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Insurance Abstract
A system for monitoring a business's operational characteristics
and employee classifications, in real time, to obtain increased
amounts of data relating to the total compensation for purposes
of providing a more accurate determination of a cost of insurance
for the risk, on a real-time basis, and to bill such charges directly
to the risk according to their unique finance plan in direct relation
to their payroll cycle.
Insurance Claims
1. A computer-based method implemented at an insurance company to
estimate a final premium charge and more accurate real time estimate
during the lifetime of the policy for workers compensation insurance
associated with a risk, said method comprising: said insurance company
receiving real-time payroll data associated with said risk; said
insurance company monitoring said received real-time payroll data
to identify and record raw data elements that have an identified
relationship with any of, or a combination of, the following: said
risk's business operation, insurability of said risk, character
of said risk, or rating parameters associated with said risk's policy;
and said insurance company determining said final premium charge
and more accurate real time estimate during the lifetime of the
policy of workers compensation insurance for said risk based on
a premium modification that increases or decreases a premium charge
based on an evaluation of said recorded raw data elements.
2. A computer-based method implemented at an insurance company
to estimate a final premium charge for workers compensation insurance
associated with a risk, as per claim 1, wherein said computer-based
method is performed over a network.
3. A computer-based method implemented at an insurance company
to estimate a final premium charge for workers compensation insurance
associated with a risk, as per claim 2, wherein said network is
any of the following: local area network (LAN), wide area network
(WAN), or the Internet.
4. A computer-based method to determine a final premium charge
for workers compensation insurance associated with a risk comprising
the steps of: monitoring a set of raw data elements, said raw data
elements associated with any of, or a combination of, the following:
said risk's employment practice, risk's payroll, modification to
a risk's payroll, or operating state of said risk; identifying and
recording a subset of said raw data elements that have an identified
relationship with any of, or a combination of, the following: said
risk's business operation, insurability of said risk, character
of said risk, or rating parameters associated with said risk's policy;
and determining said final premium charge of workers compensation
insurance of said risk based on a premium modification that increases
or decreases a premium charge based on an evaluation of said recorded
subset of raw data elements.
5. A computer-based method to determine a final premium charge
for workers compensation insurance associated with a risk, as per
claim 4, wherein said computer-based method further comprises the
steps of: calculating data elements and derived data elements from
said raw data elements, and storing said calculated and derived
data elements in a database.
6. A computer-based method to determine a final premium charge
for workers compensation insurance associated with a risk, as per
claim 4, wherein said computer-based method further comprises the
steps of: identifying a trigger event associated with at least one
of said raw data elements; and recording trigger information associated
with said trigger event, wherein said recorded trigger information
in combination with said recorded raw data elements with an identified
relationship is used to identify said surcharge or discount.
7. A computer-based method to determine a final premium charge
and more accurate real time estimate during the lifetime of the
policy for workers compensation insurance associated with a risk,
as per claim 4, wherein said computer-based method further comprises
the steps of interfacing with an existing database associated with
said risk to extract additional insurance relevant data.
8. A computer-based method to determine a final premium charge
for workers compensation insurance associated with a risk, as per
claim 4, wherein said operating state of said risk comprises any
of the following: number of employees, job classification, or payroll
per employee.
9. A computer-based method to determine a final premium charge
for workers compensation insurance associated with a risk, as per
claim 4, wherein said computer-based method is performed over a
network.
10. A computer-based method to determine a final premium charge
for workers compensation insurance associated with a risk, as per
claim 9, wherein said network is any of the following: local area
network (LAN), wide area network (WAN), or the Internet.
11. An article of manufacture comprising a computer usable medium
having computer readable program code embodied therein which implements
a method to estimate a final premium charge for workers compensation
insurance associated with a risk, said medium comprising: computer
readable program code monitoring a set of raw data elements, said
raw data elements associated with any of, or a combination of, the
following: said risk's employment practice, risk's payroll, modification
to a risk's payroll, or operating state of said risk; computer readable
program code identifying and recording a subset of said raw data
elements that have an identified relationship with any of, or a
combination of, the following: said risk's business operation, insurability
of said risk, character of said risk, or rating parameters associated
with said risk's policy; and computer readable program code determining
said final premium charge of workers compensation insurance of said
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded subset
of raw data elements.
12. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk comprising the steps of: monitoring a set of raw data
elements, said raw data elements associated with any of, or a combination
of, the following: said risk's employment practice, risk's payroll,
modification to a risk's payroll, or operating state of said risk;
identifying and recording a subset of said raw data elements that
have an identified relationship with any of, or a combination of,
the following: said risk's business operation, insurability of said
risk, or rating parameters associated with said risk's policy; determining
said final premium charge of workers compensation insurance of said
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded subset
of raw data elements; and generating revenue by performing a financial
transaction over said network based on said determined final premium
charge.
13. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk, as per claim 12, wherein said business method further
comprises the steps of: calculating data elements and derived data
elements from said raw data elements, and storing said calculated
and derived data elements in a database.
14. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk, as per claim 12, wherein said business method further
comprises the steps of: identifying a trigger event associated with
at least one of said raw data elements; and recording trigger information
associated with said trigger event, wherein said recorded trigger
information in combination with said recorded raw data elements
with an identified relationship is used to identify said surcharge
or discount.
15. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk, as per claim 12, wherein said business method further
comprises the steps of interfacing with an existing database associated
with said risk to extract additional insurance relevant data.
16. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk, as per claim 12, wherein said business method is performed
over a network.
17. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk, as per claim 12, wherein said operating state of said
risk comprises any of the following: number of employees, job classification,
or payroll per employee.
18. A business method implemented over a network to estimate a
final premium charge for workers compensation insurance associated
with a risk, as per claim 12, wherein said network is any of the
following: local area network (LAN), wide area network (WAN), or
the Internet.
19. A method of determining a cost of workers compensation insurance
for a selected period based upon monitoring, collecting and communicating
data representative of the risk's payroll characteristics during
said selected period, whereby said cost is adjustable by relating
the payroll characteristics to predetermined actuarial rates, said
method comprising: determining an initial profile and a base cost
of workers compensation insurance based on said profile; monitoring
a plurality of data elements representative of payroll and business
status of a risk during said selected period; identifying and analyzing
data elements among said plurality of data elements that have a
pre-identified relationship to said risk's insurability; consolidating
said analyzed data elements for identifying a surcharge or discount
to be applied to the base cost; and producing a final cost of workers
compensation insurance for the selected period from the base cost
and the surcharges or discounts to be billed directly to the risk
based on their finance plan, wherein said risk is charged or credited
said final cost for workers compensation insurance.
20. The method as described in claim 19, wherein said analyzing
comprises identifying a trigger event associated with one of the
data elements having the preselected relationship and analyzing
both the one data element and trigger information representative
of the trigger event.
21. The method as described in claim 19, further including immediately
communicating to a central data repository via an upload of information
representative of a trigger event associated with one of the data
elements.
22. The method as described in claim 21, further including analyzing
trigger event response information generated by said upload of information.
23. The method as described in claim 19, further including generating
derived data elements from said data elements.
24. The method as described in claim 23, wherein said consolidating
comprises accumulating said calculated and derived data elements.
25. The method as described in claim 19, wherein said monitoring
comprises: calculating total payroll compensation and classifying
relative portions of the payroll amongst a plurality of rating classifications;
and further identifying the type of work performed and classifying
the identified work performed amongst a plurality of classifications
as dictated by the state compensation rating bureaus.
26. The method as described in claim 25, wherein said consolidating
comprises calculation of a rate based upon a percentage of the exposure
in the payroll classifications.
27. The method as described in claim 19, wherein at least a portion
of the data elements are within an awareness and control of the
risk and therein the method further comprises adjustment by the
risk, of some characteristics thereby causing a change in the data
elements to effectuate change in the final cost.
28. The method as described in claim 27, wherein the base cost
is for a predetermined period of time and wherein the adjusting
by the risk is set to occur at predetermined intervals within the
predetermined period.
29. The method as described in claim 28, wherein the predetermined
period of time comprises monthly intervals.
30. A process for acquiring and monitoring payroll and employee
insurance related data during a time period via an upload processing
system for adjusting an insurance cost during the time period comprising
steps of monitoring a plurality of data elements representative
of payroll amounts and employee classifications during the time
period.
31. The process as defined in claim 30, further including communicating
from a central data repository an order for a cancellation and/or
an endorsement in response to an identifying of a special trigger
event determined to require policy term modification.
32. The process as defined in claim 31, wherein said monitoring
comprises: calculating a total payroll and classifying relative
portions of the payroll amongst a plurality of rating classifications
comprising of the state approved rates.
33. The system as defined in claim 30, wherein said consolidating
comprises calculation of a percentage of payroll in the payroll
classifications and a state location of said classifications.
34. A system to determine a final premium charge and more accurate
real time estimate during the lifetime of the policy of workers
compensation insurance associated with a risk, said system as implemented
at an insurance company comprising: a first engine monitoring a
set of raw data elements, said raw data elements associated with
any of, or a combination of, the following: said risk's employment
practice, risk's payroll, modification to a risk's payroll, or operating
state of said risk; a second engine identifying and recording a
subset of said raw data elements that have an identified relationship
with any of, or a combination of, the following: said risk's business
operation, insurability of said risk, or rating parameters associated
with said risk's policy, and a workers compensation insurance estimator
working in conjunction with said first and second engine to determine
said final premium charge of workers compensation insurance of said
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded subset
of raw data elements.
