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Insurance Abstract
A method and system of determining cost of automobile insurance
based on safety characteristics of road segments comprising routes
expected to be followed on trips insured vehicle and driver have
made or are expected to make over the time period the insurance
contract is in force. The method comprises steps of identifying
the trips, selecting routes expected to be followed on the said
trips, determining the probability of each selected route being
followed on a trip, evaluating the safety characteristics of roads
comprising the routes, consolidating the route safety information
with the assigned route probabilities and other risk classifications
to produce cost of insurance for the identified trips. The results
are further consolidated with the cost of insurance due to risk
exposures other than those of the identified trips to produce a
final insurance cost.
Insurance Claims
1. A method for determining automobile insurance cost based on safety
characteristics of roads driven on in actual or estimated movements
of the insured driver and vehicle over the time period the automobile
insurance contract is in force, the method comprising: identifying
trips insured driver and vehicle have made or are expected to make
over the time the insurance contract is in force based on the information
provided by the insured wherein the said trips are defined by a
starting location, intermediate stops and a final destination between
which the insured driver and vehicle are expected to drive or have
driven in such a manner as to reach the final destination starting
from the starting location and driving through the intermediate
stops; estimating insured driver and vehicle movements based on
starting locations, intermediate stops and a final destinations
of identified trips; determining an automobile insurance cost component
based on the risk exposure due to the said insured driver and vehicle
estimated movements on the identified trips; determining an automobile
insurance cost component based on the risk exposure due to driving
other than on the said identified trips; consolidating the said
insurance cost components into the final insurance cost.
2. The method as described in [claim 1] wherein some or all of
the identified trips are identified based on the pattern of daily
commute of the insured driver between the place of residence or
location of the insured vehicle's garage and the insured driver's
place of work or school.
3. The method as described in [claim 1] wherein the vehicle or
vehicles are used in a commercial operation and wherein the said
trips are identified based on dispatch, accounting, and logistics
information comprising the addresses of locations where the cargo
pieces are being loaded for transport and the locations where the
cargo pieces are being delivered.
4. The method as described in [claim 1] wherein the vehicle or
vehicles are used in a commercial operation to transport passengers
and wherein the said trips are identified based on dispatch, accounting,
and logistics information comprising the addresses of locations
where the passengers board for transport and the locations where
the passengers disembark.
5. The method as described in [claim 1] wherein estimating insured
driver and vehicle movements on an identified trip comprises: finding
routes connecting starting location, intermediate stops and final
destination; selecting routes likely to be followed on a trip based
on the route characteristics, insured driver profile, vehicle type
and use, cargo type, and operation profile if the vehicle is used
in a commercial operation;assigning a probability to each said selected
route based on the route characteristics, insured driver profile,
vehicle type and use, cargo type and operation profile if the vehicle
is used in a commercial operation.
6. The method as described in [claim 5] wherein the said determination
of an automobile insurance cost component based on the risk exposure
due to the insured driver and vehicle estimated movements on identified
trips comprises: subdividing the said selected routes for each identified
trip into road segments based on a road safety actuarial classification
in such a way that each segment is classified in a unique actuarial
class;assigning actuarial classification to the said road segments
based on their safety characteristics; determining road segments'
automobile insurance cost corresponding to a risk exposure of insured
driver and vehicle driving one single time the length of each road
segment and where each segment's automobile insurance cost is based
on the road segment's actuarial safety classification, length of
the road segment and other risk characteristics of the vehicle,
driver, and operation if the vehicle is used commercially;consolidating
the road segments' automobile insurance costs and the probabilities
of the corresponding routes to produce the automobile insurance
cost component corresponding to the risk exposure due to the said
insured driver and vehicle estimated movements on identified trips.
7. An insurance claims database matching for each insured the automobile
claims due to losses that occurred while driving to a locations
where the covered loss occurred.
8. An identified trip database matching the identified trips to
an insurance policy, insured driver and vehicle.
