|
Insurance Abstract
A system and method for calculating and assessing earned insurance
premium for a mileage based insurance contract is disclosed. The
system includes charging a customer a policy premium for a policy
period of an insurance contract defined in part by coverage for
a preselected number of units distance from the inception of the
contract, determining the number units distance lapsed since contract
inception, and assessing an earned premium against the charged policy
premium based on the ratio of units distance lapsed to units distance
insured under the policy.
Insurance Claims
1. A method of calculating earned insurance premium comprising:
charging a customer a policy premium for a policy period of an insurance
contract defined in part by coverage for a preselected number of
units of distance from the inception of the contract; determining
the number of units of distance lapsed since contract inception;
and assessing an earned premium against the charged policy premium
based on the ratio of units of distance lapsed to units of distance
insured under the policy.
2. The method of claim 1, further comprising calculating a commission
earned based on a percentage of the earned premium.
3. The method of claim 2 further comprising storing the commission
earned in a relational database record.
4. The method of claim 1, further comprising storing the earned
premium in a relational database record.
5. The method of claim 1, further comprising charging a second
earned premium against the charged policy premium based on the ratio
of units of distance lapsed since the last earned premium charge
to units of distance insured under the policy.
6. The method of claim 1, further comprising verifying that the
earned premium is less than an unearned premium available under
the policy prior to assessing the earned premium.
7. The method of claim 1, wherein the lapsed units of distance
are determined using an odometer reading of an automobile covered
by the insurance policy.
8. The method of claim 7, wherein the odometer reading is verified
by an official state document corresponding to one of a sale, trade-in,
or total loss of the specified vehicle corresponding to the existing
insurance policy.
9. A method of assessing an earned premium of an automobile insurance
policy, the method comprising: determining a first earned premium
based upon a ratio of units of distance lapsed since inception of
the insurance policy to units of distance insured under the insurance
policy; determining a second earned premium based upon a ratio of
units of time lapsed since inception of the insurance policy to
units of time for which the insurance policy is in force; determining
a greatest earned premium between at least the first earned premium
and the second earned premium; and assessing the greatest earned
premium against the insurance policy.
10. The method of claim 9, wherein the step of determining a greatest
earned premium further comprises determining a greatest earned premium
between at least the first earned premium, the second earned premium,
and a remaining unearned premium.
11. The method of claim 10, wherein the remaining unearned premium
is a total premium for the insurance policy minus the sum of any
previous earned premium assessments.
12. The method of claim 9, further comprising creating an earned
premium record in a relational database, the earned premium record
containing at least the greatest earned premium.
13. The method of claim 9, further comprising calculating a commission
earned based on a percentage of the greatest earned premium.
14. The method of claim 13, further comprising creating an earned
commission record in a relational database, the earned commission
record containing at least the calculated commission.
15. The method of claim 9, further comprising determining the units
of distance lapsed since inception of the insurance policy using
a plurality of odometer readings.
16. A system for assessing an earned premium of an automobile insurance
policy, the method comprising: a memory with processor-executable
instructions for: determining a first earned premium based upon
a ratio of units of distance lapsed since inception of the insurance
policy to units of distance insured under the insurance policy;
determining a second earned premium based upon a ratio of units
of time lapsed since inception of the insurance policy to units
of time for which the insurance policy is in force; and determining
a greatest earned premium between at least the first earned premium
and the second earned premium; and a processor for executing the
instructions in the memory.
17. The system of claim 16, wherein the processor-executable instructions
for determining a greatest earned premium further comprises processor-executable
instructions for determining a greatest earned premium between at
least the first earned premium, the second earned premium, and a
maximum allowable earned premium, the maximum allowable earned premium
being a total premium for the insurance policy minus the sum of
any previous earned premium assessments.
18. The system of claim 16 further comprising a relational database
to store the determined greatest earned premium.
19. The system of claim 16, wherein the memory further contains
processor-executable instructions for determining a commission based
upon a percentage of the greatest earned premium.
20. The system of claim 16, further comprising means for obtaining
an odometer reading of a vehicle covered by the insurance policy,
the odometer reading used in the first earned premium calculation.
