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Insurance Abstract
An Internet-implemented computer system and method for providing
an automated insurance package that starts with builder's risk coverage
initiated either by the homebuilder that builds the home or by the
lender that finances the home construction. The builder's risk policy
converts to a homeowner's insurance policy upon the permanent mortgage
loan closing when the new home is complete and ready for occupancy.
Preferably, any unearned premium for the time remaining on the builder's
risk policy is credited to the premium due on the new homeowner's
policy.
Insurance Claims
1. A system for use by one or more lenders and one or more insurers
to provide insurance for real property, comprising:a server connected
to a communications network and hosting a website that is accessible
by network-connected user devices of the lenders and network-connected
user devices of the insurers, the server storing files including
information on a plurality of construction loans and permanent loans
for the real property and on builder's risk insurance policies for
the construction loans, the construction loans and permanent loans
provided by the lenders, wherein the server receives from one of
the user devices a selection of an active one of the builder's risk
policies, the server communicates an underwriting request to one
of the insurers, the server receives an approval from the underwriting
insurer, and the server converts the selected builder's risk policy
to a real property insurance policy for the real property by associating
stored information from the builder's risk policy with the converted-to
real property insurance policy.
2. The system of claim 1, wherein the server-saved information
includes a first-named insured party and an additional-insured party
for the selected builder's risk policy and a primary-named insured
party and a lien holder for the real property insurance policy,
the selected builder's risk policy's first-named insured party is
the lender of the corresponding construction and permanent loans
and the additional-insured party is a borrower of the corresponding
construction and permanent loans, and as part of the conversion
the server saves the borrower as the real property insurance policy's
primary-named insured party and the lender as the lien holder.
3. The system of claim 1, wherein the server determines a pro-rated
unearned premium amount for time remaining on the builder's risk
policy, and as part of the conversion the server credits the unearned
premium amount to a premium amount due for the real property insurance
policy.
4. The system of claim 1, wherein the server assigns a first unique
identifier to the selected builder's risk policy and as part of
the conversion assigns a second unique identifier to the converted-to
real property insurance policy, wherein the second unique identifier
is correlated to the first unique identifier.
5. The system of claim 1, wherein the server receives a request
communicated from one of the lender network-connected user devices
to initiate the builders risk policy.
6. The system of claim 1, wherein the system further comprises
network-connected user devices of a plurality of builders, and the
server receives a request communicated from one of the builder network-connected
user devices to initiate the builders risk policy.
7. The system of claim 1, wherein the server receives from one
of the user devices a request to initiate a conversion of the selected
policy to the real property insurance policy, and the server saves
the files as pending real property insurance policy files after
the conversion is requested until the conversion is complete.
8. A system for providing insurance for real property for use by
a parent organization having a lending unit and an insurance unit,
the system comprising:a server connected to a communications network
and hosting a website that is accessible by at least one network-connected
user device of the lending unit and at least one network-connected
user device of the insurance unit, the server storing files including
information on a plurality of construction loans and permanent loans
for the real property and on a blanket builder's risk insurance
policy with a plurality of individual project location polices for
the construction loans, with the construction loans, the permanent
loans, and the individual project location polices provided by the
lending unit, and with the blanket builder's risk policy provided
by the insurance unit, each one of the construction loans and the
corresponding one of the builder's risk project location policies
being associated together on the server, wherein the server receives
from one of the user devices a selection of an active one of the
project location policies under the blanket builder's risk policy
and a request to initiate a conversion of the selected policy to
a real property insurance policy for the real property, the server
communicates an underwriting request to the insurance unit, the
server receives an approval from the insurance unit, and the server
converts the selected policy to the real property insurance policy
by associating stored information from the selected builder's risk
project location policy with the converted-to real property insurance
policy, wherein the server-saved information includes a first-named
insured party and an additional-insured party for the selected policy
and a primary-named insured party and a lien holder for the real
property insurance policy, the selected builder's risk project location
policy's first-named insured party is the lender of the corresponding
construction and permanent loans and the additional-insured party
is a borrower of the corresponding construction and permanent loans,
and as part of the conversion the server saves the borrower as the
real property insurance policy's primary-named insured party and
the lender as the lien holder, and wherein the server saves the
files as pending real property insurance policy files after the
conversion is requested until the conversion is complete.
9. The system of claim 8, wherein the server determines a pro-rated
unearned premium amount for time remaining on the builder's risk
policy, and as part of the conversion the server credits the unearned
premium amount to a premium amount due for the real property insurance
policy.
10. The system of claim 8, wherein the server assigns a first unique
identifier to the selected builder's risk policy and as part of
the conversion assigns a second unique identifier to the converted-to
real property insurance policy, wherein the second unique identifier
is correlated to the first unique identifier.
11. The system of claim 8, wherein the server receives a request
communicated from one of the lending unit network-connected user
devices to initiate the builders risk policy.
12. The system of claim 8, wherein the system further comprises
network-connected user devices of a plurality of builders, and the
server receives a request communicated from one of the builder network-connected
user devices to initiate the builders risk policy.
13. A method of providing insurance for real property, comprising:receiving
a request for a builder's risk policy on a construction loan for
a building on the real property, the construction loan provided
by a lender;opening a file for the builder's risk policy and the
construction loan;communicating a request for underwriting for a
real property insurance policy;receiving an underwriting approval
for a real property insurance policy; andconverting the existing
builder's risk policy to a new real property insurance policy for
the real property by associating stored information for the builder's
risk policy with the converted-to real property insurance policy.
14. The method of claim 13, wherein the step of converting includes
converting named-insured provisions by saving information on a borrower
of the construction loan, which borrower was an additional-insured
party on the builders risk policy, as a primary-named insured on
the real property insurance policy, and saving information on a
lender of the construction loan and of a new mortgage loan on the
real property, which lender was a first-named insured on the builders
risk policy, as a lien holder on the real property.
15. The method of claim 13, wherein the step of converting includes
determining a pro-rated unearned premium amount for time remaining
on the builder's risk policy, and crediting the unearned premium
amount to a premium amount due for the real property insurance policy.
16. The method of claim 13, further including the step of assigning
a first unique identifier to the builder's risk policy, and wherein
the step of converting includes assigning a second unique identifier
to the converted-to real property insurance policy, wherein the
second unique identifier is correlated to the first unique identifier.
