by an insurance company
in an insurance pool; determining a return index associated with an
expected return to the insurance company from participating in the
insurance pool; and determining a benefit index based on the
investment and return indices.
[0013] In another embodiment, a system for assessing risk is
provided. The system comprises an assessment module for assessing
risks associated with an insurance company's participation in an
insurance pool based on at least one of: an investment index
associated with the costs of participating in the insurance pool,
and a return index associated with the benefits of participating in
the insurance pool.
[0014] In yet another embodiment a method for assessing risk
associated with participating in an insurance pool is provided. The
method comprises selecting at least one particular geographic unit;
determining a benefit index based on at least one of the costs of
participating in the insurance pool and the expected benefit of
participating in the insurance pool; and determining whether to
participate in the insurance pool based in part on the value of the
benefit index.
[0015] In another embodiment, a system for assessing risk is
provided. The system comprises means for determining the costs
associated with participating in an insurance pool; means for
determining the expected benefits associated with participating in
an insurance pool; and means for determining whether to participate
in an insurance pool.
[0016] In another embodiment, a computer-usable medium for
assessing risks provided. The medium comprises code for determining
the costs associated with participating in an insurance pool; code
for determining the expected benefits associated with participating
in an insurance pool; and code for determining whether to
participate in an insurance pool.
[0017] In yet another embodiment, a computer-usable medium for
assessing risk is provided. The medium comprises code for assessing
risks associated with participation in a pool based on at least one
of: an investment index associated with the costs of participating
in the pool, and a return index associated with the benefits of
participating in the pool.
[0018] Additional objects and advantages of the invention will be
set forth in part in the description which follows, and in part
will be obvious from the description, or may be learned by practice
of the invention. The objects and advantages of the invention may
be realized and attained by means of the instrumentalities and
combinations particularly pointed out in the appended claims.
[0019] The accompanying drawings, which are incorporated in and
constitute a part of this specification, illustrate various
embodiments of the invention and, together with the description,
serve to explain the principles of the invention.
BRIEF DESCRIPTION OF THE DRAWINGS
[0020] FIG. 1 is a flow chart process of a method for assessing
risk associated with an insurance pool according to an embodiment
of the present invention.
[0021] FIG. 2 is a table including hypothetical regional data that
may be processed according to the present invention;
[0022] FIG. 2a is a histogram chart illustrating hypothetical
regional data corresponding to an insurance pool's market
share;
[0023] FIG. 2a is a histogram chart illustrating hypothetical
regional data corresponding to an insurance company's pool's
share;
[0024] FIG. 2b is a histogram chart illustrating hypothetical
regional data corresponding to an insurance company's market
share;
[0025] FIG. 2c is a histogram chart illustrating hypothetical
regional data corresponding to an insurance pool's market
share;
[0026] FIG. 2d is a frequency chart illustrating hypothetical data
corresponding to a return index according to the present;
[0027] FIG. 2e is a frequency chart illustrating hypothetical data
corresponding to an investment index according to the present;
[0028] FIG. 2f is a frequency chart illustrating hypothetical data
corresponding to a benefit index according to the present;
[0029] FIG. 2g is a frequency chart illustrating hypothetical data
corresponding to the expected costs of not participating in an
insurance pool;
[0030] FIG. 2h is a frequency chart illustrating hypothetical data
corresponding to a return index for high risk regions according to
the present;
[0031] FIG. 2i is a frequency chart illustrating hypothetical data
corresponding to a investment index for high risk regions according
to the present;
[0032] FIG. 2j is a frequency chart illustrating hypothetical data
corresponding to a benefit index for high risk regions according to
the present
[0033] FIG. 2k is a frequency chart illustrating hypothetical data
corresponding to the expected costs of not participating in an
insurance pool;
[0034] FIG. 3 is a block diagram illustrating one embodiment of a
system for assessing risk according to the present invention;
[0035] FIG. 4 is a block diagram illustrating one embodiment of a
system for assessing risk according to the present invention;
DETAILED DESCRIPTION OF THE INVENTION
[0036] Reference will now be made to the present preferred
embodiments of the invention, examples of which are illustrated in
the accompanying drawings in which like reference characters refer
to corresponding elements.
