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Insurance Abstract
A method for generating a life insurance policy comprises the step
of selecting an amount of a death benefit that is payable upon the
death of an individual. The method may further comprise the steps
of gathering prescription drug history and comparing the prescription
drug history of the individual to that of a group having a substantially
similar or similar prescription drug history. The method may additionally
include the step of correlating a mortality rate from the equivalent
prescription drug history of the group. The single premium may be
based upon the death benefit amount and the mortality rate. The
method may also include the steps of collecting the single premium
from the individual and generating the term life insurance policy
for the individual. Personal information about the applicant such
as age, gender, tobacco use, etc., may also be included in the steps
of generating the term life insurance policy.
Insurance Claims
1. A method of generating a term life insurance policy for an individual
based upon actual mortality rates of a group of individuals, the
method comprising the steps of: selecting a death benefit amount
payable upon death of the individual; gathering a prescription drug
history of the individual; determining a mortality rate from the
prescription drug history; determining a single premium cost based
upon the death benefit amount and the mortality rate; collecting
a single premium from the individual; and generating the term life
insurance policy for the individual.
2. The method of claim 1 further comprising the steps of: reverse-diagnosing
a medical condition of the individual; and determining the individual's
mortality rate from the individual's medical condition.
3. The method of claim 1 further comprising the step of automatically
underwriting the term life insurance policy.
4. The method of claim 3 wherein a cost of underwriting the term
life insurance policy is separate from a cost of the single premium
collected from the individual.
5. The method of claim 1 further comprising the step of paying
a commission for preparing the term life insurance policy, the commission
being based on a flat rate.
6. The method of claim 1 further comprising the steps of: gathering
a motor vehicle report of the individual; gathering a motor vehicle
report for a group of individuals having a substantially similar
motor vehicle report; comparing the motor vehicle report of the
individual to that of the group; and correlating a mortality rate
of the individual to a mortality rate of the group.
7. The method of claim 1 further comprising the steps of: gathering
a credit report of the individual; gathering a credit report for
a group of individuals having a substantially similar credit report;
comparing the credit report of the individual to that of the group;
and correlating a mortality rate of the individual to a mortality
rate of the group.
8. The method of claim 1 further comprising the steps of: gathering
a medical history of the individual; gathering a medical history
for a group of individuals having a substantially similar medical
history; comparing the medical history of the individual to that
of a group; and correlating a mortality rate of the individual to
a mortality rate of the group.
9. The method of claim 1 further comprising the steps of: gathering
a history of smoking, alcohol consumption and drug use of the individual;
disqualifying the individual from coverage under the term life insurance
policy based upon the history of smoking, alcohol consumption and
drug use.
10. The method of claim 1 further comprising the steps of: gathering
a history of participation in hazardous activities of the individual;
disqualifying the individual from coverage under the term life insurance
policy based upon the history of participation in hazardous activities.
11. The method of claim 1 further comprising the steps of: gathering
the individual's history of traveling to certain foreign countries;
disqualifying the individual from coverage under the term life insurance
policy based upon the history of traveling to certain foreign countries.
12. A term life insurance policy as generated according to the
method of claim 1 wherein the term life insurance policy is non-cancellable.
13. A term life insurance policy as generated according to the
method of claim 1 wherein the term life insurance policy provides
a death benefit.
14. A term life insurance policy as generated according to the
method of claim 1 wherein the term life insurance policy provides
a disability benefit.
15. A term life insurance policy as generated according to the
method of claim 1 wherein the term life insurance policy provides
a dismemberment benefit.
16. A term life insurance policy as generated according to the
method of claim 1 wherein the term life insurance policy provides
a credit option such that benefits under the term life insurance
policy are payable to a lender of a loan to the individual.
17. A term life insurance policy as generated according to the
method of claim 1 wherein the term life insurance policy is provided
as a group policy.
18. The term life insurance policy of claim 17 wherein the group
is comprised of members sharing a common attribute including at
least one of the following common attributes: employment with a
corporation, membership in a credit union, membership in a retail
establishment.
Insurance Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This application claims the benefit of U.S. Provisional
Application No. 60/665,294, entitled SINGLE PREMIUM TERM LIFE INSURANCE
filed on Mar. 25, 2005, the entire contents of which is expressly
incorporated by reference herein.
