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Insurance Abstract
Systems and methods provide customizable insurance according to
consumer preferences. Demand simulators may be used to guide the
creation of optimized packages of features, which consumers may
select from to form an insurance product appropriate for their particular
needs. Packages may be formed with a particular appeal to consumers
with common characteristics. In addition, methods are provided for
selling insurance products formed through an optimization process
and providing corresponding insurance services.
Insurance Claims
1. A method of providing insurance coverage, the method comprising:
(a) receiving from an insured a premium for an insurance coverage
package that includes a standard homeowner's coverage component
and at least one homeowner's component having an optimized grouping
of insurance features that share a common attribute; and (b) indemnifying
the insured when an event covered by the insurance coverage occurs.
2. The method of claim 1, wherein the standard homeowner's coverage
component includes features required by a financial institution.
3. The method of claim 1, wherein the standard homeowner's coverage
component includes features that exceed those required by a financial
institution.
4. The method of claim 1, wherein the at least one homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises an electronic data recovery coverage
component.
5. The method of claim 1, wherein the at least one optional homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises a home enterprise coverage component.
6. The method of claim 1, wherein the at least one homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises an identity restoration coverage
component.
7. The method of claim 1, wherein the at least one homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises a music and photography coverage
component.
8. The method of claim 1, wherein the at least one homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises a prized possessions coverage
component.
9. The method of claim 1, wherein the at least one homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises a sports and leisure coverage
component.
10. The method of claim 1, wherein the at least one homeowner's
component having an optimized grouping of insurance features that
share a common attribute comprises a yard and garden coverage component.
11. The method of claim 1, wherein the optimized grouping of insurance
features that share a common attribute are selected through an optimization
process.
12. The method of claim 11, wherein the optimization process is
based upon consumer factors.
13. The method of claim 11, wherein the optimization process is
based upon financial criteria.
14. The method of claim 1, wherein the optimized grouping of insurance
features includes at least one term that affects the premium.
15. The method of claim 1, wherein the optimized grouping of insurance
features includes at least one term that affects at least one future
premium upon renewal.
16. A method of providing insurance coverage, the method comprising:
(a) offering to provide homeowner's insurance in accordance with
an insurance policy that includes at least one optional term, wherein
the insurance policy will be associated with a first premium if
at least one optional term is selected and a second premium, different
from the first premium, if at least one optional term is not selected;
(b) receiving the premium; and (c) in exchange for the premium,
providing insurance coverage in accordance with the insurance policy.
17. A method of providing insurance coverage, the method comprising:
(a) receiving a premium for a homeowner's insurance coverage package;
and (b) in exchange for the premium, providing insurance coverage
that includes a standard homeowner's coverage component and at least
one homeowner's component having an optional optimized grouping
of insurance features that share a common attribute.
18. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises an electronic data recovery
coverage component.
19. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises a home enterprise coverage
component.
20. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises an identity restoration
coverage component.
21. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises a music and photography
coverage component.
22. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises a prized possessions coverage
component.
23. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises a sports and leisure coverage
component.
24. The method of claim 17, wherein the at least one homeowner's
component having an optional optimized grouping of insurance features
that share a common attribute comprises a yard and garden coverage
component.
Insurance Description
[0001] The present application is a continuation-in-part of U.S.
patent application Ser. No. 11/551,609, filed Oct. 20, 2006, and
entitled "Systems and Methods for Customizing Automobile Insurance"
which is a continuation-in-part of U.S. patent application Ser.
No. 11/270,611, filed Nov. 10, 2005 and entitled "Systems and
Methods for Customizing Insurance" which claims priority to
U.S. Provisional Application No. 60/629,318, filed Nov. 19, 2004.
The entire disclosures of each are hereby incorporated by reference.
TECHNICAL FIELD
[0002] The present invention relates to systems and methods for
customizing insurance and, more particularly, to customizing insurance
policies according to consumer preferences.
[0003] The present invention also provides systems and methods
to design insurance products in a manner that allows consumers to
select insurance packages that include features they consider appropriate
for their needs.
BACKGROUND
[0004] Today's consumer is more pressed than ever for time. With
increasing time demands placed, many consumers do not have much
time to shop, and what time they do have seems to be consumed in
reviewing the massive amount of information they encounter in shopping.
The pressures attendant the time constraints and information can
pervade a consumer's shopping experience, including shopping for
insurance.
[0005] New technologies, however, now make possible aids to help
consumers as they make insurance choices in much less time that
they could years ago. The challenge is how to harness those technologies.
SUMMARY
[0006] Methods and systems are provided for creating insurance
packages and providing insurance services. Insurance packages may
be created by performing research to identify a target population
and a set of insurance features desired by the target population.
The set of insurance features may be bundled into an insurance package.
The packages may include standard components, combinations of optimized
components, optimized combinations of standard components and various
combinations. The insurance packages may provide automobile insurance,
homeowner's insurance and other types of insurance.
[0007] In certain embodiments of the invention, aspects of the
present invention can be partially or wholly implemented with a
computer-readable medium, for example, by storing computer-executable
instructions or modules, or by utilizing computer-readable data
structures.