17. The method of claim 13, wherein the step of receiving a builder's
risk policy request includes receiving a request for a builder's
risk policy from the lender.
18. The method of claim 13, wherein the step of receiving a builder's
risk policy request includes receiving a request for a builder's
risk policy from a builder of the building.
19. The method of claim 13, further comprising initiating a time
period within which the conversion must be completed.
20. A computer-readable medium storing instructions that, when
executed on a programmed processor, carry out a method for providing
insurance for real property, comprising:instructions for processing
a request for a builder's risk policy on a construction loan for
a building on the real property, the construction loan provided
by a lender;instructions for associating information on the builder's
risk policy with information on the construction loan;instructions
for communicating a request for underwriting for a real property
insurance policy;instructions for processing an underwriting approval
for a real property insurance policy; andinstructions for converting
the existing builder's risk policy to a new real property insurance
policy for the real property by associating stored information for
the builder's risk policy with the converted-to real property insurance
policy.
21. The computer-readable medium of claim 20, wherein the instructions
for converting further comprise instructions for converting named-insured
provisions.
22. The computer-readable medium of claim 20, wherein the instructions
for converting further comprise determining a pro-rated unearned
premium amount for time remaining on the builder's risk policy,
and crediting the unearned premium amount to a premium amount due
for the real property insurance policy.
Insurance Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001]This application claims the priority benefit of U.S. Provisional
Patent Application Ser. No. 60/787,486 filed Mar. 30, 2006, which
is hereby incorporated herein by reference.
TECHNICAL FIELD
[0002]The present invention relates generally to property insurance
and, in particular, to systems and methods for administering builder's
risk property insurance and homeowner's property insurance.
BACKGROUND OF THE INVENTION
[0003]Since the passage of the Gramm-Leech-Bliley Act (the Financial
Services Modernization Act) of 1999, an increasing number of U.S.
banks have begun offering investment services and insurance products
such as long term care, life, retirement annuity, and equity based
products to their affluent clients. Today as many as 50% of these
relatively high-commission investment and insurance related sales
are driven by referrals from the parent bank's customer base. Cross-referrals
are integral to the efficiencies of financial services modernization.
However, these profit centers require significant investment in
highly trained personnel and regulatory infrastructure to generate
the commission/fee income necessary to meet the return-on-investment
expectations of the banking industry.
[0004]Since 1999, many U.S. banks have become active in acquiring
employee benefit and commercial property and casualty insurance
agencies rather than attempting to start brand new agencies. These
types of insurance agencies are characterized by larger premiums
and commissions per transaction and present cross-selling opportunities
for the parent bank. However, coordination between banking operations
and insurance operations is not very developed, so banking industry
referrals generally account for less than 25% of new insurance policies.
In addition, purchasing an insurance agency large enough to be viable
in the marketplace requires significant investment from the parent
bank.
[0005]At this point, U.S. banks have begun to examine the problem
of how to provide property and casualty insurance to more than about
3%-5% (the current industry average) of their depositors. Personal
and small commercial property and casualty insurance transactions
are larger in number but significantly smaller in dollar volume
per transaction. So selling property and casualty insurance to households
and small businesses would be a growth area for banks if they could
find an efficient and effective way to cross-sell banking and insurance
to these clients.
[0006]Accordingly, it can be seen that a need exists for a way
to help banks provide property and casualty insurance to a significantly
larger percentage of their depositors. In particular, there is a
need for an automated referral system and method that will enable
banks to sell insurance to households and small businesses. It is
to the provision of such a system and method that the present invention
is primarily directed.
SUMMARY OF THE INVENTION
[0007]Generally described, the present invention provides a system
and method that enable lenders to leverage their existing network
of contacts and resources to generate new insurance business. In
an example embodiment there is provided a system that is used by
lenders and insurers to insure real property. The system includes
a computer server that is connected to a communications network
such as the Internet. The server hosts a conversion website that
is accessible by the lenders and insurers using network-connected
user devices such as desktop computers, laptop computers, etc. The
server stores files with information on construction loans and permanent
loans for the real property, as well as information on builder's
risk insurance policies for the construction loans. The construction
loans and permanent loans are provided by the lenders, and the builder's
risk policies are provided by the insurers. In use, the server receives
from one of the lenders (or insurers or a third party user) a selection
of an active one of the builder's risk policies, then the server
sends an underwriting request to one of the insurers. After the
underwriting is completed, the server receives an approval from
the underwriting insurer. The server then converts the selected
builder's risk policy to a real property insurance policy for the
real property.
[0008]The conversion includes associating stored information from
the builder's risk policy and construction loan, along with addition
information such as underwriting information that has been entered
into the system, with the converted-to real property insurance policy.
For example, the conversion includes changing the named-insured
provisions. In particular, the server saves information on a borrower
of the construction loan, which borrower was an additional-insured
party on the builders risk policy, as a primary-named insured on
the real property insurance policy, and saves information on a lender
of the construction loan and of a new mortgage loan on the real
property, which lender was a first-named insured on the builders
risk policy, as a lien holder on the real property. In addition,
the server assigns a first unique identifier to the selected builder's
risk policy and, as part of the conversion, assigns a second unique
identifier to the converted-to real property insurance policy, with
the second unique identifier being correlated to the first unique
identifier. For example, the real property policy number can be
the same as the builder's risk policy number, but with the addition
of a suffix such as "-PPP." Furthermore, as part of the
conversion the server calculates a pro-rated unearned premium amount
for time remaining on the builder's risk policy, and credits the
unearned premium amount to a premium amount due for the real property
insurance policy. Moreover, the server saves the converted-to file
as "pending" real property insurance policy files after
the conversion is requested until the conversion is complete.
[0009]The system can be set up for several different ways of initiating
of the builder's risk policies that are later converted. In one
embodiment, the system is set up to receive a request to initiate
the builders risk policy from the lender of the construction loan.
Such a system is disclosed in U.S. Pat. No. 6,236,973. In another
example embodiment, the system is set up to receive a request to
initiate the builder's risk policy from the builder of the home
for which the construction loan was made. Such a system is disclosed
in U.S. Patent Application Publication No. 2005/0086084. And in
still other example embodiments the system is set up to receive
a request to initiate the builder's risk policy from the borrower
or from another party.