Insurance Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This application is a continuation-in-part of U.S. patent
application Ser. No. 11/738,796 filed Mar. 23, 2007, which is a
continuation-in-part of U.S. patent application Ser. No. 11/685,947
filed Mar. 14, 2007, which is a continuation-in-part of U.S. patent
application Ser. No. 11/563,557, filed Nov. 27, 2006, all of which
are hereby incorporated by reference. This application claims the
benefit of U.S. Provisional Patent Application No. 60/803,837, filed
Jun. 2, 2006, which is hereby incorporated by reference.
BACKGROUND OF THE INVENTION
[0002] Conventional methods for pricing and selling vehicle insurance
are generally based upon time periods (e.g., months or years), also
known as terms. An applicant's data, such as age, sex, location
of residence, and driving record are combined with other factors
to create an actuarial class, which is then used to arrive at a
price. This price is then associated with a unit of exposure. In
conventional insurance, the unit of exposure is a period of time
(a term). As the insurance contract is then principally defined
based upon the exposure unit, conventional insurance contracts are
principally defined by the term. However, such conventional insurance
mixes a fixed cost with a variable usage pattern. Among other disadvantages,
this approach penalizes low mileage customers.
[0003] Accordingly, what is needed is an improved system and method
for addressing above, and related, issues.
BRIEF DESCRIPTION OF THE DRAWINGS
[0004] FIG. 1 is a flowchart of one embodiment of a method for
assessing, pricing, and provisioning distance-based vehicle insurance.
[0005] FIG. 2 is a diagram of one embodiment of a system within
which the method of FIG. 1 may be implemented.
[0006] FIG. 3 is a flow chart of one embodiment of a method for
using the system of FIG. 2.
[0007] FIGS. 4-8 are exemplary screenshots illustrating various
displays of the system of FIG. 2.
[0008] FIG. 9 is a flowchart of one embodiment of a method for
calculating and applying a credit for a referral.
[0009] FIG. 10 is a flowchart of one embodiment of a method for
determining whether an insurance policy is about to expire and notifying
the customer of the upcoming expiration.
[0010] FIG. 11 is an exemplary windshield sticker that may be generated
by the method of FIG. 10.
[0011] FIG. 12 is a diagram of one embodiment of a system within
which the method of FIG. 10 may be implemented.
[0012] FIG. 13 is a flowchart of one embodiment of a method for
calculating a premium for use in processing a claim based on an
expired insurance policy.
[0013] FIG. 14 is a diagram of a portion of one embodiment of a
distance-based insurance policy.
[0014] FIG. 15 is a diagram of a portion of one embodiment of an
adjusted term insurance policy.
[0015] FIG. 16. is a flowchart of one embodiment of another method
for assessing, pricing, and provisioning distance-based vehicle
insurance.
[0016] FIGS. 17-22 are exemplary screenshots illustrating various
displays that could be implemented by the system of FIG. 2 or other
systems according to the present disclosure.
[0017] FIG. 23 is an entity relationship diagram illustrating one
embodiment of a system for storing odometer data.
[0018] FIG. 24 is an exemplary screenshot corresponding to a system
functionality allowing a customer to enter a voluntary odometer
reading.
[0019] FIG. 25 is a flow diagram corresponding to one method for
handling renewals and exchanges in the context of distance-based
insurance.
[0020] FIG. 26 is an exemplary screenshot corresponding to accepting
an odometer reading for a renewal policy.
[0021] FIG. 27 is an exemplary screenshot corresponding to an insurance
renewal with unused mileage rollover.
[0022] FIG. 28 is an exemplary screenshot corresponding to accepting
an odometer reading for a traded or exchanged vehicle.
[0023] FIG. 29 is an exemplary screenshot corresponding to a partially
pre-filled form for a renewal policy.
[0024] FIG. 30 is a diagram illustrating a possible relationship
between a plurality of earned premium records.
[0025] FIG. 31 is an entity relationship diagram illustrating one
method of storing earned premium and other data.
[0026] FIG. 32 is a flowchart illustrating an exemplary method
of performing an earned premium calculation.
[0027] FIG. 33 is a flowchart illustrating another exemplary method
of performing an earned premium calculation.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0028] The present disclosure relates to a system and method for
the assessment, pricing, and provisioning of distance-based vehicle
insurance. However, it is understood that the following disclosure
provides many different embodiments or examples. Specific examples
of components and arrangements are described below to simplify the
present disclosure. These are, of course, merely examples and are
not intended to be limiting. In addition, the present disclosure
may repeat reference numerals and/or letters in the various examples.