[0037] As described herein, a technical effect of the invention is
to provide a system and method for to assessing risk associated
with participating in an insurance pool. What follows is a
description of features and aspects of the invention that further
detail this and other technical effects.
[0038] The present invention is described in relation to a system
and method for assessing risk associated with insurance pools.
Nonetheless, the characteristics and parameters pertaining to the
system and method may be applicable to assessing risk associated
with other types of issues and/or content.
[0039] As used herein, the term region may he understood as
relating to any particular geographic area, including, but not
limited to, states, provinces, areas, countries, continents,
etc.
[0040] As described herein, the system and method of the invention
may generally be used in risk assessment, particularly as it
relates to assessing risk associated with an insurance pool.
According to one embodiment, the system and method of the invention
may be used to determine an index associated with the costs and
benefits of participating in an insurance pool. The index may, in
another embodiment, be compared to costs and benefits associated
with not participating in the pool. In another embodiment, the
system and method of the invention may be used to determine the
expected benefit of participating in an insurance pool, such as the
likelihood that the insurance company will receive a worthwhile
payout from the pool, for example. In one embodiment, probabilistic
models are built and stochastic simulations carried out to assess
the risk(s) associated with participating in an insurance pool.
[0041] According to one embodiment, the system and method of the
invention comprises determining various indices indicating various
elements of risk assessment. In one embodiment, the invention may
determine an investment index that reflects the amount of capital
paid or invested by the insurance company to participate in the
pool. In another embodiment, the invention may determine a return
index that reflects the amount of capital received by the insurance
company from the pool. In yet another embodiment, the invention may
determine a benefits index that may, for example, indicate whether
the insurance company should participate in the insurance pool.
According to one embodiment, the benefits index may depend on the
investment and returns indices. In another embodiment, the benefit
index may comprise the difference between the investment and
returns indices. According to this embodiment, if the difference is
greater than a predetermined number, then the insurance company may
decide to participate. The benefits index may, in another
embodiment, represent a dollar or capital amount that may be
compared by the insurance company to a like dollar or capital
amount that relates to the insurance company not participating in
the pool.
[0042] According to one embodiment, the three indices may be based
on at least one or more of the following: the total number of
casualties (or deaths) suffered in the catastrophic event; the
insurance pool's percentage market share; the insurance company's
percentage pool share; and the average policy amount. Collectively,
these variables may provide the insurance company with information
to analyze and assess the costs and benefits of participating in an
insurance pool. Other variables or factors may be considered. More
specific descriptions of the invention's various embodiments are
now provided.
[0043] FIG. 1 illustrates one embodiment of a method 100 that may
be used to assess the risks associated with an insurance pool. In
one embodiment, an insurance company may perform method 100
following the occurrence of a catastrophic event to determine
whether it should participate in a pool, for example. At step 105,
an insurance company deciding whether to participate in an
insurance pool may determine an investment index. In one
embodiment, the investment index may indicate the amount of capital
paid into the pool by the insurance company. According to one
embodiment, the investment index, P.sub.1, may be determined as
follows:
P.sub.1=D.sub.i*P.sub.i*G.sub.1i*FA.sub.i
where, D.sub.i=Total number of casualties in the catastrophic
event,
[0044] P.sub.i=Pool's percentage share to market (%),
[0045] G.sub.1i=Insurance company's percentage share to pool (%),
and
[0046] FA.sub.i=Average policy amount ($).
According to this embodiment, P.sub.1 may correspond to the
insurance company's cost for participating in the pool, for
example.
[0047] In step 110, the insurance company may determine a return
index. In one embodiment, the return index may indicate the amount
of capital received by the insurance company from the pool, i.e.,
how much capital the insurance company will receive when the pool
funds are distributed to the members once all claims are aggregated
and processed. According to one embodiment, the return index,
P.sub.2, may be determined by the following equation:
P.sub.2=D.sub.i*G.sub.2i*FA.sub.i
where, D.sub.i=Total number of casualties in the catastrophic
event,
[0048] G.sub.2i=Insurance company's percentage share to market (%),
and
[0049] FA.sub.i=Average policy amount ($).