[0010]Preferably, the system is set up for use by a parent organization
(e.g., a bank) with a lending unit and an insurance unit. In this
case, significant efficiencies can be obtained by having the same
lending unit issue the construction loan, the mortgage loan, and
individual project location certificates/policies under a blanket
builder's risk policy, and by having the same insuring unit issue
the blanket builder's risk policy and the permanent homeowner's
policy, with the lending unit and the insurance unit being affiliated
with each other.
[0011]In another example embodiment of the present invention, there
is provided a method of providing insurance for real property. The
method can be performed by a server computer such as than referred
to in the just-described embodiment. The method includes the steps
of receiving a request for a builder's risk policy on a construction
loan for a building on the real property. The construction loan
is provided by a lender. The next step is opening a file for the
builder's risk policy and associating it with the construction loan.
Next is communicating a request for underwriting for a real property
insurance policy. Upon underwriting approval, next is receiving
an underwriting approval for a real property insurance policy. And
next is converting the existing builder's risk policy to a new real
property insurance policy for the real property by associating stored
information for the builder's risk policy with the converted-to
real property insurance policy.
[0012]The conversion step includes associating stored information
from the builder's risk policy and construction loan, along with
addition information such as underwriting information that has been
saved on the server, with the converted-to real property insurance
policy. In particular, the conversion step includes changing the
named-insured provisions and assigning a new policy number that
is correlated to the original policy number. Also, the conversion
step includes calculating a pro-rated unearned premium amount and
crediting it to the premium amount due for the real property insurance
policy.
[0013]The builder's risk policies that are later converted can
be feed into the system in several different ways. One example way
is from the lenders, for example, using the system and method disclosed
in U.S. Pat. No. 6,236,973. Another way is from the builders, for
example, using the system and method disclosed in U.S. Patent Application
Publication No. 2005/0086084. And still another way is from the
borrower or from another party.
[0014]In another aspect the present invention includes a computer-readable
medium storing instructions that, when executed on a programmed
processor, carry out the method just described. The computer-readable
medium can be any type of commercially available magnetic, optic,
etc. storage device, and can be read by the server's processor to
carry out the conversion method described above.
[0015]The specific techniques and structures employed by the invention
to improve over the drawbacks of the prior systems and methods and
accomplish the advantages described herein will become apparent
from the following detailed description of the example embodiments
of the invention and the appended drawings and claims.
BRIEF DESCRIPTION OF THE DRAWINGS
[0016]FIG. 1 is a functional block diagram of a system for converting
a builder's risk insurance policy to a homeowner's insurance policy
according to an example embodiment of the present invention.
[0017]FIG. 2 is a flow diagram of an example method of intaking
new builder's risk policies for conversion using the system of FIG.
1.
[0018]FIGS. 3A and 3B are a flow diagram of an example method of
converting a builder's risk insurance policy to a homeowner's insurance
policy using the system of FIG. 1.
[0019]FIG. 4 is a flow diagram of an example premium pro-rating
method of the conversion method of FIGS. 3A and 3B.
[0020]FIG. 5 is an example "List Loans" screen shot of
the conversion system and method, showing a list of files for builder's
risk policies to be converted.
[0021]FIG. 6 is an example "Convert Quote" screen shot
of the conversion system and method, showing data entry fields for
underwriting information needed for the converted-to policy.
[0022]FIG. 7 is an example "Conversion" screen shot of
the conversion system and method, showing a list of files for new
homeowner's policies that have been converted or are in the process
of being converted.
[0023]FIG. 8 is an example Certificate of Property Coverage printout
for one of the builder's risk policies.
[0024]FIG. 9 is an example Homeowners Policy Declarations printout
for one of the converted-to homeowner's policies.
[0025]FIG. 10 is an example "Locations" screen shot of
a system and method for converting a builder's risk insurance policy
to a homeowner's insurance policy according to another example embodiment
of the present invention.
DETAILED DESCRIPTION OF EXAMPLE EMBODIMENTS OF THE INVENTION
[0026]The present invention provides a system and method of converting
a first insurance policy to a second insurance policy, with both
policies insuring the same real property or loans for the same real
property. In an example embodiment described and illustrated herein,
the system implements a method for converting a builder's risk insurance
policy for a home under construction to a separate homeowner's insurance
policy for the newly constructed home. The two policies provide
collateral for a construction loan for constructing the home and
a mortgage loan for the home purchase, and the conversion is performed
when the home purchase transaction is closed. It will be understood
that the new homeowner's policy is a separate policy that takes
effect when the builder's risk policy expires, and the term "conversion"
is not meant to imply otherwise. In addition, the term "real
property" as used herein refers to improved real property including
land and structures built on the land.
[0027]The system takes advantage of the integral role that lenders
play in the transfer of ownership of real property. The vast majority
of real property purchases are financed with lenders providing most
of the purchase money that enables the transfer of ownership to
take place. With the implementation of the Gramm-Leach-Bliley Financial
Services Modernization Act of 1999, lenders can now provide insurance
protection to U.S. consumers. The system enables lending institutions
to offer insurance coverage when extending credit to a borrower
to purchase real property. In this way, lenders can use the system
to leverage their real estate lending activity into increased non-interest
income by providing comprehensive insurance benefits at reduced
costs to their existing depositor customer base. It will be understood
that the system can be used by lenders when extending credit to
a borrower to build a new building or structure, purchase an existing
building or structure, refinance an existing building or structure,
or renovate an existing building or structure, whether the property
is commercial, residential, or both.
[0028]Typically, when the home construction is completed and the
mortgage loan closes, the builder's risk policy expires and the
borrower/homeowner replaces it with a conventional homeowner's policy
issued by another insurance company, with the borrower/homeowner
contacting a number of insurance agents for quotes and choosing
from among them. Instead, the system allows the borrower/homeowner
to have the builder's risk policy automatically converted to a discounted
homeowner's policy preferably issued by the same lender who issued
the builder's risk policy, the construction loan, and the mortgage
loan. The builder's risk policy is typically one "covered location"
under a lender's blanket builders risk policy, and in the conversion
process each of the "covered location" policies breaks
off into an individual, separate homeowner policy issued directly
to the borrower/owner client. The converted policy is preferably
a comprehensive personal protection policy with coverage parts for
the client's homeowner exposure and optionally for automobile, recreational
vehicle, personal umbrella liability, etc.