9. A system for determining and billing automobile insurance cost
based on safety characteristics of roads driven in actual or estimated
movements of the insured driver and vehicle over the time period
the automobile insurance contract is in force, the system comprising:
means for the insured party or a party associated with the operation
of the insured vehicles to record, store, revise, and communicate
to the insurer vehicle dispatch, accounting, and logistics information
needed to identify trips and to compute the automobile insurance
cost based on the insured driver and vehicle estimated movements
on the said trips; means for the insurer to identify trips and to
compute automobile insurance cost based on the identified trips
and other information submitted by the insured party or a party
associated with the operation of insured vehicles; means for the
insurer to communicate insurance cost computed on the basis of the
submitted information to the insured party or a party responsible
for payment of the said insurance cost.
10. The system as described in [claim 9] wherein the said means
for the insured party or a party associated with the operation of
the insured vehicles to record, to store, to revise and to communicate
to insurer vehicle dispatch, accounting, and logistics information
are comprising a computer connected through a computer network to
the insurer's computation platform.
11. The system as described in [claim 10] wherein the said means
for the insured party or a party associated with the operation of
insured vehicles to record, to store, to revise and to communicate
to insurer vehicle dispatch, accounting, and logistics information
are further comprising a program operational: to record, to store,
and to revise information input by the party associated with the
operation of the insured vehicles;to interface and to retrieve information
from the insured party's dispatch, accounting, and logistics systems;
to communicate information through computer network to programs
operational on the insurer's computational platform.
12. The system as described in [claim 9] wherein the said means
for the insurer to identify trips and to compute automobile insurance
cost based on the information submitted by the insured or a party
associated with the operation of insured vehicles is comprising
a computer connected through a computer network to the insured party's
computer or to a computer of a third party responsible for paying
for the provided coverage.
13. The system as described in [claim 12] wherein the said means
for the insurer to identify trips and to compute automobile insurance
cost based on the information submitted by the insured or a party
associated with the operation of insured vehicles are further comprising
a program operational: to communicate through computer networks
to programs operational on computers used by the insured party or
a party associated with the operation of the insured vehicles; to
record, to store, and to process information communicated by the
insured or party associated with the operation of the insured vehicles;
to identify trips based on the information communicated by the insured
or a party associated with the operation of insured vehicles; to
compute the automobile insurance cost based on the trips identifies
from the communicated information; to communicate the said computed
insurance cost through computer network to the insured or a party
responsible for payment of the insurance cost.
Insurance Description
BACKGROUND OF THE INVENTION
[0001]The present invention relates to data acquisition and processing
systems and in particular to systems that consider movement of insured
driver and vehicle in determination of automobile insurance cost.
[0002]Conventional methods for determining costs of automobile
insurance involve classification of driver, vehicle, use of vehicle,
type of cargo and type of operation (if a vehicle is used in a commercial
operation) into broad actuarial classes for which the expected insurance
cost can be predicted with reasonable accuracy based on the empirical
experience of the insurer. The basic costs determined by the actuarial
classification can be further adjusted by discounts and surcharges.
The discounts and surcharges are a form of refinement of the classification.
The choice of characteristics which will be used to determine the
basic cost and which to determine the surcharges and discounts is
subjective and to a degree arbitrary.
[0003]An important weakness of conventional methods is their failure
to include the actual or expected movements of insured vehicle and
driver in insurance cost determination. More particularly, the conventional
methods fail to consider safety characteristics of roads driven
on in such movement. As a result, two drivers in same actuarial
class will pay the same price even though one is on average using
safer roads and thus can be expected to have fewer insured losses.
The conventional pricing methods thus lead to subsidies and unfair
insurance cost. As a result there is a need for improvements which
would make the pricing methods more reflective of the actual risks
the insured driver and vehicle are exposed to.
[0004]The more recently suggested methods address the mentioned
weaknesses of the conventional automobile insurance pricing by collecting
data on vehicle movement from on-board Global Positioning Systems
or other on-board devices. The collected information is processed
and subsequently communicated to the insurer who periodically adjusts
the insurance cost based on the communicated information.