STATEMENT RE: FEDERALLY SPONSORED RESEARCH/DEVELOPMENT
[0002] (Not Applicable)
BACKGROUND OF THE INVENTION
[0003] The present invention relates generally to insurance and,
more particularly, to a uniquely structured single premium term
life insurance policy for an individual wherein the policy is non-cancelable
and a single premium is paid by the individual upon inception of
the policy.
[0004] There are a variety of life insurance products available
on the market. Life insurance allows the survivors of an individual
to receive cash upon the death of the individual. The amount of
cash received (i.e., the death benefit) by the survivors (i.e.,
beneficiaries) can provide financial assistance to help the survivor's
family make mortgage payments, help with the general cost of living,
paying off debt incurred by the individual, as well as paying expenses
directly related to the death of the individual such as burial costs
and estate taxes.
[0005] Life insurance may be provided in several different categories
including whole life insurance and term life insurance. Whole life
insurance provides protection during the lifetime of the individual
for as long as premiums on the insurance policy are paid. Upon the
death of the individual, the death benefit is paid to the beneficiaries
of the whole life insurance policy. In addition, some whole life
insurance policies allow for the individual to receive a cash value
or lump sum for early cancellation of the policy prior to the death
of the individual.
[0006] Term life insurance provides financial protection for a
specified term or period of time. Notably, in a term life insurance
policy, the death benefit is only payable if the individual dies
during the term of the insurance policy. Some term life insurance
policies are renewable at the end of the term if the insured agrees
to pay additional premiums in order to extend the term. The term
of the policy can be of any duration and can range from one year
to twenty or thirty years. Typically, the premiums on term life
insurance policies are payable on a monthly basis and typically
increase with the age of the individual. However, certain term life
insurance policies allow the individual to pay a constant or level
amount on the premium during the term of the policy.
[0007] Recent data suggests that there exists a growing market
for term life insurance. More specifically, such data indicates
that from the period starting from year 1996 to the year 2000, the
number of policies that have issued grew from just under 3 million
to about 5 million. Correlated to such growth during the same period
was an increase in the total face value amounts (in millions of
dollars) of all life insurance policies from just over 1 million
to about 1.3 million. It is also believed that certain market segments
(i.e., certain demographics) have been underserved and that such
markets could benefit from a term life insurance policy.
[0008] For example, recent data suggests that a vast majority of
life insurance policies are sold to those having annul incomes of
greater than $50,000. Conversely, those individuals with annul incomes
of less than $50,000 are typically covered by insurance plans provided
under an employee benefits program. However, a recent survey suggests
that there is a high demand or desire among individuals earning
less than $60,000 for term life insurance coverage wherein the life
insurance policy has a benefit of $250,000 and under.
[0009] Unfortunately, despite this projected desire for term life
insurance, it is believed that traditionally-structured term life
insurance policies suffer from several deficiencies that detract
from their overall profitability for insurance providers. For example,
government regulations dictate reserving requirements that must
be maintained for certain life insurance products. Such reserves
are primarily intended to be the source from which claims are paid
to the holder of a life insurance policy. The amount of the reserves
that an insurance company must hold is dependent in part upon policy
liability amounts.
[0010] A set of regulations known as "Regulation Triple X"
governs such reserving requirements for life insurance. Such reserving
requirements are based upon mortality tables such as those produced
by the Society of Actuaries (SOA). Triple X regulations require
life insurance issuers such as those selling term life insurance
policies to provide higher reserve amounts than the amounts previously
required. This increase in the reserving requirements has lead to
an increase in premium rates for certain life insurance products
due to increased re-insurance costs. Such re-insurance costs arise
from the purchase of individual life insurance policies by large
international financial institutions from the primary insurers.
[0011] However, the increase in premium rates for life insurance
is also believed to result from a gap or disparity that exists between
current mortality tables (i.e., SOA tables) and actual mortality
rates. An investigation into the disparity reveals an increasing
lifespan of the general population that is not properly represented
by current SOA tables. Many re-insurance institutions are motivated
to circumvent government regulations regarding reserving requirements
by transferring 100% of the risk of the primary insurer to off-shore
entities in exchange for receiving a portion of the premium that
is charged to the individual.