[0029]Referring now to the drawings, FIG. 1 is a functional block
diagram of a system 10 according to an example embodiment of the
present invention. The system 10 includes a server 12 connected
to a communications network 14 that can be accessed by user interface
devices of lender mortgage departments 16a-n and lender insurance
departments 18a-n. Client files 20a-n are stored in one or more
databases on the server 12 and are accessible by the user interface
devices of mortgage departments 16a-n and insurance departments
18a-n. In a typical commercial embodiment, the server 12 is provided
by a remote bank of conventional server computers with programmed
processors and storage media that host a website for administering
the conversion method. The client files 20a-n include borrower/owner
client information for the personal and/or commercial clients, for
example, an individual who is both the borrower of the loan and
the purchaser/owner of the home. In addition, the communications
network 14 is preferably a global computer network such as the Internet,
although in some applications the system 10 could be implemented
using a WAN, LAN, or other network. The user devices 16a-n and 18a-n
are typically desktop computers, laptop computers, handheld computers,
PDA's, web-enabled phones, and/or the like.
[0030]For maximum efficiency, the mortgage department 16a and the
insurance department 18a are preferably organizationally related
(e.g., part of the same bank or otherwise affiliated), though they
need not be physically located together. The same is true for mortgage
department 16b and insurance department 18b, up through mortgage
department 16n and insurance department 18n. The example system
10 of FIG. 1 depicts such an arrangement with, for example, Bank
A providing the construction loan, the mortgage loan, the builder's
risk insurance policy, and the homeowner's insurance policy for
one home location. In a typical commercial embodiment, the system
10 is administered by a third party such as an insurance broker
or agency for use by a number of banks that provide lending and
insurance services (and/or insurance companies that provide lending
and insurance services). In an alternative embodiment, the system
is administered by a bank (or an insurance company) for its exclusive
use (e.g., only Bank A can access the system, not Banks B-N), with
the system implemented on the Internet with access restricted to
bank-authorized users, or implemented on a private internal network
of the bank.
[0031]In another alternative embodiment, the system can be used
effectively, though perhaps not as efficiently, by separate, unaffiliated
mortgage and insurance organizations, with the system implemented
on the Internet and administered by an insurance broker or agency,
by one of the mortgage or insurance organizations, or by another
entity. For example, the system can be used to convert a builder's
risk policy issued by one insurance company to a homeowner's policy
issued by a different insurance company. Furthermore, the construction
loan and the mortgage loan can be bundled together as a two-part
construction-to-permanent loan issued by the same lender, or they
can be two separate loans with the lender of the construction loan
and the lender of the mortgage loan being different banks. Accordingly,
as used herein the terms "mortgage department" and "insurance
department" are intended to be broadly construed to generally
include all lenders of construction loans, mortgage loans, etc.
and all insurers of building construction (and loans therefor),
completed buildings, etc., respectively, whether they are organizationally
related or not, and if they are organizationally related then regardless
of whether the parent organization is a lending institution or an
insurance company. In addition, the terms "mortgage department,"
"lending unit," and "lender" are used herein
synonymously, as are the terms "insurance department,"
"insuring unit," and "insurer." Furthermore,
the terms "insurance department" and "insurer"
are used herein broadly to include an insurance carrier or an insurance
department within a lending or other institution, with or without
an insurance brokerage or agency. This is because the system could
be administered directly by an insurance carrier or an insurance
department within a lending institution without the involvement
of a separate insurance agency or brokerage, and the method steps
described as carried out by an insurance agency or brokerage could
be done directly by an insurance carrier, an insurance department
within a lending institution, etc.
[0032]Before using the system 10, each bank (or other user organization)
registers by completing an online registration application with
organizational information, and registers the individual users in
the lending and insurance departments. Such online registration
is well known in the art, so details are not provided herein.
[0033]Turning now to FIG. 2, there is shown a method 200 of feeding
in the builder's risk policies that can later be converted. At step
202, the server 12 receives a request for a builder's risk policy,
generally along with the relevant information on the property, the
builder, the lender, and the borrower/owner. In the example embodiment,
the request is typically initiated by the lender who is providing
the home construction loan being insured. For a lender-initiated
policy request, for example, the initial coverage may be provided
by a blanket builder's risk insurance policy written with the lender
as the initial-named insured, with the borrower clients added as
additional insureds at the time their construction loans are closed.
The borrower clients pay a fully-earned premium (either annual or
for the term of the loan) and their project is insured under an
endorsement to the lender's blanket policy, which has a continuous
policy term. The borrower client is provided a Certificate of Coverage
that includes the lender's blanket policy number with a uniquely
numbered suffix designating the borrower's insured project. Builder's
risk coverage provided in this way is disclosed in U.S. Pat. No.
6,236,973 and commercially available through Omni Builders Risk,
Inc. (Winder, Ga.) at "www.omnibuildersrisk.com," which
patent and website are hereby incorporated herein by reference.
Conventional builder's risk policies are initiated by the builder,
who purchases a blanket policy for covering a number of construction
projects and makes inventory reports regularly (e.g., monthly) to
the insurance company providing the coverage and the construction
lenders financing the various projects. In the patented lender-initiated
builder's risk system, however, the lender issuing the construction
loan purchases a blanket policy and adds construction projects (e.g.,
houses) and builders to be covered by the policy. So the lender
is the point of initiation and risk-aggregation of the builder's
risk policy. This system is particularly well-suited for use by
small builders--those with less than about 25 new housing starts
a year.
[0034]Alternatively, the system can be adapted to receive a builder's
risk policy request that is initiated by the builder who constructs
the home the policy covers, an individual (not a professional builder)
overseeing the construction of his home, or another entity. An example
embodiment for receiving builder-initiated builder's risk policy
requests is described below.
[0035]At step 204, the server 12 opens a new loan file 20a, assigns
a unique policy identifier (e.g., a policy number) to the file,
and saves the received information in the file as a "Saved"
type file. (A builder's risk file is herein referred to as a file
20a', a converted-to homeowner's policy is herein referred to as
a file 20a', and for convenience these are sometimes collectively
referred to as files 20a.) Typically, there will be some time before
the premium payment is received, or some additional information
will be needed, so the policy is not immediately ready to issue.