[0008] Of course, the methods and systems of the above-referenced
embodiments may also include other additional elements, steps, computer-executable
instructions, or computer-readable data structures.
[0009] The details of these and other embodiments of the present
invention are set forth in the accompanying drawings and the description
below. Other features and advantages of the invention will be apparent
from the description and drawings, and from the claims.
BRIEF DESCRIPTION OF THE DRAWINGS
[0010] All descriptions are exemplary and explanatory only and
are not intended to restrict the invention, as claimed. The accompanying
drawings, which are incorporated in and constitute a part of this
specification, illustrate embodiments of the invention and, together
with the description, serve to explain the principles of the invention.
In the drawings:
[0011] FIG. 1 is an exemplary flow chart for optimizing insurance
products, in accordance with an embodiment of the invention;
[0012] FIG. 2 is an exemplary chart comparing feature relevance
and feature differentiation, in accordance with an embodiment of
the invention;
[0013] FIG. 3 is an exemplary method of offering insurance, in
accordance with an embodiment of the invention;
[0014] FIG. 4 shows an exemplary insurance product comprising packages
selected from FIG. 3, in accordance with an embodiment of the invention;
[0015] FIG. 5 is another exemplary method of offering insurance,
in accordance with an embodiment of the invention;
[0016] FIG. 6 shows an exemplary insurance product comprising packages
selected from FIG. 5;
[0017] FIG. 6A shows an optimized insurance policy that includes
a combination of standard coverage components, in accordance with
an embodiment of the invention;
[0018] FIG. 6B shows an exemplary optimized insurance policy that
includes standard coverage components and an optional coverage component,
in accordance with an embodiment of the invention;
[0019] FIG. 7 is an exemplary system, in accordance with an embodiment
of the invention; and
[0020] FIG. 8 illustrates a process of providing insurance coverage
that may be used in connection with various embodiments of the invention.
DETAILED DESCRIPTION
[0021] Generally, insurance is an agreement by which an insurer,
sometimes referred to as an underwriter, in exchange for consideration,
undertakes to indemnify the insured party against loss, damage,
or liability arising from certain risks. The consideration paid
by an insured party is typically referred to as a premium, which
is paid to keep the insurance in effect. In general, an insurance
policy is a contract of insurance that defines the rights and duties
of the contracting parties. A typical insurance policy includes
limits on the amount of risk that the insurer will cover.
[0022] Systems and methods consistent with aspects of the present
invention provide consumers with insurance products that may help
them address some of their individual needs or wants by including
features that a particular group may find desirable or appropriate.
For the purposes of this application, features may include coverages,
terms, and rewards. Generally, a coverage provides a protection
or indemnification to the insured. A term includes any word, phrase,
or provision of import that determines the nature and scope of an
agreement, such as the coverage grant in an insurance coverage or
the premium charged. A reward may include a discount, credit, or
benefit provided to the insured upon the occurrence of a specified
event.
[0023] When a feature is not included in a group, that particular
feature is referred to as an ala carte feature. Ala carte features
refer to coverages, terms, and rewards that are selected by the
insured on an individual basis for inclusion in an insurance product.
[0024] Features may be grouped together to form a package. For
example, one grouping may form a value package for price conscious
consumers, another grouping may form a protection plus package providing
additional features, and yet another grouping may form a platinum
package including yet more additional features. An insurance product
may also include a standard package that includes coverages typically
offered to consumers. A standard homeowners package may include
coverage for personal property such as furnishings, clothes and
appliances from loss caused by specified perils. A standard homeowners
package may also include a coverage that pays for damages an insured
person may become legally obligated to pay because of injury or
property damage arising from certain covered occurrences. A standard
automobile package may include coverages required by state law,
such as bodily injury liability coverage and property damage liability
coverage. A standard automobile package may also include personal
injury protection coverage, medical payment coverage, uninsured
motorist coverage, underinsured motorist coverage, collision coverage,
and comprehensive coverage.
[0025] Most states mandate minimum types and levels of automobile
insurance coverage. For example, a state may require liability coverage
with mandated minimum coverage limits. Depending upon the particular
state, some common coverages may be mandatory or optional. Other
coverages, such as collision and comprehensive, may be required
by banks or financial institutions as a prerequisite to obtain vehicle
financing.
[0026] In the marketplace today, an automobile insurance product
offering might include standard coverages required by state law
and/or financial institutions. A standard package includes coverages
and coverage limits that meet minimum state law requirements. A
standard package may also include other coverages that are required
by financial institutions. Additionally, insurance companies may
offer coverages and coverage limits that are not required by state
law or by financial institutions. Coverage examples include towing
reimbursement and car rental reimbursement.
[0027] Automobile insurance consumers find value in optional coverages
designed around potential risks uniquely associated with driving
and or repairing of vehicles. Some examples include towing and emergency
repair coverage. A car rental reimbursement coverage may help pay
for the use of a rented vehicle while the insured vehicle is being
repaired due to a loss caused by a covered peril. Other personal
coverages are also offered in the event certain covered perils occur.