35. A system of determining a cost of workers compensation insurance
for a selected time period based upon monitoring, collecting and
communicating data representative of the risk's business characteristics,
whereby the cost is adjustable by relating the business characteristics
to predetermined standards, said system comprising: means for predetermining
a risk profile and a base cost of workers compensation insurance
based on said risk profile; means for monitoring a plurality of
data elements representative of an operating state of the risk or
a payroll modification during the selected time period; means for
collecting selected data elements out of the plurality of data elements
when said ones are determined to have a pre-selected relationship
to the risk's business operations; means for consolidating said
selected ones for identifying a surcharge or discount to be applied
to the base cost and, means for producing a final cost for the selected
time period from the base cost and the surcharge or discount.
36. The system as described in claim 35, further including means
for immediately communicating to a central data repository via an
upload of information representative of a trigger event associated
with the data elements whereby modifications to the risk's profile
may be selectively made.
37. The system as described in claim 35, further including means
for generating calculated data elements.
38. The system as described in claim 34, further including means
for generating derived data elements.
39. The system as defined in claim 34, wherein said means for monitoring
comprises: means for calculating a total payroll of the risk and
classifying relative portions of the payroll amongst a plurality
of rating classifications.
40. The system as defined in claim 35, wherein said means for consolidating
comprises said means for calculating a percentage of payroll in
the employee classifications and the employee state location classifications.
41. A method of generating an actuarial class system for determining
workers compensation insurance costs for adjusting premiums for
an insurance period of time based on data derived from the risk's
business operational characteristics and the employee's rating classification
during said insurance period of time, comprising: receiving real-time
record files representing payroll data associated with a risk during
a time period; analyzing said risk's record files with selected
actuarial classes; and determining a corresponding cost of insurance
for the risk in correspondence with one of the actuarial classes
for the insurance period of time.
42. The process for determining a cost of insurance as defined
in claim 41, wherein said real-time record files are received on
a predetermined periodic basis.
Insurance Description
RELATED APPLICATION
[0001] This application claims priority benefit to U.S. provisional
application 60/577,410 filed May 4, 2005, which is incorporated
herein by reference in its entirety.
BACKGROUND OF THE INVENTION
[0002] 1. Field of Invention
[0003] The present invention relates generally to the field of
insurance. More specifically, the present invention is related to
insurance cost calculations.
[0004] 2. Discussion of Prior Art
[0005] Conventional methods for determining costs of workers compensation
insurance involve gathering relevant historical data from a personal
interview with the applicant for the insurance and by referencing
the applicant's prior insurance records that are maintained by a
governmental agency, such as a Bureau of Workers Compensation Insurance,
if such records exist. Such data results in a classification of
the applicant to a broad actuarial class for which insurance rates
are assigned based upon the empirical experience of the insurer.
Many factors are relevant to such classification in a particular
actuarial class, such as type of employee, hours worked, location
of work, exposure classification, etc, and the cost is based upon
projected payroll and type of occupations expected within the insured's
business over the next year.
[0006] The current system of insurance creates groupings of risks
(actuarial classes) based on the following types of classifications:
[0007] Number of Employees [0008] Payroll [0009] Actuarial Classification
Codes [0010] State of coverage [0011] Experience Mod [0012] Included
Officers Coverage [0013] Types of previous losses [0014] Liability
limits [0015] State deductibles [0016] Credits
[0017] The classifications, such as payroll, are further broken
into actuarial classes, to develop a unique risk insurance cost
based on the specific combination of actuarial classes for a particular
risk. The example shown in FIG. 1 would produce a unique insurance
cost.
[0018] A change to any of this information would result in a different
premium being charged, if the change resulted in a different actuarial
class for that variable. For instance, a change in the risk's payroll
from 58 thousand to 57 thousand may or may not result in a different
actuarial class, however, a change in an employee's classification
from 0815 to 0953 may result in a different premium because of the
change in actuarial class.
[0019] A principal problem with such conventional insurance determination
systems is that much of the data gathered from the applicant in
the interview is not verifiable or is used as a snapshot of the
insured's exposures only at that moment in time, and even existing
public records contain only minimal information, much of which has
little relevance towards an assessment of the likelihood of a claim
subsequently occurring and obtaining premium based upon actual exposures
versus a retrospective analysis at policy termination. In other
words, current rating systems are primarily based on past realized
losses, projected conditions of the risk's payroll, classes, size
and employee population, which are projected over the life of the
policy, usually one year. This data is usually not updated until
the end of the policy term, wherein an insurance company exercises
its right to audit the business to determine more accurately the
number of employees, their actual payroll, and other factors. None
of the information obtained through conventional systems necessarily
reliably predicts the manner or safety of future employer activities.