At step 206, if the policy is not yet ready to issue, then the server
12 retains the saved file for a predetermined period of time. If
the needed payment and/or information is not received with that
time period, the server 12 deletes the saved file and/or archives
it. Typically, at step 208 the needed payment and/or information
is received within that time period. Once the needed information
and payment have been received and the policy is ready to issue
at step 206, the server 12 proceeds at step 210 to issue the builder's
risk policy and save the file as an "Active BR" type file.
Example "Saved" and "Active BR" files are listed
in the example screen shot of FIG. 5.
[0036]Details of the conversion process 300 will now be described
with reference to the flow diagrams of FIGS. 3A, 3B, and 4, the
screen shots of FIGS. 5-7, and the printed-out certificates of FIGS.
8 and 9. The conversion process 300 begins with an online user in
the mortgage department 16a (e.g., of a bank) utilizing a local
user interface device to access the conversion website hosted on
the server 12. The server 12 receives from the user device the proper
authorization (e.g., user ID and password) for the user, and displays
to the user device the authorized pages of the website. It will
be understood that the screen shots illustrated in FIGS. 5-7 are
representative screen displays included for explanatory purposes
only, and are they in no way intended to be limiting of the invention.
[0037]At step 302 the server 12 displays a "Loan List"
screen 30 (see FIG. 5) on the user device. The Loan List screen
30 includes "Saved" builder risk loan files (the policy
has not yet been issued) and "Active BR" loan files, as
well as a "Conversion Pending" loan files. Preferably,
the lender initiates the construction loan and the builder's risk
policy, so all the information on the loan and all the information
on the insurance policy are stored in or associated with one file,
which may be referred to as the construction loan file (as is the
custom for lenders because they think of the insurance as being
for the loan) or the builder's risk policy file (as is the custom
for builders because they think of the insurance being for the home).
The "Loan List" screen 30 includes a "view"
button for viewing details of an existing loan and builder's risk
policy file, a "new" button for setting up a new loan
and builder's risk policy file (e.g., according to the intake method
200), an "edit" button for revising or updating information
in an existing file, a "delete" button for deleting an
existing file, and a "convert" button for proceeding with
the conversion process, as described below.
[0038]At step 304 the server 12 receives from the user device a
selection of an "Active BR" policy file 20a'. Typically,
the lenders have a blanket builders risk policy and add "covered
locations" for each new home to be built, and for convenience
the term "policy" as used herein includes a stand-alone
builders risk policy or one covered location under a blanket builders
risk policy. And at step 306 the server 12 receives from the user
device a request to initiate the conversion. In the depicted embodiment,
the user clicks on a button 31 beside a listed policy file 20a'
to select that policy, then clicks on a "Convert" button
32 to initiate the conversion of the selected policy. (The "Convert"
button 32 is similar to the "Renew" button on the "loan
list" webpage for the patented lender-initiated builder's risk
system described above.) In an alternative embodiment, the lender's
core loan processing software electronically interfaces with the
conversion website (e.g., via the Internet), and the same user in
the bank's mortgage department can initiate the conversion process
by using the lender's core loan processing software to access the
conversion website.
[0039]At step 308, the system 10 then displays a "Convert
Quote" screen 34 for the user in the lender's mortgage department
1 6a to input information for the selected policy 20a' and the borrower/owner
client that may be useful for the insurance underwriters. In the
screen shot depicted in FIG. 6, for example, the "Convert Quote"
screen 34 displays a field for entering an estimated conversion
date, check boxes for indicating additional coverage types that
the client may want to discuss, and a "Notes to Insurance Department"
field for entering instructions regarding this client. In addition
to the additional coverage types shown in the "Convert Quote"
screen 34, the system 10 can be adapted to include data entry screens
for optional coverage parts such as structural warranty, mortgage
insurance, and title insurance. The "Convert Quote" screen
34 includes an "OK" button 35 that the user clicks on
to send the entered information to the server 12. Next, at step
310 the server 12 receives the requested information from the user
in the lender's mortgage department 16a. If at step 312 any required
information is not received, then at step 314 the system 10 displays
to the user in the loan department 16a the "Convert Quote"
screen with a notification (e.g., marked in red) of any incomplete
fields that are required to be competed (e.g., the estimated conversion
date) or any incorrectly entered fields (e.g., an already passed
estimated conversion date).
[0040]In the example method described herein, the conversion request
is entered into the system by the lender. However, the conversion
request can alternatively be entered by the insurer or a third party.
Or the lender can notify (e.g., by phone) the insurer that a builder's
risk policy is available for conversion and the insurer can then
initiate the conversion. In any case, the insurer can then enter
all of the underwriting information itself.
[0041]Once the server 12 has received all of the required preliminary
underwriting information at 312, then at step 316 it communicates
this information to the insurance department 18a for new business
solicitation and underwriting of the policy. In a typical commercial
embodiment, the system 10 communicates the underwriting information
to the insurance department 18a in an email. The server 12 is preferably
set up to automatically generate an email including the message
entered into the "Notes to Insurance Department" field
and the other data entered into the "Convert Quote" screen
34, as well as an email address of the insurance department, so
that all the lender/user has to do is click on "send"
to transmit the email. In addition, the email may include contact
information (stored on the server 12) for the borrower/owner client
and/or additional underwriting information from an automated homeowner's
or business owner's underwriting questionnaire. In alternative embodiments,
the system communicates the underwriting data in another way, for
example, by automatically printing out a hard copy of the data entered
into the "Convert Quote" screen 34 for faxing or mailing,
or by an SMS message. In any case, the underwriting data for the
project is communicated to the insurance department 18a, typically
to a licensed insurance agency designated by the lender 16a. This
is usually, but not necessarily, a subsidiary or otherwise affiliated
insurance agency of the lender 16a.
[0042]In the depicted embodiment, the system 10 is set up to allow
the mortgage department 16a to enter into the "Convert Quote"
screen 34 only those items of underwriting information needed to
initiate the builder's risk policy (which information the mortgage
department already has). The system 10 is not set up for the mortgage
department 16a to enter all of the information needed for underwriting
the permanent homeowner's insurance policy and any other insurance
policies of interest to the borrower/owner client. This is because,
for legal reasons, there is currently the need to limit the amount
of underwriting information that a lender without an insurance license
can load into the system 10 to only those items of underwriting
information needed to initiate the builder's risk policy. (In at
least some U.S. states, an insurance license is not required to
issue certificates of coverage for individual coverages under a
group property casualty insurance written in the name of the lender,
but an insurance license is required to write the group property
casualty insurance policy and to write individual policies.) This
avoids permitting an unlicensed person to "underwrite"
other forms of insurance. But when the conversion process 300 is
started and the underwriting data is communicated to the insurance
department 18a for underwriting of the homeowner's policy, the lender
16a can check the additional coverages that the borrower might be
interested in buying. In an alternative embodiment (for implementation
upon legal changes permitting its use), the system permits the lender
to enter all of the needed underwriting information.