[0012] The investigation further reveals that in the insurance
coverage industry, little is known regarding actual causation of
the mortality of individuals. This is due in part to current practice
in the insurance industry to record only that information which
is obtained during the insurance policy application process or from
data that is obtained upon review of the issued policy. Such information
may be entered into a relational database which may be correlated
to the mortality rate. It is believed that most information available
on the individual is only that which is obtained by scanning an
image of the issued policy. It is believed that there is a lack
of data regarding the mortality rate for individuals who are likely
to maintain their term life insurance policy for its entire duration.
[0013] Notably, it has been learned that healthy individuals who
purchase term life insurance policies are generally: (1) good credit
risks, and (2) have a generally higher level of education and above-average
income. More specifically, it is believed that individuals who are
good credit risks and having an advanced degree and above average
income have a generally low mortality rate. Regarding the credit-worthiness
of individuals, credit information may be readily obtained using
a system developed by the Fair Isaac and Co. and which is also known
as the FICO scoring system. The FICO scoring system assigns a number
to each individual which is representative of the likelihood that
a credit user will pay their bills. Levels of education and income
of individuals can be obtained from the insurance policy application.
[0014] Another deficiency of traditionally-structured term life
insurance policies is related to certain administrative costs related
to the insurance policy. Referring to FIG. 1, it has been discovered
that for term life insurance policies, approximately 100% of the
premium costs in the first year of the policy go toward a commission
for the insurance sales agent who assisted and/or prepared the term
life insurance policy application. Furthermore, it has been discovered
that term life insurance providers do not realize a positive cash
flow until approximately the fourth year of the term of the life
insurance policy as is graphically illustrated in FIG. 1 which plots
cumulative cash flow of a traditionally-structured term life insurance
policy over a ten-year time period.
[0015] As can be seen, FIG. 1 illustrates the case for a 45-year-old,
non-tobacco using male covered under a level-premium, fully underwritten
life insurance policy. It has been learned that for such traditionally-structured
term life insurance policies such as that plotted in FIG. 1, mortality
costs as a percentage of premium collected is relatively high due
to the fact that the life insurance policies that lapse (i.e., as
a result of individuals failing to pay premium costs for the duration
of the policy) are those that are owned by relatively healthy individuals.
FIG. 1 further illustrated the persistency of such traditionally-structured
term life insurance policies wherein only 40% of the insureds generally
continue making premium payments throughout the duration of the
term life insurance policy.
[0016] Such relatively high mortality costs as a percentage of
premium are also due to the fact that individuals covered by life
insurance policies that persist are often those who have developed
certain conditions (e.g., medical conditions, life changes, etc.)
that would render it difficult and costly to secure additional life
insurance coverage through another insurance provider. A further
deficiency of traditionally-structured term life insurance policy
practices is that underwriting costs for the policy continue to
be incurred even when premiums are not be paid. This may occur due
to an applicant failing to follow through with the application process
which may result from buyer's remorse, comparative shopping with
other insurance providers or general confusion about the extent
of coverage provided under the term life insurance policy. Applicant's
also tend to drop out of the application process due to the intrusive
nature of blood or urine tests required under many traditional term
life insurance policies which further adds to the overall underwriting
costs. Such additional underwriting costs are unfortunately added
to the overhead in policy premiums for other individuals who decide
to purchase a term life insurance policy.
[0017] A further deficiency associated with traditionally-structured
term life insurance policies is that commissions that are typically
paid to a life insurance agent are paid upon acceptance of the policy
by the applicant and are taken out of the first monthly premium.
However, it is often the case that only a single monthly premium
is ever paid by the individual. Unfortunately, in such cases, commission
losses must be included in the overhead pricing of the policy for
others who ultimately purchase a term life insurance policy. Still
a further deficiency associated with current term life insurance
policies is that the underwriting procedure is typically expensive
and time consuming.
[0018] For example, the underwriting process may require up to
6 weeks for completion. Other costs in providing the term life insurance
policy which are passed on to purchasers of the life insurance policy
are those associated with billing, endorsements and general administrative
costs. In traditional term life insurance policies, such costs are
built into the policy premium and are passed on to the consumer
with a resulting increase in premium rates for the term life insurance
industry. As was earlier mentioned, due to such increased costs
that are passed on to the consumer, term life insurance providers
do not realize a positive cash flow or a return on their investment
until the fourth year of the premium that is paid.