[0028] The following provides a summary of an exemplary basic optimized
package, two additional optimized packages, and various exemplary
ala carte features that may be added by a consumer to one of the
optimized packages. For example, a basic package might include a
reduced premium by adding in a few terms. It is designed as an alternative
for the customer particularly concerned about price. In particular,
a customer may be required to participate in an arrangement that
automatically makes periodic (for example, monthly) deductions from
the insured's savings or checking account to pay the premium and
other charges or fees associated with the insurance. Customers will
be charged an early termination fee (such as $100) if the insurance
is terminated by the insured, which might include the insured's
failure to accept a renewal offer, or terminated for non-payment
of premium, within a specified period of time after the package
is added.
[0029] Another optimized package might offer an accident waiver
enhancement feature and a safe driving deductible reward feature.
The accident waiver enhancement feature might specify that the first
rate-affecting accident that occurs will not cause the loss of certain
discounts or result in the application of any accident surcharges.
Subsequent rate affecting accidents will not cause the loss of the
discounts or the application of any accident surcharges if the insured
has not received this waiver in the thirty-six month experience
period ending on the date of the accident.
[0030] The safe driving deductible reward feature might provide,
upon enrollment, that the customer will receive an initial reduction
(such as $100) in his or her collision deductible. For each twelve
month experience period the policy is not assigned an accident,
the insured will receive an additional reduction (up to a maximum
$500 reduction) in their collision deductible that will apply to
all covered collision claims during the next policy period.
[0031] Yet another optimized package might offer an accident waiver
enhancement plus feature, a safe driving deductible reward feature,
and a safe driving bonus feature. With the accident waiver enhancement
plus feature, neither a single accident nor multiple accidents will
cause the loss of certain discounts or the application of accident
surcharges as long as the accidents occur while this feature is
part of the policy. The safe driving bonus feature may provide if
the policy is not assigned an accident for a designated six-month
experience period, the insured will receive 5% of their previous
term's premium for major coverages as a credit that can be applied
toward the next six-month premium.
[0032] Both the above-described exemplary optimized packages may
also allow the customer the opportunity to add, for an additional
premium, an additional feature in the form of a new car expanded
protection coverage feature on an automobile that has collision
and comprehensive coverages. The coverage provided by this feature
will continue while collision and comprehensive coverages are maintained
and will be removed at the first renewal that is effective in the
calendar year that is three years greater than the auto's model
year.
[0033] The new car expanded protection coverage feature may provide
that, in the event of a covered loss to an automobile other than
a total loss, the insurance carrier will pay to repair the auto
without a deduction for depreciation. The repair coverage may not
apply to losses caused by fire, theft, larceny, or flood. Furthermore,
the amount payable will be reduced by any amounts paid or payable
under the collision or comprehensive coverages as well as any applicable
collision or comprehensive deductible.
[0034] The new car expanded protection coverage feature may also
provide that, in the event of a covered total loss, the insurance
carrier will pay to replace the automobile with a new one of the
same make and model with the same equipment or, if a new automobile
of the same make and model with the same equipment is not available,
a new automobile that is similar in size, class, body type and equipment
(subject to a price limitation described in the coverage). The replacement
coverage may not apply to leased vehicles or to losses caused by
fire, theft, larceny, or flood. Furthermore, the amount payable
will be reduced by any amounts paid or payable under the collision
or comprehensive coverages, any applicable collision or comprehensive
deductible, and the dollar amount of any unrepaired damage that
occurred prior to the total loss of the automobile.
[0035] The new car expanded protection coverage feature may also
provide that, in the event of a covered total loss, if the amount
the customer owes under the original automobile loan or automobile
lease exceeds the actual cash value of the automobile at the time
of loss, the insurance carrier will pay the difference between the
amounts. The amount payable may be reduced by any overdue loan or
lease payments (and any financial penalties associated with those
overdue payments), the transfer or rollover of a previous outstanding
loan or lease balance from another vehicle to the original loan
or lease for the covered automobile, the dollar amount of unrepaired
damage which occurred prior to the total loss, all refunds paid
or payable to the customer as a result of the early termination
of the automobile loan or automobile lease agreement (including
financed warranty/extended service contracts), and any amount paid
or payable under the replacement protection of the new car expanded
coverage protection feature.
[0036] In forming the above exemplary packages that are offered
for sale by an insurance carrier, one forming the package offerings
might decide to consider consumer "need states" to group
features into packages offered for sale. Need states refer to the
complex web of rational and subconscious triggers that prompt a
consumer to make a product selection. Need states may be prompted
by a consumer deciding that he or she needs or wants to obtain a
product. Furthermore, they are generally a result of an individual's
situation at a particular point in time. Life stage events, such
as a new driver in the family, shift consumers' need states. Of
course, automobile insurance consumers may have varied circumstances,
and consequently, differing insurance needs and wants. One may be
a student with limited resources, and as a result, might select
state mandated coverage. Another may be near retirement and focused
on protection of assets and convenience of services.