This repetition is for the purpose of simplicity and clarity and
does not in itself dictate a relationship between the various embodiments
and/or configurations discussed.
[0029] Referring to FIG. 1, in one embodiment, a computer implemented
method 100 may be used for providing distance-based insurance to
a user (e.g., a customer). As will be described later in greater
detail, the distance-based insurance enables variable use to be
paired with variable pricing, in contrast to conventional term insurance,
where a fixed cost is paired with variable usage. Accordingly, the
method 100 enables distance-based insurance to be purchased and
used like a utility, allowing costs to accurately reflect usage,
eliminating inefficient pricing, and creating consumer choice.
[0030] Distance-based insurance may also improve the insurer's
risk management by aligning consumer pricing with the best predictor
of future insurance claims--vehicle mileage. Extensive research
on the relationship between annual mileage and insurance claims
suggest that if other risk factors (such as driver age, location,
and vehicle use) are constant, then accident risk tends to increase
in a roughly linear relationship with mileage. Distance-based insurance
may encourage beneficial risk-pool selection by being most advantageous
to low-mileage (and hence, lower risk) drivers.
[0031] Although accident risk tends to increase linearly with mileage,
time constraints may still be taken into account from a practical
standpoint. For example, it may not be ideal to have an insured
purchase a large number of miles that could take years to expire
from the policy. The rates currently being offered for various insurance
products may also change depending on market forces and other events.
An insurer may wish to more accurately account for exposure to risk
that is more accurately considered time based (e.g., comprehensive
and collision coverage) while providing a single policy to the consumer.
To address this and other concerns, a time limit may also be imposed
on a policy even though it is sold and priced as insurance per unit
of distance. In such case, the insured would be provided insurance
for a predetermined number of miles as described herein. However,
an expiration date would also be placed on the policy. In this way,
the coverage would expire the earlier of having driven all of the
covered miles, or at the expiration date of the policy. As described
further below, there may be a number of options for dealing with
mileage that has not been used by the time the policy expires.
[0032] Referring again to FIG. 1, the method 100 begins by receiving
customer and vehicle identification information in step 102. The
customer identification information may include such information
as driver's license number, age, gender, and address. The vehicle
identification information may include such information as license
plate number, vehicle identification number (VIN), and vehicle make,
model, and year. In step 104, a current odometer reading of the
vehicle is received. It is understood that the odometer units (e.g.,
miles or kilometers) may differ depending on such factors as the
location of the vehicle or its origin. Furthermore, it is understood
that no odometer audit or verification is performed by the insurance
provider during the method 100, as shown in the present embodiment.
The odometer reading entered by the customer is used as the current
odometer reading.
[0033] While the customer-provided odometer reading is all that
is needed in some embodiments to initiate or continue coverage,
odometer readings from other information sources may be used for
validation, verification, or for other purposes. Additional sources
may include records from state inspections, records from titling
or registration events, records from sale events, data from private
databases, data from internal databases, and possibly other sources.
[0034] In step 106, multiple coverage types are provided to the
customer. Exemplary coverage types may include recommended, economy,
and minimal coverage. It is understood that some aspects of the
coverage types may be controlled by applicable state regulations.
In step 108, upon receiving an input selecting one of the coverage
types, the customer is provided with at least one quote. The quote
includes a policy rate identifying a cost per distance unit (e.g.,
$0.05/mile) based on the customer and vehicle identification information.
Accordingly, the cost per mile includes various factors based on
a risk assessment.
[0035] In step 110, the customer is provided with multiple pre-calculated
items based on the quote. Each of the pre-calculated items includes
a total number of distance units for purchase at the policy rate.
For example, one item may provide 5000 miles of coverage for $250
(i.e., $0.05*5000), while another item may provide 6000 miles of
coverage for $300 (i.e., $0.05*6000). It is understood that various
alterations may be made in the calculations to provide, for example,
an incentive for a customer to purchase additional miles. For example,
the policy rate may be reduced to $0.049 upon the purchase of 10,000
miles. In step 112, a purchase transaction for an insurance policy
may be performed in response to input from the customer selecting
one of the items for purchase. The insurance policy includes an
expiration odometer value defined as the sum of the current odometer
reading and the total number of distance units included in the selected
item. Accordingly, the method 100 enables a distance-based vehicle
insurance policy to be purchased without a physical inspection of
the odometer reading by the insurer prior to purchase, and without
the use of odometer audits or verifications, or any type of tracking
device placed in the vehicle.