According to this embodiment, P.sub.2 may correspond to the
insurance company's expected benefit as a percentage of the
market's expected benefit, for example.
[0050] In step 115, the insurance company may determine a benefit
index. In one embodiment, the benefit index may reflect the
expected risks or benefits of participating in the insurance pool.
According to one embodiment, the benefit index, Y, may be
determined by the difference between the investment and returns
indices:
Y=P.sub.2-P.sub.1
Accordingly, an insurance company may realize a positive benefit if
the capital coming out of the pool is greater than the capital
being put into the pool, or a negative benefit (or cost) if
less.
[0051] FIG. 2 illustrates a table 200 containing hypothetical
regional data of an insurance pool's market share, and an insurance
company's pool and market share. Column 205 illustrates the
insurance pool's percentage market share (Pi). According to one
embodiment, Pi may be determined by the pool members' aggregate
fixed life production by region, for example. For instance, in
Region 1 the pool members have an aggregate share of 11.08% of the
market. In Region 2 it has a 17.87% market share. The TOTAL row at
the bottom of the chart indicates that across all markets the pool
members have a 20% market share. Column 210 illustrates the
insurance company's percentage pool share (G.sub.1). According to
one embodiment, G.sub.1 may be determined by the insurance
company's production to total pool production per region, for
example. For instance in Region 1 the insurance company has a
11.62% of the pool. In Region 2 it has a 11.37% share. The TOTAL
row indicates that across all pools throughout all regions the
insurance company has a 12% share. Column 215 illustrates the
insurance company's regional market share. According to one
embodiment, G.sub.2 may be determined by the insurance company's
production to total market production per region, for example. For
instance, in Region 1 the insurance company has a 1.29% of the
market. In Region 2 it has a 2.03% share. The TOTAL row indicates
that the insurance a 2.4% share of all markets.
[0052] The hypothetical data of FIG. 2 can be further represented
in graphical fashion. FIGS. 2a-2c, for example, illustrate
respective histograms of Pi, G.sub.1, and G.sub.2, and show mean
values for each of 21%, 15%, and 3%, respectively. The data
disclosed may be processed using the formulas for P.sub.1, P.sub.2,
and Y discussed above. In one embodiment, a stochastic simulation
is performed to determine P.sub.1, P.sub.2 and Y. A stochastic
simulation is a series of random processes, each of which may
depend on its previous process and on further random choices. In
another embodiment, the data may be processed to determine the
risks and benefits associated with participation in an insurance
pool.
[0053] The hypothetical data of FIG. 2 can be processed by the
formulas for P.sub.1, P.sub.2, and Y discussed above. FIGS. 2d and
2e, for example, illustrate frequency charts of P.sub.2 and
P.sub.1, respectively, based on the data of FIGS. 2a-2c. Each chart
reflects a collection of numerous calculations (or trials), each
involving a random selection of values for Pi, G.sub.1 and G.sub.2
(from FIG. 2a-2c, respectively), FA, and Di. Values for FA were
randomly selected from an actual distribution and Di values
randomly selected simulated casualties from 5-5000. Preferably,
sufficient trials are run so that a reliable mean and distribution
may be obtained for P.sub.1 and P.sub.2. For example, FIG. 2d
indicates that the insurance company would have P.sub.2 values
ranging from about $8,000.00 to about $35,000.00, and a mean value
$7,168,466. This means that, on average, the insurance company
should expect to receive an amount of $7,168,466.00 from an
insurance pool. The x-axis of the chart reflects the range of
capital received, while the left-most and right-most y-axes
indicate the probability and frequency of a particular
distribution, respectively.
[0054] FIG. 2e, on the other hand, indicates that the insurance
company would have P.sub.1 values ranging from about $6,900.00 to
about $37,015,730.00, and a mean value of $7,171,473.00. This means
that, on average, the insurance company should expect to pay
$7,171,473.00 into an insurance pool. The x-axis of the chart
reflects the range of capital received, while the left-most and
right-most y-axes indicate the probability and frequency of a
particular cost, respectively.