[0037] Systems and methods consistent with aspects of the present
invention identify distinct groupings of insurance consumers with
similar need states and identify the most commonly desired optional
features that consumers might chose to help meet their needs. Optional
features are then combined by the system into optimized packages
of insurance products that are offered for sale to consumers. By
grouping features into packages that align with common need states,
the offered products will be attractive to persons in need states
that were considered when designing the packages.
[0038] An "optimized package" includes a set of insurance
features that are packaged to help address the needs and wants of
consumers in a particular grouping. Ala carte features may also
be optimized. For example, ala carte features may be optimized by
grouping certain ala carte features together that share an attribute.
Accordingly, both optimized features and optimized ala carte features
include coverages, terms, and rewards that are selected from a group
that shares an attribute. The shared attribute allows the features
to be grouped around a common theme. For example, a value grouping
may include features designed around lower price. A protection theme
may include features optimized around protecting assets. For the
most part, features are grouped to share an attribute, however,
features that are grouped around a common theme may also include
one or more features that do not share the common theme or are based
on a regional theme.
[0039] More than one package may be grouped together to form a
"plan." A plan refers to a grouping of a standard package
with at least one optimized package of features. A consumer may
also add ala carte features, or optimized ala carte features, to
a plan on an individual basis.
[0040] The process by which packages are designed may involve consideration
of market theories. When looking to a market, one needs to identify
the individuals that might decide to purchase a product. A group
of persons that may be interested in or share a need for a particular
product or products is defined as a target population. Accordingly,
the target population is the group to be reached through some action
or intervention and may refer to groups with specific characteristics.
[0041] Market segmentation refers to the process of grouping persons
in a target population into smaller subgroups called market segments.
A market segment is a group within a heterogeneous market consisting
of consumers or organizations with relatively homogeneous needs
and wants. Consumers in a market segment are expected to respond
to a given set of marketing stimuli in a similar manner. Ideally,
individuals within a market segment will likely have similar feelings
about a marketing mix comprised of a given product, sold at a given
price, distributed in a certain way, and promoted in a certain way.
Accordingly, a market segment is a more specifically defined group
within the target population.
[0042] A target population or a market segment may share one or
more common characteristics that statistically describe the persons
within the target population or market segment. Characteristics
may include gender, age, occupation, marital status, and family
size.
[0043] To select features that might appeal to a particular target
population or market segment, features may be grouped together along
marketing demand parameters. Groups of features are offered in different
product structures, which are discussed in further detail below.
Utility-based groupings maximize product acceptance of product packages
by statistically predicting consumer demand based on multidimensional
analysis of consumer motivations. These motivations are then compiled
through a demand simulator to identify and target product requirements
that may be attractive to various segments of the consumer population.
A demand simulator measures overall demand potential as well as
consumer preferences for various product features and brands. By
using a demand simulator, it is possible to identify the features
that consumers might want most, and then measure the price they
are willing to pay for them. Demand simulators are discussed more
fully below.
[0044] For example, certain features have more universal consumer
appeal while other features appeal to a specific consumer characteristic.
An optimization process creates focused sets of features. The process
may organize product packages around central motivation factors,
such as price points and common feature acceptance. Using feature
interest as a motivating factor, the most popular features can be
grouped to form a set of features that are both universally popular
and provide an acceptable profit to an insurance carrier.
[0045] Differentiation is introduced by adding features to packages
that specifically address the motivations of a specific consumer
group. For example, some consumer groups are interested in security
features, while others may have young drivers in the household.
Because some consumers are highly driven by features while others
are driven by price, package structures may be optimized based on
price to motivate a consumer segment. Alternatively, package structures
may be optimized based on features that appeal to less price-sensitive
members of the consumer population. In addition, some optimized
package structures may be based upon both price and feature considerations.
[0046] Insurance products generated according to the present invention
may be offered for sale in a variety of manners. For example, consistent
with the present invention, optimized packages may be offered through
any form of visual display, either electronically or by the use
of brochures, posters, signs, standing displays, and any other form
of visual and/or written communication. In addition, one may offer
optimized packages through an insurance carrier's agents in person,
over the telephone, or via the Internet. In an Internet implementation,
or over the telephone using a voice recognition system, such interactions
may occur automatically.
[0047] Reference will now be made in detail to exemplary embodiments
of the invention, examples of which are illustrated in the accompanying
drawings. Wherever possible, the same reference numbers will be
used throughout the drawings to refer to the same or like parts.
[0048] FIG. 1 is a flow chart for optimizing customizable insurance
products, in accordance with an embodiment of the invention. One
may optimize insurance products by designing packages using a process
that takes into account the considerations discussed in further
detail below.
[0049] First, features are identified as candidates to be offered
as part of various packages, which together form an insurance product.
Step 110. To identify those features that one might consider as
candidates, business performance data may be analyzed. Business
performance data may include different subsets of data obtained
by collecting existing information from the marketplace to analyze
for trends and to understand the landscape of available options.
A possible subset of business performance data is market-share data,
which includes industry data used to evaluate current levels of
market share for particular consumers to determine demand generated
by specific product offerings. In this step of the process, one
might identify a target population and/or a market segment.