[0005]Although these methods address the weaknesses of the traditional
methods they have number of drawbacks. The most significant is the
additional cost of installing the monitoring and communication equipment
in the vehicle and the cost of integrating the method in the current
insurer's systems. Another is security and intrusion into privacy
since the devices are collecting and communicating the information
on insured's movements in a detail with witch the current consumer
may not feel comfortable. Yet another weakness of the GPS based
methods is that they do not analyze the movement in a concise format
based on a trip concept. To build a credible actuarial classification
system based on the road safety characteristics requires storing
and analyzes movement information for large number of insured drivers
and vehicles over number years. Without summarizing the movement
into more manageable movement units such as the trips suggested
in the present invention the data bases and computational resources
necessary would be very costly.
[0006]The present invention contemplates a new and improved method
for determining costs of automobile insurance which overcomes both
the conventional automobile insurance problem of not distinguishing
differences in risk exposure based on the movements of the vehicle
as well as the shortcoming of more recent methods which rely on
on-board instruments to monitor the operation and movements of the
insured vehicle. Unlike traditional methods the subject invention
will include safety characteristics of roads traveled in estimated
movements of the insured vehicle when determining actuarial classifications,
discounts and surcharges.
[0007]Unlike more recent insurance cost determination methodology,
the present invention does not use any on-board instruments to track
the vehicle movement but rather estimates the movements based on
the information already available as part of the insurance application
process, or information present in financial and operational data
normally collected in course of business. Compared to the other
methods using Global Positioning Systems or similar on-board devices
to track the insured vehicle movements the present invention does
not require installation of any additional devices and is thus offering
lower implementation and operational costs.
[0008]Since the information used in present invention to estimate
the insured vehicle movement is either public or of type commonly
disclosed in insurance application, financial and tax reporting,
or normal course of business operation, the proposed invention will
be less intrusive into insured's privacy.
[0009]The present invention analyzes and stores insured driver
and vehicle movements in a summarized format of a trip. A trip in
a context of present invention is characterized by starting location,
intermediate stops, and final destination. The actual movement between
these locations is only estimated. The efficiency of this format
allows the storing and analyzing of historical information for actuarial
classifications at a lower cost.
[0010]Additionally if the vehicle is used in a commercial operation
the proposed invention will enable more accurate allocation of the
insurance cost to the price of the provided services.
BRIEF SUMMARY OF THE INVENTION
[0011]In accordance with the present invention, there is disclosed
a method of determining cost of automobile insurance based upon
safety characteristics of road segments making up routes expected
to be followed on trips the insured vehicle and driver have made
or are expected to make over the time period the insurance contract
is in force. The method is comprised of: steps of identifying trips
insured driver and vehicle have made or are expected to make over
the time the insurance contract is in force based on the information
provided by the insured; steps of selecting routes likely to be
followed on the said identified trip; steps of determining probabilities
the driver will follow the said selected routes; steps of dividing
selected routes into uniform road segments and classifying the said
road segments based on an actuarial road safety classification;
steps of consolidating the road segments' classifications and the
corresponding route probabilities to determining trip specific insurance
cost; steps of determining trip non-specific insurance cost; steps
of consolidating trip specific and non-specific insurance costs
to produce a final insurance cost.
[0012]The present invention determines the final insurance cost
in two components: a trip specific insurance cost, and a non-trip
specific insurance cost. The trip specific automobile insurance
cost includes in the cost determination the safety characteristics
of roads driven on during trips that can be identified based on
the information provided by an insured. The non-trip specific insurance
cost is reflective of risk exposures other then the risk exposures
due to driving on identified trips and is determined by methods
similar to those used in current conventional insurance cost determination
methods.
[0013]In accordance with another aspect of the present invention,
the steps of identifying trips comprise recognizing vehicle movements
which can be characterized as driving from a starting location,
through intermediate stops to a final destination and for which
the starting location, intermediate stops and final destination
can be identified or inferred from the information provided by the
insured. Examples of trips that can be identified when determining
the cost of insurance include: trips which are part of the daily
commute to work or to school where for each working day within the
insurance contract period it can be estimated that the driver and
vehicle will make a trip starting from the vehicle's garage address
to the address of work place or school and back; trips in commercial
cargo delivery where starting location is the place where the first
piece of cargo is initially loaded on to the vehicle, where intermediate
stops are locations where additional cargo is loaded or off loaded,
and the final destination is the last location where the cargo is
off loaded; trips in commercial transport where the starting location
is the place where the first of the passengers initially boards
the vehicle, where intermediate stops are the locations where on
board passengers disembark or additional passengers board, and the
final destination is the location where last of the passenger disembarks.