[0019] As can be seen, there exists a need in the art for a term
life insurance policy that is based upon mortality rates that more
closely track the increasing lifespan of the general population
than that which is suggested by current mortality tables (i.e.,
SOA tables). In addition, there exists a need in the art for a term
life insurance policy wherein commissions that are paid to the insurance
agent are assessed and paid independent of the premium in order
to enhance profitability of the term life insurance policy. Furthermore,
there exists a need in the art for a term life insurance policy
wherein the underwriting costs are assessed and paid separate and
apart from the premium payment. In addition, there exits a need
in the art for a term life insurance policy wherein underwriting
costs are relatively low due to the use of nontraditional data in
establishing mortality rates.
[0020] Also, there exists a need in the art for a term life insurance
policy that eliminates attrition throughout the duration or term
of the life insurance policy such that virtually none of the term
life insurance policies lapse due to nonpayment of premiums. Finally,
there exists a need in the art for a term life insurance policy
that generates positive cash flow starting from application of the
policy throughout the duration of the policy. In this regard, there
exists a need in the art for a term life insurance policy wherein
the mortality cost of the life insurance policy is relatively low
due to the fact that such mortality cost is paid from a larger pool
of individuals who are covered by a term life insurance policy.
BRIEF SUMMARY OF THE INVENTION
[0021] Provided is a term life insurance policy and method for
generation thereof that is a single premium policy and which is
based upon actual mortality rates. Importantly, the actual mortality
rates of the term life insurance policy are determined using non-traditional
underwriting factors or characteristics. More specifically, underwriting
may be based upon prescription drug history of the individual, the
individual's motor vehicle report, credit report (i.e., FICO score)
as well as the individual's medical history. The actual mortality
rates are also based in part upon additional information about the
applicant such as age, gender and tobacco use which may be supplied
by the applicant during the application process. Information such
as prescription drug history is used to reverse diagnose medical
conditions and plot impact on mortality rates.
[0022] As was mentioned above, the term life insurance policy utilizes
a single premium that is paid up-front by the applicant. In this
manner, the problems associated with attrition or lapsing of the
term life insurance policy due to nonpayment of premiums is virtually
eliminated. In addition, certain expenditures or costs that are
incurred by the primary insurance provider are separated from the
cost of the insurance such that income from the accumulated single
premiums that are collected from applicants may be invested upon
the first day of sale of the term life insurance policy.
[0023] Due to the up-front payment of the single premium, the policy
may be configured as a non-cancelable term life insurance policy
with no possibility of return of the premium to the individual.
As was earlier indicated, all costs such as administrative costs
are provided separate from the premium amount and are disclosed
and assessed to the applicant. The term life insurance policy may
be provided in a variety of durations and face value amounts. It
should be noted that the term life insurance policy may provide
a level death benefit feature and may also include an accidental
disability or dismemberment benefit that may be equal to a certain
percentage of the death benefit amount.
[0024] It is further contemplated that commission costs are assessed
during the application process. In addition, basic administrative
costs such as costs of copying, handling, and premium collection
and mailing costs for the policy may be assessed during the application
process. A fee may be charged for endorsement of the policy in order
to cover change of address and/or change of beneficiary on the policy.
[0025] Importantly, the term life insurance policy of the present
invention may be provided as a group policy wherein members of an
entity such as a corporation or an institution may apply for such
term life insurance policy on a non-cancelable basis. The group
must have a common bond such as membership in a retail establishment,
affinity to a credit organization such as a credit card company,
or employment in a business. The underwriting process (wherein the
individual is evaluated in order to determine the risks involved
for the policy provider) is initiated with an analysis of the risk
characteristics using the aforementioned prescription drug history
and other characteristics that may be analyzed in order to arrive
at a mortality rate.
[0026] The underwriting procedure provides a means for indicating
any potential disqualifiers or indicators including, but not limited
to, certain medical conditions, participation in certain activities
such as hazardous sports or travel to certain parts of the world
that are known to be unsafe or dangerous. Other indicators regarding
smoking, consumption of alcohol, and drug use are also stated in
the policy by the individual. A scoring algorithm may be used to
analyze prescription drug history, motor vehicle report, credit
history and medical history and may include a binary (i.e., yes
or no) indicator of acceptance regarding the applicant's qualification
for the term life insurance policy.