[0043]The licensed insurance agent of the insurance department
18a who receives the email with the preliminary underwriting data
contacts the borrower/owner client and confirms all the underwriting
information, including expiration dates of optional coverage parts,
and obtains any additional underwriting information that is needed.
Of course, the borrower/owner could decline and obtain the needed
homeowner's insurance elsewhere, but with the increased convenience
and savings to the borrower/owner a high percentage of them proceed
with the process. Then the insurance agent of the insurance department
18a emails (or otherwise communicates) the underwriting information
to the insurance carrier of the insurance department with an application
for the permanent homeowner's policy.
[0044]Preferably, when the lender 16a using an interface device
clicks the "OK" button 35 on the "Convert Quote"
screen 34, in addition to communicating the preliminary underwriting
and client contact data to the insurer 18a, at step 318 the server
12 also initiates a predetermined time window for completion of
the conversion process 300. The builder's risk insurance policy
20a' remains in effect during the time window according to its original
terms. In a typical commercial embodiment, the time period is set
at 45 days because that is the length of time written into a typical
builder's risk form and this time frame works well the vast majority
of the time. (The typical builder's risk policy allows occupancy
beginning 45 days prior to the permanent loan closing, in other
words, the borrower/owner can usually move into the home before
the closing but must close within 45 days of moving in). The conversion
process 300 can be completed anytime during the time period and
as soon as the mortgage loan closes. The actual time it takes to
complete the conversion process 300 on the server 12 is just few
minutes if the insurance department 18a has all the information
it needs to initiate the homeowner policy. The net cost (policy
premiums) to the homeowner will vary according to how long it takes
to complete the conversion process 300 and how much time remains
on the initial builder's risk annual premium, as described in more
detail below. The system 10 also automatically prints out for mailing
(or otherwise communicates) to the borrower/owner a certified letter
of cancellation or non-renewal. This letter documents the date (at
the end of the time period) by which the conversion process 300
must be completed and when the builder's risk policy expires.
[0045]In an alternative embodiment, instead of initiating a set
time period to complete the conversion method 300, the system 10
displays on a data entry screen a required field for entry of the
estimated closing date of the home purchase transaction. For example,
this field can be included on the "Convert Quote" screen
34 for the lender (or insurer) to input a date, or it can be included
on a separate screen. The estimated closing date can be obtained
from the borrower/owner client (from the sales contract for the
home purchase), for example, when the insurance agent makes contact
to confirm the underwriting information. In another alternative
embodiment, the system is not set up for receiving an entered date
or initiating a time window for completion of the conversion method.
However, the administrator of the system (e.g., an insurance agency)
preferably sets up a reminder in a tickler file, on a calendar,
etc., to make sure the conversion is complete in time for the closing
of the home purchase transaction.
[0046]In addition, at step 320 the server 12 automatically makes
an entry in the activity log file 20a' for the loan/policy indicating
that a conversion has been initiated and recording the electronic
submission of the underwriting information. And the server 12 saves
the loan/policy file 20a' and indicates that the file is now a "Conversion
Pending" type on the "List Loans" screen 30 of FIG.
5 and the "Conversion" screen 38 of FIG. 7. If a user
in the lender's mortgage department 16a wants to view those loans/policies
that are in the 45-day conversion window, as well as the loans/policies
that have been converted to homeowner's policies, it clicks on the
"Conversion" button 36 in the menu bar of the "Loan
List" screen 30 of FIG. 5, and then the "Conversion"
screen 38 of FIG. 7 is displayed to the user device by the server
12. The "Conversion" screen 38 lists the "Conversion
Pending" loans/policies, as well as the "Converted"
loans/policies with their corresponding policy numbers. A "Conversion
Pending" loan/policy becomes a "Converted" loan/policy
when the homeowner's policy becomes effective. The "PPP"
suffix on the "Converted" loan/policy numbers indicates
that these are now comprehensive "Personal Protection Policies"
including homeowner's and other coverages. The user can then click
the select button for any of these loans/policies and click the
"View" button to view the activity log file on the selected
loan/policy and confirm the insurance coverages provided.
[0047]Furthermore, at step 322 the server 12 runs a calculation
to pro-rate the unearned premium remaining on the builder's risk
policy. Any unearned premium is credited to the borrower's new homeowner's
policy at the completion of the conversion process 300. Details
of the pro-rating method are provided below with reference to FIG.
4.
[0048]If at step 324 the predetermined time period expires without
the conversion process 300 being completed, then at step 326 the
file is deleted (or archived) at step 326 and the process ends.
In this case, a new homeowner's policy is not issued and the original
builder's risk coverage expires according to its original terms,
though the client could subsequently request the conversion be completed
even after the builder's risk policy has expired (there would be
a gap in coverage between the expiration of the builder's risk policy
and the effective date of the homeowner's policy). Typically, this
is not the case. Usually, within a few days the insurance department
18a makes a decision on the policy application and at step 328 the
server 12 receives the decision entered by the insurance department.
[0049]If at 330 the server 12 receives an entry that the insurance
carrier 18a rejected the permanent homeowner's coverage application,
then at step 332 the server updates the loan file to "Declined."
The builder's risk policy stays in effect according to its original
terms (including the 45-day move-in occupancy clause). To document
this, the system 10 automatically prints out for mailing (other
otherwise communicates) to the borrower/owner client a Reinstatement
Notice stating that the builder's risk coverage remains in effect
until it is replaced by another insurance carrier or until the normal
expiration of the builders risk coverage part, whichever occurs
first. The conversion process 300 then ends.
[0050]If at step 330 the insurance application is approved by the
insurance department 18a, then they communicate (e.g., via email,
phone, fax) an approval notification back to the lender mortgage
department 16a, where an online user enters the approval into the
system 10. In an alternative embodiment, the lender's core loan
processing software electronically interfaces with the conversion
website, and the loan approval status is updated on the website
directly by the lender insurance agent/department 18a. Or a user
in the insurance department 18a can enter the approval directly.