[0055] FIG. 2f illustrates a frequency chart forecasting values of
a benefit index, Y, using the data shown in FIGS. 2d-2e. In one
embodiment, benefit index, Y, may be determined as discussed above
in connection with step 115 of FIG. 1. That is, Y may be the
difference between the capital received from (P.sub.2) and paid
into (P.sub.1) a pool by the insurance company. As shown, FIG. 2f
comprises the superposition of FIGS. 2d and 2e, i.e., the
difference between P.sub.2 and P.sub.1. The portion of chart 2d
indicated by A (i.e., the area to the left of the dashed line)
represents capital paid into the pool, P.sub.1. The portion
indicated by B (i.e., the area to the right of dashed line)
represents capital received by the insurance company from the pool,
P.sub.2. FIG. 2f indicates that the insurance company would have Y
values ranging from about -$30,122,362.00 to about $29,965,811.00,
and a mean value of -$3,007.00. Given the data of FIG. 2 and the
calculations (or trials) of FIGS. 2d and 2e, therefore, the
insurance company may expect an average benefit, Y, of -$3,007.00.
In other words, the insurance will, on average, lose $3,007.00 as a
result of participating in a pool. The x-axis of the chart reflects
the range of capital received, while the left-most and right-most
y-axes indicate the probability and frequency of a particular cost,
respectively.
[0056] FIG. 2g illustrates a frequency chart corresponding to the
insurance company's expected claims (that result from the
catastrophic event) without participating in the pool. As shown,
the expected claims are identical to P.sub.2 as determined by the
above formula and illustrated in FIG. 2d.
[0057] According to another embodiment, a similar analysis to that
shown in FIGS. 2d-2g may be done that focuses on regions most
likely to experience a catastrophic event. FIGS. 2h and 2i, for
example, illustrate frequency charts of P.sub.2 and P.sub.1,
respectively, based on the data of FIGS. 2a-2c, but only for those
hypothetical regions most likely to encounter or experience a
catastrophic event, i.e., high-risk regions. Each chart reflects a
collection of numerous calculations (or trials), each involving a
random selection of values for Pi, G.sub.1 and G.sub.2 in the
high-risk regions (from FIG. 2a-2c, respectively), FA, and Di.
Values for FA were randomly selected from an actual distribution
and Di values randomly selected simulated casualties from 5-5000.
Preferably, sufficient trials are run so that a reliable mean and
distribution may be obtained for P.sub.1 and P.sub.2. For example,
FIG. 2h indicates that the insurance company would have P.sub.2
values ranging from about $158.00 to about $54,000.00, and a mean
value $8,504,349.00. This means that, on average, the insurance
company should expect to receive an amount of $8,504,349.00 from an
insurance pool. The x-axis of the chart reflects the range of
capital received, while the left-most and right-most y-axes
indicate the probability and frequency of a particular
distribution, respectively.
[0058] FIG. 2i, on the other hand, indicates that the insurance
company would have P.sub.1 values ranging from about $10.00 to
about $108,424,394.00, and a mean value of $11,440,793.00. This
means that, on average, the insurance company should expect to pay
$11,440,793.00 into an insurance pool. The x-axis of the chart
reflects the range of capital received, while the left-most and
right-most y-axes indicate the probability and frequency of a
particular cost, respectively.
[0059] FIG. 2j illustrates a frequency chart forecasting values of
a benefit index, Y, using the data shown in FIGS. 2a-2c
corresponding to high-risk regions. In one embodiment, benefit
index, Y, may be determined as discussed above in connection with
step 115 of FIG. 1. That is, Y may be the difference between the
capital received from (P.sub.2) and paid into (P.sub.1) a pool by
the insurance company. As shown,
[0060] FIG. 2f comprises the superposition of FIGS. 2h and 2i,
i.e., the difference between P.sub.2 and P.sub.1. The portion of
chart 2j indicated by A (i.e., the area to the left of the dashed
line) represents capital paid into the pool, P.sub.1. The portion
indicated by B (i.e., the area to the right of dashed line)
represents capital received by the insurance company from the pool,
P.sub.2. FIG. 2j indicates that the insurance company would have Y
values ranging from about -$103,140,000.00 to about $96,692,976.00,
and a mean value of -$2,936,444.00. Given the data of FIG. 2 and
the calculations (or trials) of FIGS. 2d and 2e, therefore, the
insurance company may expect an average benefit, Y, of
-$2,936,444.00. In other words, the insurance company will, on
average, lose $2,936,444.00 as a result of participating in a pool.