BRIEF DESCRIPTION OF THE DRAWINGS
[0027] These as well as other features of the present invention
will become more apparent upon reference to the drawings wherein:
[0028] FIG. 1 is a graph of persistency and cumulative cash flow
plotted over a ten-year time period for a term life insurance policy
of the prior art and illustrating the negative change in persistency
level and the initially negative cumulative cash flow thereof;
[0029] FIG. 2 is a graph of persistency and cumulative cash flow
plotted over a ten-year time period for a term life insurance policy
of the present invention and illustrating a constant persistency
level and an initially high cumulative cash flow;
[0030] FIG. 3 is a graph with the plots of cumulative cash flow
for the term life insurance policy of the prior art of FIG. 1 superimposed
with the term life insurance policy of the present invention; and
[0031] FIG. 4 is a graph which plots mortality rate vs. attrition
rate over a ten-year time period for the term life insurance policy
of the present invention.
DETAILED DESCRIPTION OF THE INVENTION
[0032] Referring now to the drawings wherein the showings are for
purposes of illustrating the present invention and not for purposes
of limiting the same, provided is a system for a term life insurance
policy for an individual that is based upon actual mortality rates.
More specifically, provided is a term life insurance policy and
method for generation thereof wherein the actual mortality rates
of the term life insurance policy are based upon certain characteristics
of the individual that correlate to an actual mortality rate. The
invention may include an algorithm and procedure that gathers information
such as prescription drug history, credit data, motor vehicle report
data and medical history information in addition to information
that is supplied by the applicant in order to generate the term
life insurance policy. Information such as prescription drug history
is used to reverse-diagnose and plot impact on mortality rates.
[0033] Importantly, the term life insurance policy utilizes a single
premium that is paid up front by the applicant. In this manner,
attrition or lapsing of the term life insurance policy and nonpayment
of premiums is eliminated. In addition, certain expenditures that
are incurred by the primary insurance provider are separated from
the cost of the insurance. For example, underwriting costs, commissions,
billing and endorsement costs and other administrative fees such
as policy issuance fees are separated from the amount of the single
premium. In this manner, investment income from the accumulated
single premiums that are collected from applicants may be invested
upon the first day of sale of the term life insurance policy.
[0034] As shown in FIG. 2, the term life insurance policy of the
present invention features a constant persistency level and an initially
high cumulative cash flow which ultimately reduces overall costs
for generating the term life insurance policy by about 30% compared
to costs for generating a traditionally-structured term life insurance
policy. FIG. 2 graphically represents the case for a 45-year-old,
non-tobacco-using male covered under a term life insurance policy
over a ten-year time period. Such policy has no cash value and is
underwritten automatically such as by using an appropriate algorithm
and/or procedure.
[0035] It should be noted that due to the single premium payment
feature, the term life insurance policy generates a positive cash
flow from inception of the policy and through the duration of the
term resulting in a profit increase of about 300% compared to profits
that are attainable using traditional term life insurance policy
methodologies. Such increased profitability is graphically illustrated
in FIG. 3 which superimposes plots of cumulative cash flow for the
term life insurance policy of the prior art (as shown in FIG. 1)
with the term life insurance policy of the present invention (as
shown in FIG. 2). FIG. 4 is a graph of a traditional term life insurance
policy which plots mortality rate vs. attrition rate over a ten-year
time period. Represented by the solid curve, the attrition rate
can be seen as relatively high (e.g., up to about 13 percent) in
the initial stages of the ten-year period but starts to level out-toward
the latter half of the ten-year-period. Conversely, the mortality
rate represented by the dashed curve and indicated by the term "QF"
remains relatively steady up to about the eight year after which
the mortality rate increases relatively sharply.
[0036] In its broadest sense, the method for generating the life
insurance policy may include the steps of selecting the amount of
death benefit that is payable upon the death of the individual.