Accordingly, the limited amount of accumulated time sensitive, relevant
data, and its minimal evidential value towards computation of a
fair cost of insurance has generated a long-felt need for an improved
system for more reliably and accurately accumulating data having
a highly relevant evidential value towards predicting the actual
payroll and classification changes of the risk. In addition, the
changes in premium that result from these predictions is charged
or credited directly to the risk to better facilitate cash flow
management techniques.
[0020] Many types of workers compensation data collection systems
have heretofore been suggested for purposes of maintaining an accurate
record of certain elements of a risk's operation. Some are suggested
for identifying the cause of a loss, others are for more accurately
assessing the efficiency of classifying the employee's of the risk.
Such systems disclose a variety of conventional techniques for collecting
the risk's operational data elements in a variety of data collection
systems.
[0021] The various forms and types of risk company information
acquisition systems that have heretofore been suggested and employed
have met with varying degrees of success for their express limited
purposes. All possess substantial defects, such that they have only
limited economical and practical value for a system intended to
provide an enhanced acquisition, recording and uploading of system
of data which would be both comprehensive and reliable in predicting
an accurate and adequate cost of insurance for the risk. Since the
type of company operating information acquired and recorded in prior
art systems was generally never intended to be used for determining
an updated cost of workers compensation insurance, the data elements
that were monitored and recorded therein were not directly related
to predetermined safety standards or the determining of an actuarial
class for the employees. There is also the problem of collecting
and subsequently compiling the relevant data for an accurate determination
of an actuarial profile and an appropriate insurance cost therefore.
[0022] Current payroll control and operating systems comprise electronic
data reporting systems readily adaptable for modification to obtain
the desired types of information relevant to determination of the
cost of insurance. Payroll tracking systems have been suggested
which use uploads to back-end audit systems for providing information
describing a risk's changes to the original insurance application.
When such information is combined with additional information in
an expert system, a risk's premium is ascertainable. Mere back-end
audit information, though, will not provide data particularly relevant
to the actuarial class of operation unless the data is combined
with other relevant data in an expert system which is capable of
assessing whether the change is relevant to the policy's terms or
not, and, in addition, it is not real-time, which does not afford
the carrier the opportunity to prevent potential losses, such as
applying Loss Control services.
[0023] Typically, workers compensation premiums are derived from
information obtained directly from the risk at the inception of
the policy's term, and then, again through a payroll audit conducted
at the end of a policy's term. This causes, in some cases, a materially
significant difference in premium costs, if the conditions of the
policy's exposure, changes considerably from policy inception to
audit. There is a need in the industry to "flatten" out
this change in premium by monitoring a risk's payroll and manage
the risk (which is accomplished through a payroll-processing monitoring
system) electronically, and then, adjusting the policy's premium
reflective of the actual, current risk and spreading the difference
in cost over the life of the policy to more accurately reflect the
real exposure of the risk.
[0024] Whatever the precise merits, features, and advantages of
the above mentioned prior art techniques, none of them achieves
or fulfills the purposes of the present invention.
SUMMARY OF THE INVENTION
[0025] A method and system of determining a cost of workers compensation
insurance based upon monitoring, collecting, and communicating data
representative of the risk's "real time" number of employees,
classification of employees, payroll, and other characteristics
by acquiring this data through the risk's "payroll processor".
The cost is therefore adjustable concurrently and prospectively
by relating the employer's business characteristics, and payroll
information received from their payroll processor or payroll processing
system via predetermined transfer of information via an EDI (Electronic
Data Interface). The method comprises steps of monitoring a plurality
of raw data elements representative of a risk's employment practices
or an action of the risk. Selected raw data elements are evaluated
when they are determined to have an identified relationship to the
insurability of the risk. The selected data elements are consolidated
for processing against an insurer profile and for identifying an
increase or reduction to be applied to a base cost of workers compensation
insurance. A final cost is produced from the base costs and the
surcharges or discounts as mandated by state compensation rating
bureaus. This cost is then directly charged, or credited, directly
to the risk via their finance plan. This allows the risk to pay
the premium in installments into their pay periods and reflect the
actual exposures, resulting in fewer variations at the time of the
insurance company's audit, and allowing the carrier to make real-time
decisions regarding continued insurability of the risk and/or apply
risk management or loss control scenarios to the risk.
[0026] The present invention provides for a computer-based method
implemented at an insurance company to estimate a final premium
charge and more accurate real time estimate during the lifetime
of the policy for workers compensation insurance associated with
a risk, wherein the method comprises: the insurance company receiving
real-time payroll data associated with the risk; the insurance company
monitoring the received real-time payroll data to identify and record
raw data elements that have an identified relationship with any
of, or a combination of, the following: the risk's business operation,
insurability of the risk, character of the risk, or rating parameters
associated with the risk's policy; and the insurance company determining
the final premium charge of workers compensation insurance for said
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded raw data
elements.