[0014]In accordance with yet another aspect of the present invention,
the selection of routes likely to be followed on an identified trip
comprises of: steps of identifying routes connecting the trip's
locations; evaluating route characteristics relative to the other
routes; and selecting set of routes likely to be followed based
on the said evaluation. Examples of characteristics which could
be used in selecting a likely route to be followed on an identified
trip include but are not limited to: time it takes to travel the
route; length of the route; complexity of the route; cost of driving
the route; and safety of the route. Examples of routes selected
based on the characteristics in the above example include:
[0015]shortest route connecting the trip starting location, intermediate
stops and final destination; fastest route based on legal speed
limit for the road segments comprising the route; fastest route
based on average traffic flow speeds; most cost effective route;
least complex route; and safest route based on the safety characteristics
of the road segments comprising the route.
[0016]In accordance with yet another aspect of the present invention,
the steps of determining the probability the insured driver will
follow a selected route comprise of evaluation of driver and vehicle
profiles, cargo type (if a the vehicle is used in a commercial operation)
and the route characteristics related to the drivers preference
for a route relative to other selected routes. Examples of route
characteristics influencing driver's preference for a route are:
length of the route relative to the other selected routes; total
expected driving time for the route relative to other selected routes;
cost of driving the route relative to the cost of driving the other
selected routes; relative complexity of a route; and safety characteristics
of the route relative to the safety characteristics of the other
selected routes for a given trip.
[0017]In accordance with yet another aspect of the present invention,
the trip specific insurance cost determination comprises of steps
of subdividing the said selected routes for a trip into road segments
in such a way that each resulting road segment can be classified
in unique actuarial class.
[0018]In accordance with yet another aspect of the present invention,
the trip specific insurance cost determination comprises of additional
steps of assigning each said road segment of a selected route to
an actuarial class of road safety characteristics. Examples of road
segments safety characteristics used in the actuarial classification
and in the surcharge or discount determination are: historical per
mile frequency and per mile average cost of insurance claims due
to accidents on the road segment per mile of the segment; type of
road comprising the road segment where an example of a road type
would be primary road, secondary road, or interstate highway; number
of traffic lanes on the road segment; number of intersections or
highway interchanges; number of railroad crossings;separation type
of the opposite direction traffic flows where the traffic flows
separation type can be either divided or undivided; maximum legal
speed limit of the road segment; average legal speed limit of the
road segment; average speed of traffic flow on the road segment;
segment's traffic density in number of vehicles per mile; geographic
information such as but not limited to average, maximum, and minimum
elevation of the road segment; the maximum and minimum longitude
and latitude for the road segment; demographic information such
as for example but not limited to population density of the surrounding
area, average income of the population in the surrounding area,
or the average age of the population etc; geo-political information
as for example but not limited to the state and county through which
is the road segment passing; climate and meteorological information
over the selected period for the area the road segment is passing
through as for example maximum, minimum and average temperature,
participation, or an average number of days with temperature under
the freezing point.
[0019]In accordance with yet another aspect of the present invention,
the trip specific insurance cost determination comprises of additional
steps of determining discounts and surcharges for each road segment
of a selected route based on safety characteristics of the said
road segment. There is some overlap between the use of actuarial
classes, discounts and surcharges. It will depend on the insurer's
historical experience and another business consideration which of
the road segment characteristics will be used to determine the actuarial
classifications and which to determine the discounts and surcharges.
[0020]In accordance with yet another aspect of the present invention,
the trip specific insurance cost determination comprises of additional
steps of: consolidating the road segments actuarial classifications,
discounts or surcharges, and the probabilities assigned to the selected
routes to produce an insurance cost for an identified trip; consolidating
the insurance cost for all identified trips into the trip specific
insurance cost.