The method may further comprise the steps of gathering prescription
drug history, and comparing the prescription drug history of the
individual to that of a group having a substantially equivalent
or similar prescription drug history. The method may additionally
include the step of correlating a mortality rate from the equivalent
prescription drug history of the group. The method may further include
the step of determining the amount of the single premium based upon
the death benefit amount and the mortality rate. The method may
also include the steps of collecting the single premium from the
individual and generating the term life insurance policy for the
individual. Personal information about the applicant such as age,
gender, tobacco use, etc., may also be included in the steps of
generating the term life insurance policy.
[0037] Due to the up-front payment of the single premium, the policy
may be configured as a non-cancelable life term insurance policy
with no return of the premium to the individual. As was earlier
indicated, all costs such as administrative costs are separate from
the premium amount and are disclosed and passed on to the applicant.
The term life insurance policy may include policy term configurations
in durations of 3, 5, 7 and 10 years and may have face value amounts
on the order of about $50,000, $100,000, $150,000, $200,000, or
$250,000. However, it should be noted that the term life insurance
policy provided herein may be provided in any term duration and
in any face value amount. Furthermore, the term life insurance policy
may provide a level death benefit feature and may also include an
accidental disability or dismemberment benefit that may be equal
to a certain percentage such as 25%, of the death benefit amount.
[0038] The term life insurance policy may also include a credit
life insurance option wherein the sole beneficiary of the term life
insurance policy will be the lender of a loan for an instrument
such as a mortgage, auto or personal loan. Upon the death of the
individual, the insurance provider would pay the outstanding balance
on the loan such as the mortgage with no proceeds going to any other
individual or entity. It is contemplated that the amount payable
on the credit life insurance option would be limited to and/or is
proportional to the amount of premiums paid on the policy. In the
event of a suicide or a fraud on the life insurance policy during
the first two years of the duration of the term, it is contemplated
that the death benefit is limited to and/or proportional to the
amount of premiums paid.
[0039] As was earlier stated, the term life insurance policy is
based upon a single premium paid upon inception of the policy. Furthermore,
it is contemplated that the term life insurance policy provides
no value other than the benefits or options indicated and accepted
by the individual upon inception of the policy. Regarding amounts
payable in the form of death benefits, it is contemplated that the
term life insurance policy of the present invention may provide
a minimum death benefit of about $50,000 and a maximum death benefit
of about $250,000 although any amount may be provided as the death
benefit amount.
[0040] It is also estimated that a standard fee may be incurred
and passed on to the individual for underwriting in order to cover
the costs associated with gathering information about the applicant
such as the applicant's contact information. Furthermore, the underwriting
costs may be incurred in order to cover the cost purchasing prescription
drug history of the individual, the individual's motor vehicle report
(MVR report), credit report (i.e., FICO report) as well as the individual's
medical history such as information which is available from the
Medical Information Bureau (MIB). In addition, the underwriting
costs may be provided in order to cover the cost of verifying the
individual's social security number.
[0041] It is further contemplated that commission costs payable
to the insurance agent will be disclosed to the individual at the
time of application and that such commission costs may be a one-time
fee. It is contemplated that the amount of the commission cost may
be approximately equal to or greater than the underwriting costs
although the commission costs may be provided in any amount. A further
cost for policy issuance may be assessed to the individual in order
to cover basic administrative costs such as costs associated with
copying, handling, and premium collection and mailing costs. An
additional fee may be charged for endorsement of the policy with
such fee being a nominal or relatively low amount in order to cover
change of address and/or change of beneficiary on the policy.
[0042] Importantly, the term life insurance policy of the present
invention may be provided as a group policy wherein members of an
entity such as a corporation or institution may optionally apply
for such term life insurance policy on a non-cancelable basis. The
group must be commonly bound by a membership in a retail establishment,
affinity to a credit organization such as a credit card company,
or employees of an organization such as a corporation or a business.
The underwriting process may initially include an evaluation of
the individual as part of a group in order to determine the risks
involved for the policy provider. The underwriting process may include
an analysis of the group's risk characteristics such as the aforementioned
prescription drug history and other characteristics. Such information
may be plotted in order to arrive at a mortality rate.
[0043] It is contemplated that members of the group may be between
the ages of about 20 and about 55. Furthermore, it is contemplated
that such group members preferably are married, have a relatively
stable credit history such as that which may be inferred by referring
to the individual's FICO score. Furthermore, it is contemplated
that at least one member of the group's family is employed. Finally,
it is contemplated that the group member may be covered with a health
benefit program. However, it is contemplated that various other
group characteristics may be utilized in order to determine which
members of the group are included during the underwriting process.