[0027] The present invention provides for a computer-based method
to determine a final premium charge and more accurate real time
estimate during the lifetime of the policy for workers compensation
insurance associated with a risk, wherein the computer-based method
comprises the steps of: monitoring a set of raw data elements, the
raw data elements associated with any of, or a combination of, the
following: the risk's employment practice, the risk's payroll, modification
to the risk's payroll, or operating state of the risk; identifying
and recording a subset of the raw data elements that have an identified
relationship with any of, or a combination of, the following: the
risk's business operation, insurability of the risk, character of
the risk, or rating parameters associated with the risk's policy;
and determining the final premium charge of workers compensation
insurance of the risk based on a premium modification that increases
or decreases a premium charge based on an evaluation of the recorded
subset of raw data elements.
[0028] The present invention also provides for an article of manufacture
comprising a computer usable medium having computer readable program
code embodied therein which implements a method to estimate a final
premium charge and more accurate real time estimate during the lifetime
of the policy for workers compensation insurance associated with
a risk, wherein the medium comprises: computer readable program
code monitoring a set of raw data elements, the raw data elements
associated with any of, or a combination of, the following: the
risk's employment practice, the risk's payroll, modification to
the risk's payroll, or operating state of the risk; computer readable
program code identifying and recording a subset of the raw data
elements that have an identified relationship with any of, or a
combination of, the following: the risk's business operation, insurability
of the risk, character of the risk, or rating parameters associated
with the risk's policy; and computer readable program code determining
the final premium charge of workers compensation insurance of the
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded subset
of raw data elements.
[0029] The present invention also provides for a business method
implemented over a network to estimate a final premium charge and
more accurate real time estimate during the lifetime of the policy
for workers compensation insurance associated with a risk, wherein
the business method comprising the steps of: monitoring a set of
raw data elements, the raw data elements associated with any of,
or a combination of, the following: the risk's employment practice,
the risk's payroll, modification to the risk's payroll, or operating
state of the risk; identifying and recording a subset of the raw
data elements that have an identified relationship with any of,
or a combination of, the following: the risk's business operation,
insurability of the risk, or rating parameters associated with the
risk's policy; determining the final premium charge of workers compensation
insurance of the risk based on a premium modification that increases
or decreases a premium charge based on an evaluation of the recorded
subset of raw data elements; and generating revenue by performing
a financial transaction over the network based on the determined
final premium charge.
[0030] The present invention also provides for a method of determining
a cost of workers compensation insurance for a selected period based
upon monitoring, collecting and communicating data representative
of the risk's payroll characteristics during said selected period,
whereby the cost is adjustable by relating the payroll characteristics
to predetermined actuarial rates and the method comprises the steps
of: determining an initial profile and a base cost of workers compensation
insurance based on the profile; monitoring a plurality of data elements
representative of payroll and business status of a risk during said
selected period; identifying and analyzing data elements among the
plurality of data elements that have a pre-identified relationship
to the risk's insurability; consolidating the analyzed data elements
for identifying a surcharge or discount to be applied to the base
cost; and producing a final cost of workers compensation insurance
for the selected period from the base cost and the surcharges or
discounts to be billed directly to the risk based on their finance
plan, whereby the risk is charged or credited said final cost for
workers compensation insurance.
[0031] The present invention also provides for a system to determine
a final premium charge and more accurate real time estimate during
the lifetime of the policy of workers compensation insurance associated
with a risk, wherein the system as implemented at an insurance company
comprises: a first engine monitoring a set of raw data elements,
the raw data elements associated with any of, or a combination of,
the following: the risk's employment practice, the risk's payroll,
modification to the risk's payroll, or operating state of the risk;
a second engine identifying and recording a subset of the raw data
elements that have an identified relationship with any of, or a
combination of, the following: the risk's business operation, insurability
of the risk, or rating parameters associated with the risk's policy,
and a workers compensation insurance estimator working in conjunction
with the first and second engine to determine the final premium
charge of workers compensation insurance of the risk based on a
premium modification that increases or decreases a premium charge
based on an evaluation of the recorded subset of raw data elements.
BRIEF DESCRIPTION OF THE DRAWINGS
[0032] FIG. 1 illustrates a prior art system including classifications,
such as payroll, broken into actuarial classes, used to develop
a unique risk insurance cost based on the specific combination of
actuarial classes for a particular risk.
[0033] FIG. 2 illustrates the basic topology for implementing the
present invention.
[0034] FIGS. 3a-d illustrate exemplary scenarios where the present
invention's system and method are implemented at the insurance carrier.