[0036] While, in some embodiments, the methods of the present disclosure
are meant to increase convenience to the customer by not requiring
physical odometer inspections, audits, or tracking devices, this
does not necessarily preclude the use of odometer readings from
sources such as state inspections for purposes such as validation
or verification. In one embodiment, the customer provided odometer
reading may be checked for consistency against outside sources.
For example, a customer-provided odometer reading for a given vehicle
that is lower than an odometer reading obtained at a previous inspection
or similar event would indicate that the customer has made a mistake,
is attempting to defraud the insurance company, or has been the
victim of odometer fraud. By verifying customer provided readings
against outside sources, these problems may be appropriately addressed.
In some embodiments a notice may be provided to the customer informing
him or her of the discrepancy. Coverage may be cancelled if it is
determined that the customer has purposefully misrepresented the
odometer reading. In other cases, the customer may be alerted to
odometer fraud and the decision may be made to extend or continue
coverage. In another case, an odometer reading may be obtained from
an outside source that would indicate that the customer's insurance
policy has already lapsed. In this case, the customer may be notified
and possibly given the opportunity to renew. As described herein,
this additional data can be used to more accurately predict when
a given customer is nearing a lapse in insurance coverage. In turn,
more accurate warning notices of impending lapses in coverage may
be generated.
[0037] Referring to FIG. 2, a system 200 illustrates one embodiment
of a system that may be used to provide distance-based vehicle insurance.
For example, the method 100 of FIG. 1 may be implemented within
the system 200. In the present example, the system 200 includes
a kiosk 202 at which a user (not shown) may price, select, and purchase
distance-based insurance. It is understood that other systems (e.g.,
a website) may provide similar functionality.
[0038] The kiosk 202 includes a number of components to provide
information to the user and to receive and process input from the
user. For example, the kiosk 202 may include a central processing
unit (CPU) 204 coupled to a memory unit 206, an input/output ("I/O")
device 208, a network interface 210, a printer 212, and a magnetic
stripe reader (MSR) 214. The network interface may be, for example,
a modem (e.g., a V.90 modem) and/or one or more network interface
cards (NICs) that are each associated with a media access control
(MAC) address. The network interface 210 may be compatible with
any of a variety of wireline and wireless network technologies,
such as TCP/IP and/or Bluetooth. The components 202, 204, 206, 208,
210, and 212 are interconnected by a bus system 216, which may include
wireless and/or wired communication paths.
[0039] The components may be located in a single storage unit in
the kiosk 202 or may be configured in many different ways. For example,
the CPU 204, memory unit 206, I/O device 208, and network interface
210 may be located within the kiosk 202 as part of a single computer,
and the printer 212 and MSR 214 may be attached as peripherals.
In addition, it is understood that each of the listed components
may actually represent several different components. For example,
the CPU 204 may represent a multi-processor or a distributed processing
system; the memory unit 206 may include different levels of cache
memory, main memory, hard disks, and remote storage locations; and
the I/O device 208 may include monitors, keyboards, touch screen
displays, and the like. The printer 212 may be one or more printers
and may utilize thermal printing or other suitable printing technologies.
For example, the printer 212 may represent a thermal printer for
vinyl stock and another thermal printer for coated paper stock.
[0040] The network interface 210 may be connected to a network
218. The network 218 may be, for example, a subnet of a local area
network, a company wide intranet, and/or the Internet. Because the
network interface 210 may be connected to the network 218, certain
components may, at times, be shared with other computers (not shown).
Therefore, a wide range of flexibility is anticipated in the configuration
of the kiosk and its components. Furthermore, it is understood that,
in some implementations, CPU 204 may act as a server to other computers.
[0041] Coupled to the kiosk 202 via the network 218 is a server
220. The server 220 may be one of a plurality of servers and may
be selected for handling a particular user's request by a network
device such as a router (not shown). The router may handle all communication
requests by delegating them in round-robin fashion (or using another
allocation/load balancing process) amongst the servers. The server
220 is coupled to or includes an actuarial engine 222, which utilizes
information stored in a database 224. The actuarial engine 222 and
database 224 may be used to determine an actuarial class for the
customer as well as an associated price per mile, as will be described
later. The server, which includes a processor and memory (not shown)
may execute software instructions needed to access the actuarial
engine 222 and database 224, as well as to communicate with the
CPU 204. In some embodiments, the server 220 may host all or part
of a website comprising various web pages and/or executable code
for providing similar functionality to that of the present example.