[0021]One of the benefits of use of the present invention is a
system providing more accurate determination of the automobile insurance
cost based on the actual or estimated movements of the insured driver
and vehicle and on the risk characteristics of roads followed in
such movement.
[0022]It is another benefit of the present invention that the method
for determining or estimating the movements of the insured driver
and vehicle does not require installation of any additional equipment
and hence the method can be implemented at a lower cost to both
the insured and the insurer.
[0023]It is yet another benefit of the present invention that the
information used to estimate the movement such as the home address,
the place of work address or school address, or dispatch logs is
usually already being provided in a course of determination of insurance
cost by the conventional methods or is part of financial records
compiled for financial reporting or in course of normal business
operations. Hence the system based on the present invention is easy
to implement by interfacing with the insurers and the insured party
existing systems and databases.
[0024]It is yet another benefit of the present invention that the
information collected in the process of estimating the insured driver
movement is of a type that is less intrusive in the privacy of the
insured thus making the present invention more acceptable to the
consumer.
[0025]It is yet another benefit of the present invention that insurance
cost can be more easily allocated to a particular service provided
in the commercial transport operation since the insurance cost is
closely associated with particular cargo deliveries or person transport.
The said ease of allocation of the insurance cost will enable the
commercial companies to more competitively price their services.
[0026]It is yet another benefit of the present invention that the
information about insured drivers movements can be summarized in
a concise format of a trip thus making the storage and compilation
of historical information necessary to generate road safety actuarial
classifications more cost effective.
[0027]Other benefits and advantages of the subject new vehicle
insurance cost determination method will become apparent to those
skilled in the art upon a reading and understanding of the specifications.
BRIEF DESCRIPTION OF THE DRAWINGS
[0028]The invention may take physical form in a certain parts and
steps and arrangements of parts and steps, the preferred embodiments
of which will be described in detail in this specification and illustrated
in accompanying drawings which form a part of hereof and wherein:
[0029]FIG. 1 is a flowchart generally describing the method for
determining the automobile insurance cost based on trips insured
driver and vehicle have made or are expected to make over the time
period the insurance contract is in force;
[0030]FIG. 2 is a flowchart illustrating the process of determining
the trip specific component of the automobile insurance cost;
[0031]FIG. 3 is a flowchart illustrating the process of determining
the contribution of a single trip to the trip specific component
of the insurance cost;
[0032]FIG. 4 is a flowchart illustrating the detail of how the
road segment information is consolidated in determination of the
contribution of a single trip to the trip specific component of
the insurance cost.
DETAILED DESCRIPTION
[0033]Although described with specific reference to automobiles,
this invention is also applicable to other operator controlled motor
vehicles normally requiring insurance.
[0034]The invention consists of a system and a method for determining
automobile insurance cost based on safety characteristics of roads
driven on in actual or estimated movements of the insured driver
and vehicle over the time period the automobile insurance contract
is in force, wherein the said movements can be identified and estimated
based on the information provided by the insured. The invention
breaks down the actual or expected movements of an insured driver
and vehicle into trips in which insured driver and vehicle proceed
from a starting location, through intermediate stops to a final
destination. The term intermediate stop refers in the context of
the present invention to a location the insured driver and vehicle
are passing through whether or not the driver actually stops there.
The method estimates the actual movements on a trip based on starting
location, intermediate stops and the final destination by generating
routes of road segments connecting these locations on a map. The
accuracy of the movement estimate depends on the number of provided
intermediate stops. The actual movement on a trip can be completely
determined with a sufficient number of intermediate stops. If the
insured does not provide a sufficient information to completely
describe the trip a number of likely routes is generated and each
is assigned a probability based on the route characteristics and
number of other factors such as for example driver profile, vehicle
type and use, profile of the operation if the vehicle is used for
commercial purposes.