[0035] FIG. 4 illustrates a basic flow chart of the processing
sequence of the present invention including an exception processing
element.
DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0036] While this invention is illustrated and described in a preferred
embodiment, the invention may be produced in many different configurations.
There is depicted in the drawings, and will herein be described
in detail, a preferred embodiment of the invention, with the understanding
that the present disclosure is to be considered as an exemplification
of the principles of the invention and the associated functional
specifications for its construction and is not intended to limit
the invention to the embodiment illustrated. Those skilled in the
art will envision many other possible variations within the scope
of the present invention.
[0037] The present invention contemplates a new and improved workers
compensation monitoring, collecting, and communication system, which
primarily overcomes the problem of determining a cost of insurance
based upon data which does not take into consideration how a specific
payroll changed during the life cycle of the policy. The subject
invention will base insurance charges with regard to current material
data representative of actual current payroll characteristics of
the risk to provide a classification rating of each employee into
an actuarial class which has a vastly reduced rating error over
conventional insurance cost systems. Additionally, the present invention
allows for ongoing adjustments to the cost of coverage because of
the changes in the risk's number of employees and/or their payroll
to said employees. This can result in workers compensation insurance
charges that are readily controllable by the risk. The system is
adaptable to current electronic payroll reporting systems, tracking
systems and data upload systems for the improved extraction of selected
insurance related data.
[0038] FIG. 2 illustrates the basic topology for implementing the
present invention wherein the present invention's system and method
(as implemented in the insurance carrier) communicates directly
with the employer (which in turn works in conjunction with the depicted
payroll processor and insurance agency) to receive real-time payroll
data associated with the risk. The insurance carrier monitors the
received real-time payroll data to identify and record raw data
elements that have an identified relationship with any of, or a
combination of, the following: said risk's business operation, insurability
of said risk, character of said risk, or rating parameters associated
with said risk's policy. The insurance company determines the final
premium charge and more accurate real time estimate during the lifetime
of the policy of workers compensation insurance for the risk based
on a premium modification that increases or decreases a premium
charge based on an evaluation of said recorded raw data elements.
[0039] Although an example is shown in FIG. 2 illustrating the
specific interaction between the employer, insurance carrier, payroll
processor, and insurance agency, other variations are within the
scope of the present invention. For example, FIGS. 3a-d illustrate
exemplary scenarios where the present invention's system and method
are implemented at the insurance carrier. FIG. 3a illustrates the
specific scenario involving a large self-insured entity working
in conjunction with the insurance carrier implementing the present
invention. FIG. 3b illustrates another scenario wherein the employer
works with a specific insurance agency and a specific payroll processor.
FIG. 3c illustrates another scenario wherein the employer works
in conjunction with only a payroll processor (and no insurance agency).
FIG. 3d illustrates yet another scenario where the employer works
with a payroll processor that has a preferred insurance agency.
In the scenarios of FIG. 2 and FIGS. 3a-d, the insurance company
works directly with the employer to determine the final premium
charge and more accurate real time estimate during the lifetime
of the policy of workers compensation insurance for the employer
based on a premium modification that increases or decreases a premium
charge based on an evaluation of recorded raw data elements.
[0040] FIG. 4 illustrates a basic flow chart of one embodiment
of the processing sequence. In accordance therewith, there is disclosed
a method of determining a cost of workers compensation insurance
based upon monitoring, collecting and communicating data representative
of the risk's characteristics, whereby the cost is adjustable by
relating the payroll characteristics to predetermined actuarial
rates. The method is comprised of steps of monitoring a plurality
of raw data elements representative of an operating state of the
risk's business. Selected ones of the plurality of raw data elements
are recorded when they are determined to have an identified relationship
to the rating parameters of the risk's policy. The recorded elements
are consolidated for processing against an insured profile and for
identifying a surcharge or discount to be applied to a base cost
of workers compensation insurance. The total cost of insurance obtained
from combining the base cost and surcharges or discounts is produced
as a final cost to the risk, and is directly charged, or credited,
directly to the risk via their finance plan.
[0041] The present invention provides for a computer-based method
implemented at an insurance company to estimate a final premium
charge for workers compensation insurance associated with a risk,
wherein the method comprises: the insurance company receiving real-time
payroll data associated with the risk; the insurance company monitoring
the received real-time payroll data to identify and record raw data
elements that have an identified relationship with any of, or a
combination of, the following: the risk's business operation, insurability
of the risk, character of the risk, or rating parameters associated
with the risk's policy; and the insurance company determining the
final premium charge of workers compensation insurance for said
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded raw data
elements.