In any event, once the status is updated to "Converted,"
at step 334 the server 12 makes an entry in the activity file of
the loan/policy and saves the file 20a'' as a "Converted"
type with the new permanent policy coverage data. Then the server
12 determines the amount of any unearned premium remaining on the
builder's risk policy (according to the pro-rating method 400 of
FIG. 4) and applies this amount as a credit to the premium due for
the new homeowner's policy. The system 10 then issues the new homeowner's
policy and emails or otherwise communicates (e.g., prints out for
regular mailing) a copy of the homeowner's policy, including a net
premium invoice, to the insurance agency 18a and/or the borrower/owner
client.
[0051]The conversion by the system includes several parts. Preferably,
the converted file 20a''is a newly opened file on the server 12
that is populated with information from the file 20a' on the builder's
risk policy and construction loan. In addition, the converted file
20a'' is populated with preliminary underwriting information entered
by the lender and/or any additional underwriting information entered
by the insurer, for example coverage limits, deductibles, the identification
of the property being covered, the distance to the nearest fire
hydrant and/or station, the inclusion of a home security and/or
fire detection system, etc. Furthermore, the conversion includes
changing the named-insured provisions, as described in more detail
below. At the conclusion of the conversion, the original policy/loan
file 20a' is archived as an expired file so that it is accessible
at a later date for documentation purposes.
[0052]The converted policy is preferably similar to the personal
package policies currently offered by several insurance carriers.
The property coverage part is required coverage on the converted
policy, and additional coverage parts such as personal liability,
general liability, automobile, inland marine floaters/recreational
vehicle, umbrella liability, mortgage life and mortgage disability
are optionally available. The coverage parts other than the homeowner
portion can remain open until the client's current automobile, recreational
vehicle, or personal umbrella insurance is up for renewal, then
upon the client's request the files of those coverage parts can
be populated with the client's information.
[0053]As mentioned above in the conversion method 300, the system
10 enables the borrower/owner client to receive a credit towards
the new premium due on the homeowner's policy. When conversion takes
place, the term premium for the builder's risk coverage is pro-rated
and any unearned premium may be credited towards the premium for
the permanent coverage. For a conventional builder's risk policy,
the premium is often based on a one-year term. However, often the
house (or other construction project) is completed in less than
one year. So often a portion of the premium paid to the insurer
is not earned, with the exact amount based on how many days remain
in the one-year term. For example, in the situation where the builder's
risk policy is based on a one-year term and the builder completes
the house in eleven months, then there is an unearned premium portion
equal to 1/12 of the total premiums paid, and the insurer typically
keeps this unearned premium. When using the system 10, however,
any unearned premium is credited towards the premium for the permanent
coverage. In other words, the builder's risk premium remains fully
earned and the credit is applied to the homeowner rates (that are
filed and approved by the various Insurance Commissioners) in recognition
of the new business acquisition expense savings realized through
the conversion process.
[0054]With reference to FIG. 4, the pro-rating method 322 will
now be described in more detail. At step 400, the server 12 looks
up the premium amount, the start date, and the expiration date of
the builder's risk policy in the loan/policy file. Also, at step
402 the server 12 checks the current date. Preferably, the server
12 includes a clock feature that can be checked for the current
date. If at step 404 the current date is before the expiration date
of the builder's risk policy, then at step 406 the server 12 runs
a calculation to prorate the amount of the premium corresponding
to the amount of time remaining on the policy. The users in the
mortgage department 16a or in the insurance department 18a can log
onto the conversion website, access the "List Loans" screen
30 of FIG. 5 or the "Conversion" screen 38 of FIG. 7,
select one of the "Conversion Pending" loans/policies,
and click on the "View" button. Then the new homeowner's
policy premium amount due, including the unearned premium credit
from the builder's risk policy based on the current date, is displayed
to the user (along with other details of the loans and policies).
So the users in the mortgage and insurance department 16a and 18a
can pass this information on the homeborrower/owner client.
[0055]At step 408, when the current date is indexed by one regular
predetermined time unit, the server 12 returns to step 402 and repeats
the pro-rating process. The time unit is typically set to one day,
but it could be set to a week, an hour, or another time unit. If
desired, the system 10 can be set up to automatically report to
the borrower/owner client (or another party) via daily emails (or
other communications) the currently available unearned premium credit.
If at step 404 the builder's risk policy has expired, then at step
410 the unearned premium credit for the builder's risk policy is
set to zero, and the method ends.
[0056]Referring now to FIGS. 8 and 9, there are shown an example
"Certificate of Property Coverage" 24' and an example
"Homeowners Policy Declarations" 24''. The "Certificate
of Coverage" 24' is for the policy of file 20a' under the lender's
blanket construction policy, and is printed out by the system 10
when a user selects that policy file and clicks on the "Print
Certificates" button 40 on the "List Loans" screen
30. Similarly, the "Homeowners Policy Declarations" 24"is
for the converted, separate homeowner's policy file 20a'', and is
printed out by the system 10 when a user selects that policy file
and clicks on the "Print Certificates" button 40 on the
"Conversion" screen 38.
[0057]A unique policy number 22' is associated with the construction
loan and policy file 20a'' for a specific construction project under
the lender's blanket construction policy. During the conversion
process, this policy number 22' is replaced in the separate permanent
homeowner's policy file 20a'' by another unique policy number 22''.
The second unique policy number 22'' for the homeowner's policy
is preferably correlated to the first unique policy number 22' for
the builder's risk policy. For example, the second unique policy
number 22'' may be assigned to be the same as the first unique number
22' plus a suffix such as "-PPP," as depicted in FIGS.
8 and 9.
[0058]In addition, during the conversion process the named-insured
provisions also convert so that the borrower (who was the additional-insured
party on the builders risk policy) becomes the primary-named insured,
and the lender (who was the first-named insured on the builders
risk policy) becomes the lien holder on the home. This named insured
conversion takes place because permanent mortgages are eventually
bundled and sold to other lenders like Fannie Mae or Freddie Mac.