[0035]Since not all movements of the insured driver and vehicle
can be estimated based on the provided information the method determines
the insurance cost in two components. One component is based on
the movements that can be estimated based on the information provided
by the insured and is referred to in the context of the present
invention as a trip specific component or a trip specific insurance
cost. The other component reflects the risk exposure due to movements
of the vehicle which cannot be identified based on the provided
information and is referred to as non-trip specific component or
non-trip specific cost of insurance.
[0036]An example of application of the current invention is determination
of cost of private automobile insurance where the vehicle is used
to regularly commute to work or school. Some of the insured driver
and vehicle movements on a working day can be estimated based on
the garage address of the vehicle and the address of the place of
work or school provided by the insured in the application process.
The set of identified trips in this example would consists of two
trips, one to work and one from work for each working day in the
time period covered by the insurance contract. In a simplified version
of the current invention the movement during each commute trip to
work can be estimated by a single route with assigned probability
of one such as for example the shortest route connecting the garage
address as the starting location to the place of work address as
the final destination with no intermediate stops. The commute trip
back from work would have the locations reversed. The trip specific
component of the insurance cost can be then determined based on
the safety characteristics of roads making up the route and driver
and vehicle profiles. The non-trip specific component of the insurance
cost is determined based on the driver and vehicle profiles and
the miles estimated to be driven, other then those which are part
of the daily commute to work, by methods similar to those used in
current conventional automobile insurance pricing. The two components
are then consolidated to produce the final automobile insurance
cost.
[0037]Another example of an application of the present invention
is an automobile insurance of a transportation company, wherein
the set of movements of insured vehicles and drivers is estimated
based on locations where cargo is being loaded for transport and
locations where cargo is delivered. The information consisting of
the name of the driver, vehicle identification, type of cargo, addresses
of the locations where the cargo is loaded and subsequently delivered
can be submitted to the insurer at various intervals through computer
network. The information can be submitted by the party associated
with vehicle operation or can be obtained automatically by interfacing
with existing dispatch, logistics and accounting systems in use
by the insured party. Submitted information can optionally include
the sequence in which the cargo is loaded and delivered. In absence
of this information a delivery sequence is estimated which either
minimizes the total cost of delivery or minimizes the time it takes
to deliver the various cargo pieces. In the most simple version
of the present invention the movement can be estimated by a shortest
route starting at the location where the first piece of cargo is
loaded, going through the intermediate stops where the other cargo
pieces are being loaded or delivered, and ending at a final destination
where the last cargo piece in the delivery sequence is off-loaded.
In more sophisticated versions of the present invention a number
of routes based on other criteria can be generated and each is assigned
a probability based on the driver, vehicle and the transport operation
profiles. The trip specific component of the insurance cost can
be then determined based on the safety characteristics of the roads
making up the estimated routes, route probabilities, cargo type,
and driver, vehicle and operations profiles. The insured party can
be optionally provided with itemized list of the insurance cost
for each submitted delivery thus enabling the transport company
to more accurately allocate the insurance cost to the provided cargo
transport services. An initial estimate for the trip specific insurance
cost can be billed at the inception of the policy and periodically
adjusted based on the provided information. Alternatively the trip
specific insurance component can be billed at daily, monthly or
at other intervals through out the policy term.
[0038]The non-trip specific cost is determined separately by method
similar to the current conventional pricing methodologies at the
inception of the policy. It can be later adjusted based on the actual
miles driven other then the miles driven on the identified trips.
[0039]Referring now to the drawings, wherein the showings are for
purposes of illustrating the invention only and not for purposes
of limiting the same.
[0040]The present invention relies on estimating some of the insured
driver and vehicle movements and when illustrating the method it
is convenient to break down the determination of the insurance cost
into subcomponents corresponding to the components in which the
said movement is estimated. In the present invention the most general
component of the insured driver and vehicle movement is a trip.
A trip is determined by its starting location, intermediate stops
and a final destination. A trip for which these locations can be
identified from the information provided by the insured is referred
to in the context of the present invention as an identified trip.
The risk exposure of the insured vehicle and driver driving on identified
trips is reflected in the trip specific insurance cost. The risk
exposure of the insured driver and vehicle driving on trips which
cannot be identified is reflected in the non-trip specific insurance
cost. Each trip can be accomplished by following a route and a route
consists of the most basic components of road segments.