The x-axis of the chart reflects the range of capital received,
while the left-most and right-most y-axes indicate the probability
and frequency of a particular cost, respectively.
[0061] FIG. 2k illustrates a frequency chart corresponding to the
insurance company's expected claims (that result from the
catastrophic event) without participating in a pool. As shown, the
expected claims are identical to P.sub.2 as determined by the above
formula and illustrated in FIG. 2d.
[0062] FIGS. 2 and 2a-2k illustrate how the system and method of
the present invention may be used by an insurance company in
determining whether to participate in an insurance pool.
[0063] Although the embodiments discussed above relate specifically
to analyzing a plurality of regions, the invention may nonetheless
be practiced on a per-region basis. That is, the analyses and
calculations discussed above may be performed for a particular to
assist the insurance company in determining whether to participate
in an insurance pool.
[0064] FIG. 3 illustrates one embodiment of a system 300 that may
be used to perform the method of FIG. 1. As shown, the system 300
may include a plurality of client stations 310 that may be accessed
by representatives of an insurance company to provide or access
information relating to the risks, benefits and costs associated
with participating in an insurance pool. In one embodiment, each
client station 310 may be located at the corresponding departments
or units of the insurance company. In another embodiment, a client
station 310 may be portable to provide maximum accessibility to the
user.
[0065] Client stations 310 may include, for instance, a personal or
laptop computer running a Microsoft Windows.TM. 95 operating
system, a Windows.TM. 98 operating system, a Millenium.TM.
operating system, a Windows NT.TM. operating system, a Windows.TM.
2000 operating system, a Windows XP.TM. operating system, a Windows
CE.TM. operating system, a PalmOS.TM. operating system, a Unix.TM.
operating system, a Linux.TM. operating system, a Solaris.TM.
operating system, an OS/2.TM. operating system, a BeOS.TM.
operating system, a MacOS.TM. operating system, a VAX VMS operating
system, or other operating system or platform. Client stations 310
may include a microprocessor such as an Intel x86-based or Advanced
Micro Devices x86-compatible device, a Motorola 68K or PowerPC.TM.
device, a MIPS device, Hewlett-Packard Precision.TM. device, or a
Digital Equipment Corp. Alpha.TM. RISC processor, a microcontroller
or other general or special purpose device operating under
programmed control. Client stations 310 may further include an
electronic memory such as a random access memory (RAM) or
electronically programmable read only memory (EPROM), a storage
such as a hard drive, a CDROM or a rewritable CDROM or another
magnetic, optical or other media, and other associated components
connected over an electronic bus, as will be appreciated by persons
skilled in the art. Client stations 310 may be equipped with an
integral or connectable cathode ray tube (CRT), a liquid crystal
display (LCD), electroluminescent display, a light emitting diode
(LED) or another display screen, panel or device for viewing and
manipulating files, data and other resources, for instance using a
graphical user interface (GUI) or a command line interface (CLI).
Client stations 10 may also include a network-enabled appliance
such as a WebTV.TM. unit, a radio-enabled Palm.TM. Pilot or similar
unit, a set-top box, a networkable game-playing console such as a
Sony Playstation.TM., Sega.TM. Dreamcast.TM. or a Microsoft.TM.
XBox.TM., a browser-equipped or other network-enabled cellular
telephone, or another TCP/IP client or other device.