For example, it is contemplated that members of the group may be
of any age and may have any relationship status such as single,
divorced or separated, etc.
[0044] Furthermore, individuals having various credit worthiness
ratings and employment status as well as participation or nonparticipation
in any health benefit program may participate in the term life insurance
policy program. Regarding the underwriting methodology about which
the risk of an individual applicant for the term life insurance
policy is concerned, it is contemplated that premiums are at least
partially based on the exact age of the applicant as determined
by the applicant's nearest birthday. It is further contemplated
that premiums for the term life insurance policy are based on current
term life mortality rates as fully underwritten. If the applicant
desires an increase in a cash value payable upon death of the individual,
it is contemplated that additional charges may be assessed the applicant
for such increases in the death benefit.
[0045] As was previously mentioned, determination of the life insurance
premium is substantially dependent upon the duration of the term
as well as the face value of the insurance policy. However, the
life insurance policy of the present invention utilizes information
based upon the prescription drug history of the applicant in order
to reverse-diagnose and plot the impact on mortality rate. Furthermore,
credit data and MVR data may be gathered. MVR data may be gathered
from the state department of motor vehicles (DMV). Medical information
may be gathered from the MIB (Medical Information Bureau) in addition
to basic personal information of the applicant such as date of birth,
gender, etc.
[0046] It is further contemplated that during the underwriting
procedure, inquiries regarding the health status of the applicant
will be clearly stated. In addition, it is contemplated that the
underwriting process will indicate that the life insurance policy
of the present invention is intended for individuals having the
capability to finance a multiple year policy with its premium that
is payable as a single lump sum in advance. However, it is also
contemplated that financing may be made available in the form of
an unsecured or secured loan in order to pay for the single premium
for the life insurance policy.
[0047] The underwriting procedure will also provide a means for
indicating any potential disqualifiers of the life insurance policy
including, but not limited to, certain medical conditions. It is
also contemplated that the applicant for the life insurance policy
must directly affirm or deny whether such disqualifiers are applicable.
Options will also be available for the individual to indicate their
participation in certain activities such as hazardous sports or
other hazardous activities such as skydiving. In this regard, travel
to certain parts of the world that are known to be unsafe or dangerous
may be used in disqualifying the individual from coverage under
the life insurance policy.
[0048] Other disqualifiers or indicators regarding smoking, consumption
of alcohol, and drug use must also be clearly stated in the policy
by the individual. It is further contemplated that assessment of
the individual's risk during the underwriting procedure may be preformed
using a scoring algorithm taking into consideration the prescription
drug history, motor vehicle report, credit history and Medical Information
Bureau information. The scoring algorithm may optionally include
a binary (i.e., yes or no) indicator of acceptance or decline regarding
the applicant's qualification for the term life insurance policy
of the present invention.
[0049] It is further contemplated that individuals who indicate
or otherwise provide information regarding a smoking or tobacco
use habit or history will not necessarily be disqualified from coverage
under the life insurance policy. However, it is also contemplated
that a surcharge may be assessed to the individual depending on
certain characteristics that are also indicated as potentially increasing
the risk or which may otherwise place the individual at a high mortality
rate than average. In this regard, it is also contemplated that
individual applicants with certain characteristics may be assessed
a surcharge in proportion to their smoking habits as well as positively
indicating that they have other negative characteristics.
[0050] Although insurance coverage may be provided at a certain
cost for a certain quantity of face value, it is contemplated that
the cost of the single premium payment may be based on any amount
of coverage of the death benefit. For example, it is contemplated
that the cost of the single premium payment may be based on each
$1,000 worth of insurance coverage. Such cost for a quantity of
insurance coverage is contemplated to be disclosed to the individual
applicant at the mortality rate. Furthermore, the cost per unit
coverage of insurance is preferably based on a fully underwritten
term life insurance policy. Disclosures regarding the underwriting
process will be clearly stated or indicated in the life insurance
application so as to provide a history for the particular individual
life insurance policy.