[0050] Other categories of data considered in this step include
industry-product-offering data and internal-pricing data. Industry-product-offering
data includes an evaluation of the products and features offered
in policies from various insurance carriers. In addition, this data
may be supplemented by internal pricing data proprietary to the
insurance carrier conducting the demand simulation.
[0051] Internal-pricing data may include the insurance carrier's
premiums, loss, and expense data so that the cost of features can
be taken into account. Internal-pricing data allows one to compare
a specific insurance carrier's ability to provide a product to consumers
at a price consumers are willing to pay. Other ways of arriving
at candidate features include brainstorming with experts, examining
the current and past marketplace, and by soliciting and receiving
suggestions and input from consumers and agents.
[0052] Next, the cost of each candidate feature is determined.
Step 120. In determining costs of the candidate features, the losses
that are expected for a particular feature are examined when determining
the premium that consumers will pay.
[0053] Once candidate features and costs are determined, the demand
for each feature in the marketplace is evaluated. Step 130. During
the evaluation, consumer preferences are evaluated to form price
utility curves, which are created after conducting consumer research
to better understand consumer preferences for each feature or combination
of features.
[0054] The process of evaluating demand may include collecting
information using focus groups selected from different geographic
regions. For example, persons participating in focus groups can
be selected across all age groups that have actively shopped for
insurance during an appropriate time frame. Selection of groups
may occur on the basis of any identified target population and/or
market segment. During this step, features may be eliminated from
further consideration based upon the focus groups' preferences.
In addition, focus groups may provide survey information identifying
the price each individual was willing to pay for certain features.
Such considerations may involve an evaluation of sample packages
containing different combinations of features offered at different
prices.
[0055] Next, features may be grouped into possible packages. Step
140. During this step, cost prohibitive features may be eliminated
from packages because consumers may not be willing to pay the price
of a particular feature. Also, strategic alternatives data may be
examined, including price-point data and variable-feature-level
data. Price point data includes an evaluation of a particular insurance
carrier's current prices to competitors' prices and includes an
evaluation of the impact of adding packaged features. Variable feature
level data may be considered to describe the most compelling packages
of features. Variable feature level data is derived from consumer
research and includes uniqueness and differentiation of features
to evaluate the best features and how features should be grouped
in packages.
[0056] In addition, incremental costs of strategic alternatives
data includes variable-feature-cost data and fixed-cost-investments
data. Variable-feature-cost data describes an insurance carrier's
proprietary loss and expense data and is used to determine a cost
to offer a given feature. Fixed-cost investments data takes into
account systems, infrastructure, and other costs associated with
implementation of an optimized product architecture.
[0057] When designing packages, another concept that may be incorporated
into the process is that of self-selection. For example, packages
should include features that appeal to consumers in a particular
need state such that these consumers will recognize the value of
a particular package and consider including it in their insurance
selections.
[0058] Next, demand is simulated using a demand simulator. Step
150. The demand simulator estimates the number of individuals that
will purchase a particular product offering. Optimization of packages
is accomplished by iteratively trying all possible package combinations
or by determining which features may be substituted for other features
in the most optimal packages to arrive at a set of features that
provides an arrangement of features that a consumer would find of
value.
[0059] The demand simulator may be implemented as a software module,
which processes data provided to it. During the operation of the
demand simulator, user input may provide the ability to select different
features and to alter inputs to the module. Consistent with the
present invention, processing may also occur automatically at the
direction of optimization software including automated logic.
[0060] Features that are used by the demand simulator may be selected
with utility-based product segmentation. As discussed above, price-utility
curve data may be used to determine packages. A utility value for
each feature may be determined through consumer research to identify
the features most attractive to the overall target population as
well as to subsets of the target population that form market segments.
Features are then grouped into packages, and groups of packages
form an insurance product.
[0061] After the demand simulator provides an initial processing
of features, a user may decide whether to simulate demand again.
Step 160. If the user decides to stop, the process ends. If the
user decides to continue, the process goes to Step 170. In Step
170, processing may be further refined by re-examining costs of
packages by examining different feature combinations based on particular
judgment criteria. For example, if the cost of offering a particular
package is high, it may be identified using variable-feature-cost
data and fixed-cost investment data, as described above in connection
with Step 120.
[0062] After inspecting the costs, certain features may be removed
or added to packages. Step 180. User input may further provide the
ability to select different features and to alter inputs to the
module. The process then returns to simulate demand for the newly
modified packages. Step 150.
[0063] FIG. 2 shows an exemplary chart comparing feature relevance
and feature differentiation used to perform analysis used in optimizing
features for packages. By plotting the data as shown in FIG. 2,
it is possible to determine a feature set 205 that includes features
that are highly relevant and distinctive. Such a process may be
done for an entire population to arrive at feature set 205 and may
also be done for sub-segments based on characteristics common to
the sub-segments to determine the packages that most appeal to a
particular group or subgroup.
[0064] Accordingly, research may be performed to identify a target
population and a set of insurance features desired by the target
population. The set of insurance features are bundled into an insurance
package. A cost of the insurance package may be determined and the
insurance package may be offered for sale.