[0042] The present invention provides for a computer-based method
to determine a final premium charge and more accurate real time
estimate during the lifetime of the policy for workers compensation
insurance associated with a risk, wherein the computer-based method
comprises the steps of: monitoring a set of raw data elements, the
raw data elements associated with any of, or a combination of, the
following: the risk's employment practice, the risk's payroll, modification
to the risk's payroll, or operating state of the risk; identifying
and recording a subset of the raw data elements that have an identified
relationship with any of, or a combination of, the following: the
risk's business operation, insurability of the risk, character of
the risk, or rating parameters associated with the risk's policy;
and determining the final premium charge of workers compensation
insurance of the risk based on a premium modification that increases
or decreases a premium charge based on an evaluation of the recorded
subset of raw data elements.
[0043] The present invention also provides for a business method
implemented over a network to estimate a final premium charge and
more accurate real time estimate during the lifetime of the policy
for workers compensation insurance associated with a risk, wherein
the business method comprising the steps of: monitoring a set of
raw data elements, the raw data elements associated with any of,
or a combination of, the following: the risk's employment practice,
the risk's payroll, modification to the risk's payroll, or operating
state of the risk; identifying and recording a subset of the raw
data elements that have an identified relationship with any of,
or a combination of, the following: the risk's business operation,
insurability of the risk, or rating parameters associated with the
risk's policy; determining the final premium charge of workers compensation
insurance of the risk based on a premium modification that increases
or decreases a premium charge based on an evaluation of the recorded
subset of raw data elements; and generating revenue by performing
a financial transaction over the network based on the determined
final premium charge.
[0044] The present invention also provides for a method of determining
a cost of workers compensation insurance for a selected period based
upon monitoring, collecting and communicating data representative
of the risk's payroll characteristics during said selected period,
whereby the cost is adjustable by relating the payroll characteristics
to predetermined actuarial rates and the method comprises the steps
of: determining an initial profile and a base cost of workers compensation
insurance based on the profile; monitoring a plurality of data elements
representative of payroll and business status of a risk during said
selected period; identifying and analyzing data elements among the
plurality of data elements that have a pre-identified relationship
to the risk's insurability; consolidating the analyzed data elements
for identifying a surcharge or discount to be applied to the base
cost; and producing a final cost of workers compensation insurance
for the selected period from the base cost and the surcharges or
discounts to be billed directly to the risk based on their finance
plan, whereby the risk is charged or credited said final cost for
workers compensation insurance.
[0045] In accordance with another aspect of the present invention,
the collection process comprises identifying a trigger event associated
with the raw data elements which has an identified relationship
to the risk's policy conditions so that trigger information representative
of the event is recorded.
[0046] In accordance with yet another aspect of the present invention,
the method comprises steps of generating calculated data elements
and derived data elements from the raw data elements, and accumulating
the calculated and derived data elements in a proprietary database.
[0047] The present invention will use information acquired from
the risk to more accurately assess the risk's business and thereby
derive insurance costs more precisely and fairly. Examples of possible
actuarial classes developed from risk provided data include: [0048]
Payroll [0049] Number of employees [0050] Job Classification [0051]
Payroll per employee
[0052] These new and more precise actuarial classes are considered
to be better predictors of premium cost because they are based on
actual payrolls dispersed by the risk. This will allow the risk
more precise control over their cash flow because the cost of their
insurance will match more precisely the actual real-time experience
of the business.
[0053] One benefit obtained by use of the present invention is
a system that will provide precise and timely information about
the current operation of a risk's business that will enable an accurate
determination of operating characteristics, including such features
as number of employees, job duties and classifications, and amount
of payroll. This information can be used to establish actual real-time,
fact based, insurance charges, eliminating rating errors that are
prevalent in traditional systems and will result in insurance charges
that can be directly controlled by the risk. Charges and/or credits
can then be immediately reflected directly to the risk via their
finance plan. Also, the insured business and the carrier can benefit
from applying Loss Control services as the exposures occur, to prevent
injuries which then impact on the profitability of the account and
future premium charges for the business.
[0054] It is another benefit of the subject invention that conventional
payroll processing company's database interfaces are easily supplemented
and interfaced by our database system components to extract selected
insurance relevant data from the risk.
[0055] It is yet another object of the present invention to generate
actuarial classes and risk profiles relative thereto based upon
actual business characteristics of the risk, as represented by the
monitored and recorded data elements for providing a more knowledgeable,
enhanced insurance rating precision.
[0056] The subject new insurance rating system retrospectively
adjusts and prospectively sets premiums based on data derived from
risk supplied characteristics throughout the policy period through
the generation of new actuarial classes determined from such characteristics,
which classes heretofore have been unknown in the insurance industry.
[0057] Other benefits and advantages of the subject new insurance
cost determination process will become apparent to those skilled
in the art upon a reading and understanding of the specification.