[0066] As shown in FIG. 3, client stations 310 are connected to a
communications link 320. The communications link 320 may be,
include or interface to any one or more of, for instance, the
Internet, an intranet, a Personal Area Network (PAN), a Local Area
Network (LAN), a Wide Area Network (WAN) or a Metropolitan Area
Network (MAN), a storage area network (SAN), a frame relay
connection, an Advanced Intelligent Network (AIN) connection, a
synchronous optical network (SONET) connection, a digital T1, T3,
E1 or E3 line, a Digital Data Service (DDS) connection, a Digital
Subscriber Line (DSL) connection, an Ethernet connection, an
Integrated Services Digital Network (ISDN) line, a dial-up port
such as a V.90, V.34 or V.34bis analog modem connection, a cable
modem, an Asynchronous Transfer Mode (ATM) connection, or a Fiber
Distributed Data Interface (FDDI) or Copper Distributed Data
Interface (CDDI) connection. The communications link 320 may
further include or interface to any one or more of a Wireless
Application Protocol (WAP) link, a General Packet Radio Service
(GPRS) link, a Global System for Mobile Communication (GSM) link, a
Code Division Multiple Access (CDMA) or Time Division Multiple
Access (TDMA) link such as a cellular phone channel, a Global
Positioning System (GPS) link, cellular digital packet data (CDPD),
a Research in Motion, Limited (RIM) duplex paging type device, a
Bluetooth, BlueTeeth or WhiteTooth radio link, or an IEEE 802.11
(Wi-Fi)-based radio frequency link. The communications link 320 may
further include or interface to any one or more of an RS-232 serial
connection, an IEEE-1394 (Firewire) connection, a Fibre Channel
connection, an infrared (IrDA) port, a Small Computer Systems
Interface (SCSI) connection, a Universal Serial Bus (USB)
connection or another wired or wireless, digital or analog
interface or connection.
[0067] Also connected to the communications link 320, and thereby
accessible to users using stations 310, is a server station 330.
The server station 330 may host one or more applications or modules
that function to permit users of stations 310 to provide or access
information relating to the risks, benefits and costs associated
with participating in an insurance pool. For example, the server
station 330 may include an administration module 400 that serves to
permit interaction between the system and the user or department
charged with maintaining the system. Another module that may be
hosted by server 330 is a pool market share module 410 that, among
other things, permits a user to provide or access information
relating to at least one insurance pool's market share. In one
embodiment, such information may correspond to an insurance pool's
market share in particular regions. In another embodiment, the
information relates to an insurance pool's market share throughout
a collection of regions, for example. In yet another embodiment,
the information is provided as a percentage of the total market
share.
[0068] Server station 330 may include an insurance company pool
share module to permit a user of station 310 to provide or access
information relating to at least one insurance company's pool
share. In one embodiment, such information may correspond to an
insurance company's pool share in particular regions. In another
embodiment, the information relates to an insurance company's pool
share throughout a collection of regions, for example. In yet
another embodiment, the information may relate to an insurance
company's share across a plurality of pool, for example.
[0069] Server station 330 may include an insurance company market
share module to permit a user of station 310 to provide or access
information relating to at least one insurance company's market
share. In one embodiment, such information may correspond to an
insurance company's market share in particular regions. In another
embodiment, the information relates to an insurance company's
market share throughout a collection of regions, for example. In
yet another embodiment, the information may relate to an insurance
company's share across a plurality of markets, for example.
[0070] Server station 330 may include a policy amount module to
permit a user of station 310 to provide or access information
relating to policy amounts. In one embodiment, such information may
correspond to an insurance company's policy amount(s) in particular
regions. In another embodiment, the information relates to an
insurance company's policy amount(s) throughout a collection of
regions, for example. In yet another embodiment, the information
may relate to an insurance company's average policy amount(s)
across a single or plurality of regions, for example.
[0071] Server station 330 may include an assessment module to
permit a user of station 310 to provide or access information
relating to risks, benefits or costs associated with participating
in at least one insurance pool. In one embodiment, such information
may correspond to an investment index as described above in
connection with FIG. 1 and relating to the insurance company's
investment in at least one insurance pool. In another embodiment,
the information relates to a return index as described above in
connection with FIG. 1 and relating to the insurance company's
returns from at least one insurance pool. In yet another
embodiment, the information may relate to an insurance company's
benefit index as described above in connection with FIG. 1 and
relating to the insurance company's expected benefits of
participating in at least one insurance pool.