[0065] Furthermore, the research to identify the insurance features
may be carried out through an optimization process, as described
above. In some embodiments, the optimization process is based upon
consumer factors. In other embodiments, the optimization process
is based also upon financial criteria that provide the insurance
company with an acceptable profit. The research may also include
examining common characteristics of the target population or of
a market segment within the target population.
[0066] This procedure may be repeated for additional market segments.
A set of ala carte features may also be identified and a cost for
each of the ala carte features may also be identified, along with
determining corresponding prices for the ala carte features and
offering the ala carte features for sale at the corresponding prices.
[0067] In one embodiment of the invention, an optimized package
includes a basic set of insurance features and may be offered for
sale along with the insurance package. A standard package may include
a set of insurance features required by a governing law. Alternatively,
a standard package may also include a set of insurance features
required by a financial institution.
[0068] For example, an optimized package may additionally include
a set of insurance features created by performing research to identify
a target population or a market segment. Alternatively, a standard
package may also be combined with the optimized package to form
a plan. Sets of additional insurance features may also be selected
to form additional packages. Each plan may include a standard package
and an optimized package.
[0069] In addition, a third party may sell optimized packages without
a standard package. Such a situation might involve a third party's
sale of optimized packages as additions to an existing insurance
product. An insurance carrier has sold the existing insurance product
to a consumer, who has then gone to a third party from which the
consumer may obtain the optimized packages. The optimized packages,
however, may be created or selected consistent with the principles
of the present invention.
[0070] FIG. 3 is an exemplary method of selling insurance, in accordance
with an embodiment of the present invention. As shown in FIG. 3,
a consumer is offered a variety of options. For example, a consumer
may only want to purchase a basic insurance product. That consumer
may select a standard package 308. Alternatively, the consumer may
select a value plan 302, which includes a standard package 304 and
a value package 306 with additional features.
[0071] However, if a consumer would like to purchase more than
a basic insurance product, the consumer may select from optimized
package group 310. FIG. 3 includes two exemplary optimized packages:
a protection plus plan 312 and a platinum plan 318. Protection plus
plan 312 includes a standard package 314 and a protection plus package
316. Protection plus package 316 may include features such as a
repair/replace feature and a loan/lease-gap coverage feature. Alternatively,
the consumer may select platinum plan 318, which includes a standard
package 320 and a platinum options package 322. Platinum options
package 322 may include features such as a repair/replace feature,
a loan/lease-gap coverage feature, a monetary death indemnity feature,
and a full roadside assistance feature.
[0072] In addition, the consumer may select from optimized ala
carte features 324. Optimized ala carte features 324 are individual
features sold separately as add-ons to certain optimized packages.
Optimized ala carte features 324 have been keyed as a group to share
an attribute. In addition, the consumer may also select from a general
group of ala carte features 326 that have not been optimized. As
shown in FIG. 3, there are many possible combinations and variations
from which a consumer may select to form an insurance product.
[0073] FIG. 4 shows an exemplary insurance product comprising packages
selected from FIG. 3. The example shown in FIG. 4 displays a possible
selection that a consumer may make from the options provided in
FIG. 3 to form insurance product 402. Insurance product 402 includes
protection plus plan 312, which includes standard package 314 and
protection plus package 316. In addition, insurance product 402
includes several ala carte features labeled A, B, and C, which may
or may not be optimized.
[0074] FIG. 5 is another exemplary method of selling insurance
in accordance with an embodiment of the invention. In the method
shown in FIG. 5, a consumer combines packages in a linear fashion
to form an insurance product. For example, the consumer selects
a standard package 502. Since standard package 502 meets the minimum
requirements for an insurance product, the consumer may decide only
to purchase standard package 502. However, the consumer may also
decide to select additional optimized packages from optimized package
group 504. For example, the consumer may also select optimized options
package 506, which is considered a "basic" optimized package.
In addition, however, the consumer may also select optimized options
package 508 and/or optimized options package 510. These additional
optimized packages are considered "premium" packages because
they offer additional features at a cost greater than the basic
optimized package. Furthermore, optimized packages 506-510 may include
features optimized in a manner consistent with the present invention.
In some embodiments, a consumer may be required to first select,
for example, a particular optimized options package before the consumer
may select a further optimized package. Such a "tiered"
arrangement requires the purchase of an initial optimized package
as a prerequisite before additional optimized packages may be purchased.
[0075] Once the consumer has selected optimized options package
508 or optimized options package 510, the consumer may also select
any one or more optimized ala carte features 512. Additionally,
a consumer that has selected any one of optimized options packages
506-510 may also select one or more ala carte features 514. As shown
in FIG. 5, there are many possible combinations and variations from
which a consumer may select to form an insurance product.
[0076] FIG. 6 shows an exemplary insurance product comprising packages
from FIG. 5. The example in FIG. 5 shows a possible selection that
a consumer may make to form insurance product 602. Insurance product
602 includes standard package 502, optimized package 506, and optimized
package 508. In addition, insurance product 602 includes several
ala carte features A, B, and C, which may or may not be optimized.