[0041]Corresponding to this breakdown the most basic component
of the trip specific insurance cost is the road segment's insurance
cost where the said cost component reflects the risk exposure of
the insured driver and vehicle driving one single time the length
of the road segment. The road segments insurance costs are consolidated
to produce a route insurance costs which are then further consolidated
to produce a trip insurance costs. The trip costs for the identified
trips are aggregated to produce the trip specific insurance cost.
The FIGS. 1 through 5 illustrate in increasing detail how this can
be accomplished.
[0042]The FIG. 1 is a flowchart illustrating in general determination
of the automobile insurance cost in two separate components, the
trip specific insurance cost and the non-trip specific insurance
cost. The process illustrated in the flowchart starts similarly
as conventional automobile insurance pricing process by determining
initial risk profile of drivers and vehicles to produce the actuarial
classification needed for automobile insurance cost determination.
The initial profiles can be determined on a basis of personal interview,
online questionnaire, information retrieval from databanks, on side
evaluation of the risk characteristics of a commercial operation,
or any other method commonly used to gather the necessary information.
[0043]Having determined the initial profiles, the trip specific
and the non-trip specific insurance costs are determined separately.
The non-trip specific cost is determined by methods similar to those
used in current conventional insurance pricing.
[0044]The determination of the trip specific insurance cost comprises
of steps of identifying trips the insured driver and vehicle are
expected to make over the time the insurance contract is in force
and of steps of determining the trip specific insurance cost based
on safety characteristics of road segments the insured driver and
vehicle are expected to drive on during the said identified trips.
The said trips can be identify based on the in the initial interview
or based on additional information submitted through out the time
period the contract is in force. The determination of the trip specific
insurance cost is illustrated in further detail in FIG. 2.
[0045]The FIG. 2 is a flowchart illustrating in more detail the
determination of trip specific insurance cost based on trips the
insured driver and vehicle are expected to make or have made over
the time period the insurance contract is in force. The said trips
have been identified in prior steps. The set of identified trips
can contain trips made or expected to be made multiple times as
well as trips made or expected to be made only once. The process
as illustrated in FIG. 2 determines how many different or unique
trips have been identified in prior steps and how many times each
of the unique trips occurs. A queue of the unique trips is formed
and separate insurance cost component is determined for each unique
identified trip and is later consolidated with the number of times
the said trip was made or is expected to be made. The resulting
insurance costs are then aggregated to produce the trip specific
insurance cost. The determination of a trip specific insurance cost
component based on the risk exposure due to a single unique trip
is illustrated in further detail in FIG. 3.
[0046]FIG. 3 is a flowchart illustrating the determination of a
trip insurance cost.
[0047]The initial step as illustration in FIG. 3 is to estimate
the movements of the insured driver and vehicle on the trip by selecting
routes which connect the locations on a trip. In the context of
present invention a trip is characterized by a starting location,
intermediate stops, and final destination and refers to a movement
of the insured driver and vehicle through the said locations in
such a manner as to reach the final destination starting from the
starting location and driving through the intermediate stops. Depending
on number and order of the intermediate stops there may be number
of different routes which the insured driver can chose in order
to drive from the starting location through the intermediate stops
to the final destination. Some of the possible routes connecting
the trip locations are selected as a good estimate of the insured
driver and vehicle movement on a trip. The route selection is based
on characteristics which make a route likely to be chosen by the
insured driver. Examples of criteria used in selecting the routes
include but are not limited to the length of the route, estimated
time it takes to drive the length of the route, estimated cost of
driving the length of the route, and safety characteristics of the
route. Examples of selected routes include but are not limited to:
shortest route connecting the trip starting location, intermediate
stops and final destination; fastest route based on legal speed
limit for the road segments comprising the route; fastest route
based on average traffic flow speeds on the road segments comprising
the route; most cost effective route; safest route based on the
safety characteristics of the road segments comprising the route.