[0042] The CPU 204 includes a plurality of software instructions
for an operating system that handles peripheral device communication,
network communication, and hosts a local point-of-sale (POS) application
for customer use. The CPU 204 and its associated components may
communicate all customer information and selections over the network
218 to the server 220, or the CPU 204 may perform some or all processing
functions itself.
[0043] In operation, a customer interacts with the kiosk 202 via
the touch screen display 208, which allows the customer to both
read and enter data (the latter by use of an onscreen keyboard).
When queried by the POS application for driver's license information,
the customer swipes his driver's license in the MSR 214 (assuming
the driver's license includes a magnetic stripe containing such
information). When queried by the POS application for credit card
information, the customer swipes his credit card in the MSR 214.
If the customer agrees to a policy, the printer 212 prints a vinyl
static-cling reminder sticker for the policyholder's windshield.
Additionally, the printer 212 prints two proof-of-insurance cards
on coated paper for the customer.
[0044] In some embodiments, the kiosk may include wireless (e.g.,
Bluetooth) capability to enable interaction with the customer's
cellular telephone. For example, during a payment step in the purchasing
process, the customer may elect to purchase the insurance via the
cell phone. Cell phones have unique identifier numbers (e.g., an
international mobile subscriber identify (IMSI) number) that allows
for their cellular network identification. This number may also
be used for unique identification for payment transactions. A customer
may, for example, purchase insurance and have it added to their
cell phone bill.
[0045] The use of a cell phone also enables a customer to transmit
electronic coupon offers to the kiosk. These coupon offers could
be part of a larger marketing campaign wherein the customer receives
insurance coupons/credits at participating businesses.
[0046] The use of a cell phone may also enable the customer to
conveniently transmit the phone number of a referrer (e.g., another
customer who has referred the current customer for the current purchase).
The phone number may then be used as a unique identifier (UID) for
a referral credit. For example, the customer may scroll through
their cell phone's address book looking for the name of the person
who referred them to the kiosk 202. Next to each address entry may
be a keypad option to select the phone registry entry as "Referred
me for insurance." If the user presses the cell phone keypad
item, the relevant phone number for the displayed address entry
is transmitted to the kiosk 202. The kiosk 202 may be configured
to acknowledge the receipt of the referrer number over the network.
[0047] Referring now to FIG. 3 and with additional reference to
FIGS. 4-8, a method 300 illustrates a more detailed example of how
a customer may purchase a distance-based vehicle insurance policy
using an interactive system such as the system 200 of FIG. 2. In
the present example, the customer is a new customer who was referred
by an existing policyholder/customer.
[0048] In step 302 and with additional reference to screenshot
400 of FIG. 4, the customer approaches the kiosk 202 and enters
his or her driver's license by swiping it through the MSR 214 or
entering the number via the touch screen 208. The system 200 may
use the driver's license number to retrieve the customer's name,
age, address, driving record, registered vehicles, and similar information.
It may also be used for a limited criminal history check. If the
consumer is a returning customer, all of the previous policy information
may be loaded based upon the license number and a confirmation key,
and the consumer may then modify any existing information and selections.
In step 304, the customer enters the license plate number of the
vehicle he wants to insure. The license plate number may be used
to retrieve the vehicle identification number (VIN), vehicle make,
vehicle model, vehicle color, and vehicle age. It may also be used
to determine if differences exist between the driver's license information
and vehicle registration information. The VIN may be used to check
the vehicle history.
[0049] In step 306, the customer enters the current odometer reading
of the vehicle, which provides the starting point for vehicle coverage
(if a policy is purchased). In step 310, if there are secondary
drivers (as determined in step 308), the customer enters the drivers'
license numbers of the secondary drivers. As with the customer's
driver's license number, this information may be used to retrieve
the secondary drivers' names, ages, addresses, driving records,
and registered vehicles, as well as for a limited criminal history
check. In the present example, secondary drivers listed with a registered
address different than the primary driver's (e.g., the customer)
are not permitted.
