Insurance patent
Encyclopedia
Under some patent laws
, patents may be obtained for insurance
-related invention
s. Historically, patents could only cover the technological aspects of a new insurance invention. This is still the case in most countries. In the United States
, however, recent court decisions have encouraged more inventors to file patent applications on methods of doing business
. These patents may be used to get more comprehensive coverage of improvements in basic insurance processes, such as the methods of calculating premium
s, reserves
, underwriting
, etc. This is causing controversy in the insurance industry as some see it as a positive development and others see it as a negative development.
A more recent example of an insurance patent is , granted as "Individual evaluation system for motorcar risk". This patent issued by the European Patent Office
in 1996 to Salvador Minguijon Perez. It discloses a means for auto insurance risk selection
whereby a driver’s mileage and driving behavior are monitored and insurance premiums are charged accordingly. The United Kingdom part of this European patent has been sold to Norwich Union
insurance company.
This changed dramatically, however, with the 1998 State Street Bank Decision. The State Street Bank Decision was a ruling by the Court of Appeals for the Federal Circuit that confirmed that there was no “business method
exception” under United States patent law
. The number of patent application
s filed per year after this decision was handed down jumped to about 150. The number of patents issuing per year jumped to about 30.
filed a patent infringement
lawsuit
against Transamerica Life Insurance Company
and other entities for allegedly infringing , “Method and apparatus for providing retirement income benefits”. This patent covers methods for administering variable annuities. The jury found the patent valid and infringed. The court ordered Transamerica to pay Lincoln $13 million in damages. At a rate of 11 basis point
s of assets under management
, this was considered a reasonable royalty. In June 2010, however, the verdict against Transamerica was overturned on appeal
In June 2010, Progressive Auto Insurance filed a patent infringement lawsuit against Liberty Mutual
over one of Progressive’s Pay As You Drive auto insurance patents.
Some are concerned that the growth in patent claims will be negative. They are concerned that invalid patents will issue and that this will lead to patent troll
s inhibiting new product introductions by demanding excessive license fees for these questionable patents.
Inventors can now have their insurance U.S. patent applications reviewed by the public in the Peer to Patent
program. The first insurance patent application to be posted was US2009005522 “Risk assessment company”. It was posted on March 6, 2009. This patent application describes a method for increasing the ease of changing insurance companies to get better rates.
auto insurance in the UK. “Computer apparatus and method for defined contribution and profit sharing pension and disability plan”. Patented disability insurance
for a defined contribution pension plans. Adopted by IBM
for their employees.
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
, patents may be obtained for insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
-related invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
s. Historically, patents could only cover the technological aspects of a new insurance invention. This is still the case in most countries. In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, however, recent court decisions have encouraged more inventors to file patent applications on methods of doing business
Business method patent
Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking, tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the...
. These patents may be used to get more comprehensive coverage of improvements in basic insurance processes, such as the methods of calculating premium
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
s, reserves
Actuarial reserves
An actuarial reserve is a liability equal to the net present value of the future expected cash flows of a contingent event. In the insurance context an actuarial reserve is the present value of the future cash flows of an insurance policy and the total liability of the insurer is the sum of the...
, underwriting
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
, etc. This is causing controversy in the insurance industry as some see it as a positive development and others see it as a negative development.
History
An early example of an insurance patent is Means for Securing Travelers Against Loss by Accident. This patent was issued in 1892. It discloses a means for selling travelers' insurance by combining coupons with a newspaper.A more recent example of an insurance patent is , granted as "Individual evaluation system for motorcar risk". This patent issued by the European Patent Office
European Patent Organisation
The European Patent Organisation is a public international organisation created in 1977 by its contracting states to grant patents in Europe under the European Patent Convention of 1973...
in 1996 to Salvador Minguijon Perez. It discloses a means for auto insurance risk selection
Auto insurance risk selection
Auto insurance risk selection is the process by which vehicle insurers determine whether or not to insure an individual and what insurance premium to charge. Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in...
whereby a driver’s mileage and driving behavior are monitored and insurance premiums are charged accordingly. The United Kingdom part of this European patent has been sold to Norwich Union
Norwich Union
Norwich Union was the name given to insurance company Aviva's British arm before June 2009. It was originally established in 1797. It is the biggest life insurance provider in the United Kingdom, and has a strong position in motor insurance...
insurance company.