[0048]Having selected the routes, they are queued up to determine
the routes insurance cost and to assign to each route a probability
reflecting an estimate of the insured driver's preference for the
route relative to the other selected routes. The determination of
the route insurance cost is illustrated in further detail in the
FIG. 4. The determination of the route's probability depends on
the route characteristics, the insured driver and vehicle profiles
and an operation profile if the vehicle is used commercially. Examples
of the route characteristics influencing the insured driver preference
for a route relative to other selected routes include but are not
limited to: length of the route relative to the other selected routes;
route's driving time relative to the driving time on the same basis
for the other selected routes; relative complexity of the route
in number of different roads comprising the route; cost of the route
relative to the cost of the other selected routes; safety characteristics
of the route relative to the safety characteristics of the other
selected routes for a given trip.
[0049]Examples of the insured driver and vehicle characteristics
influencing the insured driver preference for a route relative to
other selected routes include but are not limited to: insured driver
age and gender; marital status; vehicle type; vehicles maximum speed;
engine size and power; type of cargo if the vehicle is used commercially;
[0050]The actual characteristics used and the probabilities they
determine can be either based on insurer's historical experience
or established by sampling and evaluating the preferences of the
insured drivers.
[0051]FIG. 4 is a flowchart illustrating the determination of route
insurance cost. The first step in the illustration is to subdivide
the route into road segments based on classification of the road
safety characteristics so that each road segment belongs to a unique
class. The length of different segments will vary and in average
will depend on the refinement of the road safety classification
system. The finer the said classification the shorter on average
would the road segments need to be in order to be able to assign
each segment to a unique class. An example of road safety characteristics
which can form a basis for a road safety classification system includes
but is not limited to the following safety characteristics: type
of road such as primary road, secondary road, or interstate; type
of road surface; number of traffic lanes; type of separation of
the opposite direction traffic flows where the traffic flows; maximum
and minimum legal speed limit; geographic information such as but
not limited to elevation, longitude and latitude range along the
road segment; demographic information such as for example but not
limited to density, average income, average age of the population
in area surrounding the road segment; geo-political information
as for example but not limited to state and county through which
is the road segment is passing; climate and meteorological information
over the time period the insurance is in force for the area the
road segment is passing through.
[0052]Having subdivided the route, the resulting road segments
are queued up to determine the road segment insurance cost where
the said insurance cost reflects the risk exposure of the insured
driver and vehicle driving one single time the length of the road
segment. The road segment insurance cost is determined by combining
the road segment base insurance cost with appropriate discounts
and surcharges. The base insurance cost is determined as a product
of the per mile insurance cost corresponding to the road segments
classification and the length of the road segment. The road segment
discount or surcharge factors are based on the road segment's safety
characteristics other than those used in the base classification,
the driver and vehicle profile, use of the vehicle, and operation
profile and cargo type if used commercially. The said discounts
and surcharges other than those based on the road segment safety
characteristics are similar to those used in the conventional automobile
insurance pricing.
[0053]An example of road segment safety characteristics which can
be used to determine the said discounts and surcharges include but
are not limited to the following: historical frequency and average
cost of insurance claims due to accidents on the road segment;
[0054]road type comprising the road segment; number of traffic
lanes on the road segment; number and type of road intersections
or highway interchanges on the road segment; number of railroad
crossings on the road segment; type of separation of the opposite
direction traffic flows; maximum legal speed limit; speed of traffic
flow;
[0055]segment's traffic density in number of vehicles per mile
of road; geographic information; demographic information; geo-political
information; and climate and meteorological information over the
selected period for the area the road segment is passing through;
[0056]The choice of which road safety characteristics are used
to determine the basic classification and which a premium discount
is to a degree arbitrary, however, the set of characteristics used
to determine the surcharges and discounts should exclude those used
in the classification.
[0057]Although the trip specific insurance cost and its components
were described with specific reference to automobile insurance cost,
this invention is also applicable to methods where the costs are
expressed relative to a base.
[0058]The invention has been described with reference to preferred
embodiments. Obviously, modifications and alterations will occur
to others upon a reading and understanding of the specification.
It is our intention to include all such modifications and alterations
insofar as they come within the scope of the appended claims or
the equivalents thereof. |