[0077] Those skilled in the art will appreciate that aspects of
the invention may be applied to create a variety of different insurance
products. The insurance products may include combinations of optimized
components, optimized combinations of standard components and combinations
of both. FIG. 6A, for example, shows an optimized insurance policy
604 that includes a combination of standard coverage components
606, 608 and 610. In one implementation, optimized insurance policy
604 is a homeowner's insurance policy. FIG. 6B illustrates an exemplary
optimized insurance policy 620 that includes standard coverage components
622 and 624 and an optional coverage component 626. Optional coverage
component 626 may include a grouping of insurance features that
share a common attribute.
[0078] FIG. 7 illustrates a system 700 that may be used to implement
at least some of the methods described above, in accordance with
an embodiment of the present invention. System 700 includes a server
705, connected to a network 760, including a CPU 720 and a memory
730. Software loaded into memory 730 from, for example, a disk drive
(not shown) at the direction of CPU 720 may be used to implement
a program for optimizing insurance in a manner consistent with various
embodiments of the present invention. For example, the software
may execute instructions for performing demand simulation to analyze
data and to form optimized packages. In addition, memory 730 may
store, for example, a database (not shown) of market data and store
research conducted to design packages.
[0079] Additionally, network 760 provides communications between
the various entities in system 700, such as user terminals 770-790.
Network 760 may be a shared, public, or private network and encompass
a wide area or local area. Further, network 760 may be implemented
through any suitable combination of wired and/or wireless communication
networks. By way of example, network 760 may be implemented through
a wide area network (WAN), local area network (LAN), an intranet,
or the Internet.
[0080] Terminals 770-790 allow a user to exchange information with
server 760. Terminals 770-790 may be any type of appropriate device
for communicating with server 705 over network 760. For example,
terminal 770 may be a PDA running a program for communicating with
server 705, while terminal 780 may be a desktop type computer running
a web browser for communicating with sever 705 via the Internet.
Terminal 790 may be a standard landline telephone or wireless phone.
[0081] Users may access server 705 via network 760 to customize
an automobile insurance product through a web browser running on,
for example, terminal 780. A website may include options to provide
information or to fill out an application, and may present the user
with a series of screens prompting the user to make various selections.
The user may make appropriate selections to customize the insurance
product. Additionally, a user at terminal 790, a telephone, may
contact a consumer service representative at terminal 750. The consumer
service representative may assist a consumer through a process that
the customer can use to consider options for customizing an insurance
product by asking a series of questions. During the process, the
consumer service representative may use software running on terminal
750, and may send data to and from server 705.
[0082] Aspects of the invention may be used in connection with
automobile insurance, homeowner's insurance and other types of insurance.
One of skill in the art will readily recognize how to adapt the
methodology described above to a variety of areas of insurance.
For example, consistent with aspects of the present invention, an
insurance carrier may expand its homeowner's insurance offerings
to consumers by identifying features with appeal and profitability
to design packages of related features at different pricing points.
Customizable homeowner's insurance may include a standard package
of typical coverages, and a consumer may further select optimized
packages of features in a manner similar to that discussed above.
[0083] A homeowner's insurance product typically covers a building
or structures on the premises and household personal property. A
typical homeowner's insurance product usually also includes certain
personal liability coverage and coverage for medical payments to
others. Additional coverages or features are purchased ala carte.
[0084] Homeowner's insurance consistent with aspects of the present
invention provides optional coverages that reflect different lifestyles
and life stage needs. In particular, by implementing a methodology
consistent with that described above, one may also create optimized
homeowner packages. Optimized solutions may include coverages that
are popular with most homeowners, as well as optimized coverages,
that align with the wants and needs of a given consumer. Consumers
may be offered optimized packages of coverages and terms that share
a common attribute. Common attributes may relate to electronic data
recovery, home enterprises, identity restoration, music & photography,
prized possessions, jewelry, sports & leisure, yard & garden
or other areas that present particular liability concerns to at
least a group of consumers.
[0085] Optional insurance component 626 (shown in FIG. 6B) may
include a grouping of insurance features that share a common attribute,
such as one of the attributes described above. An electronic data
recovery component may provide reimbursement for expenses incurred
from an attempt to restore lost data resulting from a covered loss
or computer virus. The coverage may have a limit, such as $5,000.
In one embodiment, losses are covered if they are caused by sudden
and accidental direct physical loss to electronic data processing
equipment or accessories caused by one or more specified covered
perils; or are caused by vandalism or malicious mischief that corrupts,
harms and introduces unauthorized instructions or code that propagate
themselves through a computer system or network. An electronic data
recovery coverage component may also cover losses to electronic
data that are caused by physical losses to electronic data processing
equipment or accessories. For example, an electronic data recovery
coverage component may cover expenses associated with losses to
data that result from a computer device being destroyed by specified
covered perils Covered expenses may include research, restoration
and/or replacement of electronic data stored in an insured person's
electronic data processing equipment or accessories.