[0072] Other functional modules may be provided.
[0073] The server station 330 may include, for instance, a
workstation running the Microsoft Windows.TM. NT.TM. operating
system, the Windows.TM. 2000 operating system, the Unix operating
system, the Linux operating system, the Xenix operating system, the
IBM AIX.TM. operating system, the Hewlett-Packard UX.TM. operating
system, the Novell Netware.TM. operating system, the Sun
Microsystems Solaris.TM. operating system, the OS/2.TM. operating
system, the BeOS.TM. operating system, the Macintosh operating
system, the Apache operating system, an OpenStep.TM. operating
system or another operating system or platform.
[0074] A representative of an insurance company may access the
server station 330 via the communications link 320 using a client
station 310. As was mentioned above, interaction between the system
300 of the invention and a user permits the provision or accessing
of various information relating to risks, benefits and costs
associated with participating in an at least one insurance pool.
Specifically, a user may input or access data (such as that shown
in FIG. 2) using an input device (not shown) associated with
station 310, which input device may comprise a keyboard, mouse,
joystick, or other like device. The nature of the information
provided or accessed may, in one embodiment, vary depending on the
identity of the user. In such an embodiment, each user will only be
presented with information relating to areas or categories which
the user's work impacts. For example, an agent or agency of a
particular insurance company may only provide or access information
relating to its region(s), but not information relating to other
agencies' work or regions, for example. Identification of a
particular user may be determined automatically by the system 300
based on the department or unit's IP address or other similar
identifier, or may be based on log-in data or information provided
by the representative of the department or unit, such as the
department or unit's predetermined user name and a password. Other
information may be used to personalize the session.
[0075] Information relied on by the system 300 may be stored in a
database 340, as shown in FIG. 3. The database 340 may include or
interface to, for example, an Oracle.TM. relational database sold
commercially by Oracle Corporation. Other databases, such as an
Informix.TM. database, Database 2 (DB2) database, a Sybase.TM.
database or another data storage or query format, platform or
resource such as an On Line Analytical Processing (OLAP) data
storage facility, a Standard Query Language (SQL) data storage
facility, a storage area network (SAN) facility, or a Microsoft
Access.TM. database or other similar database platform or resource.
The database 340 may be supported by a server or other resources,
and may include redundancy, such as a redundant array of
independent disks (RAID), for data protection. For example, the
database 340 and the server station 330 may comprise an OLAP system
that generates a plurality of user-specific reports from data
maintained by the database 340. In another example, the server
station 330 may be associated with or connected to a database
server (not shown) that serves to present queries against the
database 340. The database server may comprise an OLAP server
system for accessing and managing data stored in the database 340.
The database server may also comprise a Relational On Line
Analytical Processing (ROLAP) engine, a Multi-dimensional On Line
Analytical Processing (MOLAP) engine, or a Hybrid On Line
Analytical Processing (HOLAP) engine according to different
embodiments. Specifically, the database server may comprise a
multithreaded server for performing analyses directly against the
database 340.
[0076] Information stored in the database 340 may be input and
administered by a user of station 310, for example, via an
administration interface 350. Information entered by the
representative may, in one example, correspond to data required by
the formulas for P.sub.1, P.sub.2 and Y discussed above in
connection with FIG. 1, namely, an insurance pool's share to market
(Pi), an insurance company's share to pool (G.sub.1) and market
(G.sub.2), the average policy face amount (FA), and the number of
casualties resulting a catastrophic event (Di). In addition, the
representative may input and modify the various formulas relevant
to the process of the invention such as the formulas for P.sub.1,
P.sub.2 and Y, for example. Other information may be entered. In
all instances, the inputted information may be stored and updated,
as necessary.
[0077] The server station 330 is shown in more detail in FIG. 4. As
shown, the server station 330 may include an administration module
400 that may be accessed by an authorized user using the
administration interface 350 (or station 310) to monitor or control
operation of the system 300, create, input or update information
stored in the database 340, such as information regarding the
above-described variables and formulas. Other information may be
administered or inputted. For example, the administration module
400 may query a representative of the insurance company, via an
interface, to input information regarding a particular insurance
pool, such as the pool's share to market, the insurance company's
share to pool, and any other relevant information. The
administration module 400 may also be used by a user to monitor of
the system 100's overall operation. For instance, the user may
monitor user participation.