[0051] Regarding the assessment of costs, it is contemplated that
the single premium is assessed separate from such costs. For example,
it is contemplated that the cost of underwriting is to be a separate
cost from the single premium payment. Notably, it is contemplated
that such costs are relatively low compared to traditional means
for underwriting term life insurance policies due to the use of
prescription drug history and other nontraditional underwriting
factors. For example, it is contemplated that the single premium
payment may be provided at a rate of about $50 per application.
[0052] Because such underwriting cost is paid at the time of the
application, it is contemplated that commission costs are also paid
on a per-transaction basis. Such commission costs are also indicated
on the application as being separate costs apart from the single
premium payment. It is further contemplated that the cost of commissions
will be a flat rate and will be independent of the cost of the single
premium payment. Furthermore, the amount of such commission costs,
like the underwriting costs, will be disclosed and passed on to
the applicant of the insurance policy. Although the commission cost
may be assessed in any value, it is contemplated that the commission
cost may range in the area of from about $50 to about $100.
[0053] Administrative costs are also to be assessed apart from
the premium payment cost. For example, photocopying, mailing and
other similar functions will be assessed at a flat rate to the individual
applicant. For example, endorsements of the life insurance policy
may be charged to the consumer at a rate of about $10 per occurrence.
Other costs such as a policy issuance cost may also be assessed
to the individual applicant separate and apart from the single premium
payment. For example, a cost of $25 may be assessed for the policy
issuance fee and will be collected at the time of the application.
Likewise, other costs will also be collected at the time of the
application.
[0054] By assessing the costs apart from the single premium payment
it is contemplated that the overall costs are about 30% less than
those assessed using traditionally-structured term life insurance
methodologies. In addition, due to the single premium payment, it
is contemplated that the term life insurance policy will generate
a positive cash flow upon application and through the duration of
the term to issuance. More specifically, it is estimated that by
using the methodology disclosed herein, it is contemplated that
the term life insurance policy will result in a profit increase
of about 300% compared to profits that are attainable using traditionally-structured
life term life insurance policy methodologies.
[0055] Regarding financing of the life insurance policy of the
present invention, it is contemplated that the methodology used
in assessing risk for the issuance of credit cards may be applied
for a secured or unsecured loan for the single premium payment.
In addition, conventional installment loan criteria may be utilized
in determining the credit worthiness of the individual in regard
to financing of the life insurance policy of the present invention.
It is believed that a relatively high interest rate may be assessed
by the financial institution for a loan for the single premium payment
of the life insurance policy of the present invention.
[0056] For example, it is contemplated that an annual percentage
rate of about 10% to about 18% may be received due to subsidization
of the interest rate. In regard to customers of certain financial
institutions with whom individuals carry certain credit devices
such as credit cards, it is contemplated that such financial institutions
may extend certain ones of credit card holders the ability to charge
the amount of the single premium payment to an existing credit card
held by the individual of the institution. For example, it is known
that certain financial institutions such as banks allow their existing
customers to request transfers of balances from other financial
institutions.
[0057] It is also known that such banks allow different interest
rates to be charged for different transactions on certain credit
cards held by their customers. Such customers may be applicants
of the life insurance policy of the present invention and therefore
may qualify for financing their term life insurance application
and premium costs. By financing the single premium payment under
such credit cards, insurance providers who are policy issuers thereby
benefit due to the elimination of billing costs that would otherwise
be passed on to their customers. Furthermore, reduced customer service,
underwriting costs and retention of the policy holder is contemplated
for the duration of the term of the policy. Advantageously, the
individual applicant thereby is provided additional coverage for
each dollar of single premium payment.
[0058] Other benefits provided by the life insurance policy of
the present invention include a simplified application process,
lower priced premium, and improved customer relations due to the
improved face value amount available for the life insurance policy
in relation to the cost of a single premium payment as compared
to traditional life insurance policies. Finally, the term life insurance
policy and methodology disclosed herein is believed to result in
a higher profit margin for the policy provider as well as for the
re-insurer due to lower costs of issuance of the policy as well
as lower maintenance costs.
[0059] Additional modifications and improvements of the present
invention may also be apparent to those of ordinary skill in the
art. Thus, the particular combination of parts described and illustrated
herein is intended to represent only certain embodiments of the
present invention, and is not intended to serve as limitations of
alternative device within the spirit and scope of the invention.
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