Growth
Historically, only about one or two patents per year issued in the US on inventions specifically related to insurance policies.This changed dramatically, however, with the 1998 State Street Bank Decision. The State Street Bank Decision was a ruling by the Court of Appeals for the Federal Circuit that confirmed that there was no “business method
Business method patent
Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking, tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the...
exception” under United States patent law
United States patent law
United States patent law was established "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;" as provided by the United States Constitution. Congress implemented these...
. The number of patent application
Patent application
A patent application is a request pending at a patent office for the grant of a patent for the invention described and claimed by that application. An application consists of a description of the invention , together with official forms and correspondence relating to the application...
s filed per year after this decision was handed down jumped to about 150. The number of patents issuing per year jumped to about 30.
Litigation
In September 2006, Lincoln National CorporationLincoln National Corporation
Lincoln National Corporation is a Fortune 200 American holding company, which operates multiple insurance and investment management businesses through subsidiary companies...
filed a patent infringement
Patent infringement
Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may vary by jurisdiction, but it typically includes using or...
lawsuit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
against Transamerica Life Insurance Company
AEGON
Aegon N.V. is one of the world’s largest life insurance and pension groups, and a strong provider of investment products. Aegon's head office is in The Hague, Netherlands...
and other entities for allegedly infringing , “Method and apparatus for providing retirement income benefits”. This patent covers methods for administering variable annuities. The jury found the patent valid and infringed. The court ordered Transamerica to pay Lincoln $13 million in damages. At a rate of 11 basis point
Basis point
A basis point is a unit equal to 1/100 of a percentage point or one part per ten thousand...
s of assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
, this was considered a reasonable royalty. In June 2010, however, the verdict against Transamerica was overturned on appeal
In June 2010, Progressive Auto Insurance filed a patent infringement lawsuit against Liberty Mutual
Liberty Mutual
Liberty Mutual Group, more commonly known by the name of its primary line of business Liberty Mutual, is a diversified global insurer and the third largest property and casualty insurer in the United States based on 2010 net written premium. It is the 82nd company on the Fortune 500 list for 2011...
over one of Progressive’s Pay As You Drive auto insurance patents.
Controversy
Some in the insurance industry see the growth in insurance patents as a positive development. They cite that by being able to protect inventions, insurance companies will be more inclined to invest in new product development.Some are concerned that the growth in patent claims will be negative. They are concerned that invalid patents will issue and that this will lead to patent troll
Patent troll
Patent troll is a pejorative but questioned term used for a person or company who is a non-practicing inventor, and buys and enforces patents against one or more alleged infringers in a manner considered by the target or observers as unduly aggressive or opportunistic, often with no intention to...
s inhibiting new product introductions by demanding excessive license fees for these questionable patents.
Public review
]Inventors can now have their insurance U.S. patent applications reviewed by the public in the Peer to Patent
Peer to patent
The Peer To Patent project is an initiative that seeks to assist patent offices in improving patent quality by gathering public input in a structured, productive manner...
program. The first insurance patent application to be posted was US2009005522 “Risk assessment company”. It was posted on March 6, 2009. This patent application describes a method for increasing the ease of changing insurance companies to get better rates.
Notable patents
“Individual evaluation system for motorcar risk”. First patent on telematic automobile insurance. Commercialized as PAYDPAYD
Usage based insurance, also known as pay as you drive and mile-based auto insurance is a type of automobile insurance whereby the costs of motor insurance are dependent upon type of vehicle used, measured against Time, Distance and Place....
auto insurance in the UK. “Computer apparatus and method for defined contribution and profit sharing pension and disability plan”. Patented disability insurance
Disability insurance
Disability Insurance, often called DI or disability income insurance, is a form of insurance that insures the beneficiary's earned income against the risk that a disability will make working uncomfortable , painful , or impossible...
for a defined contribution pension plans. Adopted by IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
for their employees.