[0058] One of the useful consequences of the subject invention
is that other products could be marketed to a particular risk based
on information provided from the subject invention from the risk's
business. Since the invention includes processes for gathering,
extracting and analyzing information provided by the risk, a more
informed judgment can be made about a determination of when and
which products could be marketed to that risk.
[0059] The present invention process benefits the insurance company
because changes to characteristics of the risk can be immediately
reflected in the policy's premium and charged directly to the risk
according to the terms of the policy's finance plan. This not only
allows the risk to have better cash flow management opportunities,
but, also, the insurance company experiences the benefit of immediately
realizing their exposure. The charge that is generated directly
to the risk is also a cash flow management tool that is better than
traditional "charge back" methods because the insurance
company enjoys the immediate availability of funds, as opposed to
waiting for the audit results, or, as opposed to waiting for the
charge-back through a payroll-processor, and takes responsibilities
for the calculation of premium and fees.
[0060] The invention has been described with reference to preferred
embodiments. Obviously, modifications and alterations will occur
to others upon a reading and understanding of the specification.
It is our intention to include all such modifications and alterations
insofar as they come within the scope of the appended claims or
the equivalents thereof.
[0061] Additionally, the present invention provides for an article
of manufacture comprising computer readable program code contained
within implementing one or more modules to determine cost of workers
compensation insurance based upon monitoring, collecting and communicating
data representative of the risk's "real time" number of
employees, classification of employees, payroll, and other characteristics
by acquiring this data through the risk's "payroll processor".
[0062] The present invention also provides for a system to determine
a final premium charge and more accurate real time estimate during
the lifetime of the policy of workers compensation insurance associated
with a risk, wherein the system as implemented at an insurance company
comprises: a first engine monitoring a set of raw data elements,
the raw data elements associated with any of, or a combination of,
the following: the risk's employment practice, the risk's payroll,
modification to the risk's payroll, or operating state of the risk;
a second engine identifying and recording a subset of the raw data
elements that have an identified relationship with any of, or a
combination of, the following: the risk's business operation, insurability
of the risk, or rating parameters associated with the risk's policy,
and a workers compensation insurance estimator working in conjunction
with the first and second engine to determine the final premium
charge of workers compensation insurance of the risk based on a
premium modification that increases or decreases a premium charge
based on an evaluation of the recorded subset of raw data elements.
[0063] Furthermore, the present invention includes a computer program
code-based product, which is a storage medium having program code
stored therein which can be used to instruct a computer to perform
any of the methods associated with the present invention. The computer
storage medium includes any of, but is not limited to, the following:
CD-ROM, DVD, magnetic tape, optical disc, hard drive, floppy disk,
ferroelectric memory, flash memory, ferromagnetic memory, optical
storage, charge coupled devices, magnetic or optical cards, smart
cards, EEPROM, EPROM, RAM, ROM, DRAM, SRAM, SDRAM, or any other
appropriate static or dynamic memory or data storage devices.
[0064] The present invention also provides for an article of manufacture
comprising a computer usable medium having computer readable program
code embodied therein which implements a method to estimate a final
premium charge and more accurate real time estimate during the lifetime
of the policy for workers compensation insurance associated with
a risk, wherein the medium comprises: computer readable program
code monitoring a set of raw data elements, the raw data elements
associated with any of, or a combination of, the following: the
risk's employment practice, the risk's payroll, modification to
the risk's payroll, or operating state of the risk; computer readable
program code identifying and recording a subset of the raw data
elements that have an identified relationship with any of, or a
combination of, the following: the risk's business operation, insurability
of the risk, character of the risk, or rating parameters associated
with the risk's policy; and computer readable program code determining
the final premium charge of workers compensation insurance of the
risk based on a premium modification that increases or decreases
a premium charge based on an evaluation of said recorded subset
of raw data elements.
CONCLUSION
[0065] A system and method has been shown in the above embodiments
for the effective implementation of workers compensation system
for determining a cost of insurance. While various preferred embodiments
have been shown and described, it will be understood that there
is no intent to limit the invention by such disclosure, but rather,
it is intended to cover all modifications falling within the spirit
and scope of the invention, as defined in the appended claims. For
example, the present invention should not be limited to the preferred
embodiment workman's compensation calculation; other insurance types
and programs can benefit from the present invention without departing
from the scope thereof. Also, software/program, computing environment,
or specific computing hardware, should not limit the invention.
[0066] The above enhancements are implemented in various computing
environments. For example, the present invention may be implemented
on a conventional IBM PC or equivalent, multi-nodal system (e.g.
LAN) or networking system (e.g. Internet, WWW, wireless web). All
programming and data related thereto are stored in computer memory,
static or dynamic, and may be retrieved by the user in any of: conventional
computer storage, display (i.e. CRT) and/or hardcopy (i.e. printed)
formats. The programming of the present invention may be implemented
by one of skill in the art of database programming. |