For example, as can be seen in FIGS. 8 and 9, in the file 20a' for
the construction coverage the lender 28a was the first-named insured
and the borrower/owner client 28b was an additional insured. However,
in the file 20a'' for the homeowner's coverage the borrower/owner
28b is now designated as the "Named Insured" and the lender
28a is designated as "Loss Payee" or "Mortgagee."
The information on the lender 28a, the borrower/owner 28b, etc.,
is encrypted and securely stored on the server 12 for populating
various webpages.
[0059]Furthermore, as can be seen in the screen shots of FIGS.
5 and 7, the system 10 includes additional features for the convenience
of the users in the mortgage and insurance departments 16a and 18a.
When users click on the "List Reports" button, the system
10 displays a screen with a list of the available reports that can
be run on the loan/policy files 20a stored on the server 12. The
system 10 can be set up with standardized reports, and custom reports
can be generated if desired. When users click on the "Preferences"
button, the system 10 displays a screen where the users can enter
preferences such as a user-defined default for the user's state
(e.g., Georgia) that will populate new files 20a when they are set
up. When users click on the "Utilities" button, the system
10 displays a menu of screens for various features such as setting
up new banks, insurance companies, and builders in the system for
regular use, editing rates, user training, and updating risk data
(zip codes changed to higher risk for earthquakes or floods). And
when users click on the "Downloads" button, the system
10 displays a screen with a list of downloadable forms such as a
form for banks to add new users, a form for requesting increased
coverage limits (for larger-type risks), and a printable checklist
for obtaining the data needed for setting up loan and policy files.
[0060]Accordingly, the system 10 is an automated system that implements
a lender-based insurance distribution model to produce several advantages,
including but not limited to the below-listed advantages. [0061]1)
As mentioned above, lenders usually have the majority capital investment
in the properties they finance. Lender-based insurance distribution
allows the lenders to leverage their insurable interest in the insurance
marketplace to provide their borrowers with a comprehensive, convenient,
and competitive optional source for the required property insurance
coverage needed to close the loan. [0062]2) The automated system,
which aggregates insurance risk based on the lender's underwriting
of the credit risk, makes lender-based insurance distribution systems
more efficient by reducing administrative costs, more profitable
via reduced loss ratios, and less expensive for the consumer--up
to about 25 percent lower rates. [0063]3) The automated system allows
insurers to determine their exposures to loss on a real-time basis.
Coverage data provided to the insurer's catastrophe-modeling software
improves the timeliness and quality of underwriting information,
which in turn reduces uncertainty and risk-based costs. [0064]4)
Lender-based aggregation of risk provides larger lenders the option
to participate in the underwriting results of their portfolio of
insurance via reinsurance arrangements. Lender participation in
the underwriting results may promote more responsible development
in hazard prone coastal areas and earthquake zones. [0065]5) An
automated, mass-marketing approach to cross-selling between banking
and insurance. Mortgage transactions that lenders make possible
create an "instant of interest" that provides banks the
opportunity to cross-sell personal and small commercial lines insurance
to millions of consumers. The system 10 provides a multi-coverage
part insurance policy designed for the lending industry to capitalize
on this "instant of interest" created when a consumer
obtains credit to re-finance an existing building, purchase an existing
building, or construct a new building.
[0066]In the example embodiment described above, the builder's
risk policy is initiated by a lender. In another example embodiment,
the builder's risk policy is initiated by a builder so that the
homebuilder is able to provide its home buyers less expensive homeowners
coverage on their newly completed homes. For a builder-initiated
policy request, for example, the initial coverage may be provided
by a blanket builders risk policy written with a medium-sized or
large homebuilder as the initial named insured and with new home
buyer clients named as additional insureds under the terms of their
purchase contract with the homebuilder. Builder's risk coverage
provided in this way is disclosed in U.S. Patent Application Publication
No. 2005/0086084 and commercially available through Omni Builders
Risk, Inc. (Winder, Ga.) at "www.omnibuildersrisk.com,"
which patent is hereby incorporated herein by reference.
[0067]The system and method of this example embodiment are essentially
the same as those described above and illustrated with reference
to FIGS. 1-9. However, as shown at step 202 of the builder's risk
intake method 200 of FIG. 2, the request for the builder's risk
policy to be converted is initiated by a builder. Because the builders
think of the policies as being associated with project locations
instead of with loans (as the lenders do), about the only difference
in this system is that it displays a "Locations" screen
130, an example of which is shown in FIG. 10, instead of the "List
Loans" screen 30 of FIG. 5. Similarly to the "List Loans"
screen, by selecting one of the location/policy files 120a' and
clicking the "View" button, the system displays details
of the builder's risk policy for that location. And upon clicking
on the "Convert" button 132 a "Convert Quote"
screen is displayed to the online user, similarly to in the system
and method described above. Thus, this conversion system and method
is essentially the same as that described above.
[0068]While the above-described example embodiments provide a conversion
system and method for insurance policies for residential real property,
another example embodiment within the scope of the invention provides
a conversion system and method for insurance policies for commercial
real property. In such an embodiment, a commercial builder's risk
insurance policy (also known as a "course of construction"
or "COC" policy) is converted to a business-owner's policy
(for smaller structures/risks) or a commercial multi-peril package
policy (for larger structures/risks). As used herein, the term "builder's
risk policy" includes insurance policies for the construction
of residential, commercial, industrial, or mixed use structures
on real property (or loans therefor). And as used herein the term
"real property insurance policy" includes homeowner's
insurance policies for residential structures on real property (or
loans therefor), business-owner's policies and commercial multi-peril
package policies for commercial and/or industrial structures on
real property (or loans therefor).
[0069]It is to be understood that this invention is not limited
to the specific systems, methods, conditions, or parameters described
and/or shown herein, and that the terminology used herein is for
the purpose of describing particular embodiments by way of example
only. Thus, the terminology is intended to be broadly construed
and is not intended to be limiting of the claimed invention. For
example, as used in the specification including the appended claims,
the singular forms "a," "an," and "one"
include the plural, the term "or" means "and/or,"
and reference to a particular numerical value includes at least
that particular value, unless the context clearly dictates otherwise.
In addition, any methods described herein are not intended to be
limited to the sequence of steps described but can be carried out
in other sequences, unless expressly stated otherwise herein.
[0070]While the invention has been shown and described in exemplary
forms, it will be apparent to those skilled in the art that many
modifications, additions, and deletions can be made therein without
departing from the spirit and scope of the invention as defined
by the following claims. |