[0078] The server station 30 may also include a pool share market
module 410 for entering, organizing and editing information
relating to at least one insurance pool. By way of example, a user
may access pool share market module 410, via station 310, and
specifically enter such information as individual insurance pool's
percentage share of a particular market. Further, the user may use
pool share market module 410 to categorize or associate individual
insurance pool's with one or more regions or categories. For
instance, information may be entered and stored limiting a
particular insurance pool to certain cities or states. Pool share
market module 410 may thus be used to correlate the individual
insurance pools with corresponding percentage market shares on a
region by region basis, for example. The information entered by a
user via pool share market module may be stored in database 340,
for example.
[0079] Server 330 may also include an insurance company pool share
module 420 for entering, organizing and editing information
relating to at least one insurance company. For example, a user may
access insurance company pool share module 420, via station 310,
and specifically enter information such as an insurance company's
percentage share of a particular pool(s). Further, the user may use
insurance company pool share module 420 to categorize or associate
individual insurance company's with one or more regions,
categories, or insurance pools. For instance, information may be
entered and stored limiting a particular insurance company to
certain cities or states. Insurance company pool share pool module
420 may thus be used to correlate the individual insurance pools
with corresponding percentage pool shares on a region by region
basis, for example. The information entered by a user via insurance
company pool share module may be stored in database 340, for
example.
[0080] Server 330 may also include an insurance company market
share module 430 for entering, organizing and editing information
relating to at least one insurance company. For example, a user may
access insurance company market share module 430, via station 310,
and specifically enter information such as an insurance company's
percentage share of a particular market(s). Further, the user may
use insurance company market share module 430 to categorize or
associate individual insurance company's with one or more regions,
categories, or markets. For instance, information may be entered
and stored limiting a particular insurance company to certain
markets. Insurance company market share module 430 may thus be used
to correlate the individual insurance pools with corresponding
percentage market shares on a region by region basis, for example.
The information entered by a user via insurance company market
share module may be stored in database 340, for example.
[0081] Server 330 may also include a policy amount module 440 for
entering, organizing and editing information relating to at least
one insurance company's policies. For example, a user may access
policy amount module 440, via station 310, and specifically enter
information such as an insurance company's average policy face
amount. Further, the user may use policy amount module 440 to
associate policy face amounts with one or more regions, categories,
or markets, for example. The information entered by a user via
insurance company market share module may be stored in database
340, for example.
[0082] Server 330 may also include an assessment module 450 for
processing relevant data to determine the risks, benefits and costs
associated with participating in at least one insurance pool. In
one embodiment, assessment module 450 may access information
entered or processed by pool market share module 410, insurance
company pool share module 420, insurance company market module 430,
and/or policy amount module 440 to provide a user with an index or
other information relating to the risks, benefits and costs
associated with participating in a particular insurance pool. In
one embodiment, assessment module 450 may perform the process
described above and disclosed in FIG. 1. That is, assessment module
may calculate an investment index (P.sub.1), a return index
(P.sub.2), and a benefit index (Y). In another embodiment,
assessment module 450 may present these and other indices in
graphical format, such as is illustrated in FIGS. 2a-2k. In another
embodiment, the assessment module may perform a stochastic
simulation to determine P.sub.1, P.sub.2 and Y. A stochastic
simulation is a series of random processes, each of which may
depend on its previous process and on further random choices. Users
may access assessment module 450 to determine the risks, benefits,
and costs associated with participating various insurance pools in
various regions.
[0083] Other embodiments, uses and advantages of the present
invention will be apparent to those skilled in the art from
consideration of the specification and practice of the invention
disclosed herein. The specification and examples should be
considered exemplary only. For instance, the invention may be used
to assess risk(s) associated with any type of pool, not just an
insurance pool. The intended scope of the invention is only limited
by the claims appended hereto.
* * * * *