[0086] A home enterprise coverage component may bundle increased
limits for consumers who work from their home in an office/studio
setting and desire additional protection for business property,
liability, and/or office/studio equipment and furniture. In one
embodiment of the invention, a home enterprise coverage component
includes the features of an electronic data recovery component.
An identity restoration component may reimburse consumers for lost
wages and other covered expenses resulting from identity theft.
The coverage may have a limit, such as $25,000 and may have no deductible.
A music & photography component may include a bundle of increased
limits for consumers who have musical instruments and photography
equipment. A prized possessions component may include a bundle of
increased coverage limits for consumers who have acquired certain
types of assets, such as silverware, jewelry, furs, etc. A sports
& leisure component may include a bundle of increased limits
for consumers who have sports equipment and/or small watercraft.
[0087] A yard & garden component may include a bundle of increased
limits for trees, shrubs, landscaping and other plants. The bundle
may include coverage for motorized land vehicles used to service
the residence premises. An increased limit, such as 10% or $1,000
per tree, may be included for replacement and debris removal of
trees for certain perils. In certain embodiments increased debris
removal coverage may be included in the bundle for the perils such
as windstorm, hail, weight of ice, snow and sleet.
[0088] A golf enthusiast component may extend comprehensive coverage
to owned golf equipment. The component may also provide membership
fee protection in case of illness or injury and may include "loss
of use" provisions in case of loss. Hole-in-one coverage may
also be provided.
[0089] A ski & snowboard enthusiast component may extend comprehensive
coverage to owned ski & snowboard equipment and provide membership
fee protection in case of illness or injury. A "loss of use"
provision may also be included. The component may provide trip protection
up to a predetermined limit if a trip is cancelled due to adverse
weather conditions or avalanche.
[0090] A student protection component may cover legal liability
of school property. Additional living expense coverage may be extended
from a primary policy to student residence up to a predetermined
limit. The component may also provide illness & injury protection
for missed exams and tuition recovery, emergency home travel coverage
and extended freezer food coverage.
[0091] One of skill in the art will appreciate that aspects of
the invention may be used to create insurance coverage packages
that include standard homeowner's coverage components and at least
one homeowner's component having a grouping of insurance features
that share other common attributes. Exemplary common attributes
may relate to replacement cost protection, identity theft, blanket
protection of valuables, limited personal umbrella policy coverage
and any other attributes or combination of attributes that are desired
by at least a group of consumers. Various embodiments may also include
claim forgiveness features that specify that the first rate-affecting
claim that occurs will not cause the loss of certain discounts or
result in the application of any claim surcharges. In another embodiment,
common attributes may relate to extended dwelling limits coverage.
[0092] FIG. 8 illustrates a process of providing insurance coverage
that may be used in connection with the embodiments of the invention
described herein. A customer 802 pays a premium 804 to an insurer
806. The premium is provided in exchange for insurance coverage
described in an insurance policy 808. Insurer 806 provides indemnification
810 to customer 802 when an event covered by insurance policy 808
occurs.
[0093] Personal automobile and homeowners insurance are examples
of property and casualty insurance offerings. One skilled in the
art will recognize that the above-described methodology is applicable
to other types of insurance products as well, such as commercial
insurance for business customers. In addition, an insurance carrier
may offer annuity products to consumers for retirement or financial
planning purposes by identifying features with appeal and profitability
to design packages of related features at different pricing points
or expense levels. Customizable annuity products may include a standard
annuity with typical accumulation, return, and payout features.
A consumer may further select enhanced packages of features in a
manner similar to that discussed above for automobile insurance.
[0094] Additional embodiments of the present invention are possible,
each designed to cover other classes of insurable risk, including
but not limited to, mortality risk and life insurance products;
morbidity risk and health and long-term care insurance products;
as well as professional practice risk and liability insurance.
[0095] Although not common in today's marketplace, it is possible
to apply the disclosed methodology to so-called hybrid or multi-risk
products that combine the coverages of two or more products from
different classes of insurance risk into a single product. Customizable
hybrid products may include a standard package across two or more
risk classes with typical features in each class and a consumer
may further select enhanced packages of features in a manner similar
to that discussed above for automobile insurance.
[0096] The foregoing descriptions of the invention have been presented
for purposes of illustration and description. They are not exhaustive
and do not limit the invention to the precise form disclosed. Modifications
and variations are possible in light of the above teachings or may
be acquired from practicing of the invention. For example, the described
implementation includes software but the present invention may be
implemented as a combination of hardware and software or in hardware
alone. Additionally, although aspects of the present invention are
described as being stored in memory, one skilled in the art will
appreciate that these aspects can also be stored on other types
of computer-readable media, such as secondary storage devices, like
hard disks, floppy disks, or CD-ROM; a carrier wave from the Internet
or other propagation medium; or other forms of RAM or ROM. The scope
of the invention is defined by the claims and their equivalents.
[0097] Other embodiments of the invention will be apparent to those
skilled in the art from consideration of the specification and practice
of the invention disclosed herein. The specification and examples
should be considered as exemplary only, with a true scope and spirit
of the invention being indicated by the following claims. |