[0050] In step 312 and with additional reference to screenshot
500 of FIG. 5, the customer chooses from three coverage lines (e.g.,
"Recommended," "Economy," and "Minimum")
using a radio-button set. In the present example, the three coverage
choices improve transaction speed and make the process more intuitive
for the consumer, as well as simplifying the management of risk-pools.
It is understood that more or fewer coverage choices may be used,
and that each coverage choice may be more or less complicated. In
step 314, the customer may also select from additional coverage
options (e.g., "Collision," "Comprehensive,"
and "Roadside Assistance") using checkboxes as illustrated
in FIG. 5. These are coverages that are not legally required, although
some lienholders may require them to secure the vehicle collateral.
For both the coverage lines and the coverage options, the cost per
mile is illustrated to the customer. The cost-per mile is based
on the entered customer and vehicle information and an actuarial
rate class with which the customer is matched by computer (e.g.,
the server 220 of FIG. 2). The actuarial rate class is based solely
on age, location (e.g., residence address or driving region), and
vehicle type in the present example, but it is understood that other
factors may be used.
[0051] In step 316 and with additional reference to screenshot
600 of FIG. 6, the customer is presented with an insurance quote
in the form <currency unit>/<distance unit>. In the
present example, the quote is for $0.056/mile, which is the summation
of the customer selected "Recommended" coverage line,
and the additional coverage options "Collision" and "Comprehensive"
(as priced in FIG. 5). The customer chooses the amount of insurance
coverage by selecting from a list of pre-calculated items. For instance,
the pre-calculated item in FIG. 6 offers $5000 miles of insurance
for $280 (at $0.056/mile). Additional menu items (not shown, but
selectable using the up/down arrows in FIG. 6) may be provided for
predefined increments up to a maximum available number of miles
(e.g., 1000 mile increments up to 25000 miles). This approach allows
consumers to see the cost savings relative to their term-based insurance
plans. It also allows them to see a direct impact for reduced mileage
in the future. The pre-calculation is also very convenient and intuitive
as a user interface.
[0052] In step 318 and with additional reference to screenshot
700 of FIG. 7, the customer is presented with a electronic payment
screen and may swipe his credit card in the MSR 214 or enter the
credit card information via the touch screen 208. This approach
provides not only payment information, but also provides a last
validation check for corroboration of the address/name information
from the driver's license or provided by the customer with the credit
card issuer's records. Assuming a successful validation, immediate
payment may be received from the customer without having to incur
the clearance/handling costs of cash or personal checks.
[0053] It is understood that not every customer utilizing the systems
and methods disclosed herein will qualify for insurance coverage.
For example, those who have been found to have driven under the
influence of alcohol or while intoxicated may not qualify for coverage.
In some embodiments, drivers under 18, drivers without a car, drivers
who do not live and/or work in a specified state, drivers without
licenses or with expired licenses, drivers with adverse prior claims
history, and drivers utilizing their cars for business may also
be disqualified. Those skilled in the art will also recognize other
risk factors, circumstances, and legal considerations that may disqualify
a driver from obtaining coverage utilizing the systems and methods
disclosed herein.
[0054] Similarly, some circumstances may lead an insurer utilizing
the systems and methods of the present disclosure to require a live
representative or agent to evaluate particular cases. These cases
may fall outside the ambit of the automated systems and methods
disclosed herein, but insurance may ultimately be provided following
review. In such cases, the information obtained by the automated
systems and methods disclosed herein may be used for the evaluation.
In other embodiments, the information obtained may be supplemented
or replaced by additional information obtained by the live representative
or agent. If insurance coverage is granted for such exceptional
cases, the customer may be required to continue to deal with the
live agent or may be returned to the automated systems and methods
described herein.
[0055] Referring again to FIG. 3, in step 320, a determination
may be made as to whether the customer was referred by an existing
customer. If so, in step 322, the customer enters a referral UID
of the referring customer. The referral UID is used to calculate
the credit to the referrer, as will be described later in greater
detail.
[0056] In step 324 and with additional reference to FIG. 8, the
customer completes the financial transaction. Using the printer
212, two proof-of-insurance receipts are printed on paper cardstock.
The proof-of-insurance cards may also have a confirmation key which
can be used to speed future transactions by loading existing policy
data. Another printer may be used to print a static-cling windshield
reminder sticker (FIG. 11) on vinyl stock simultaneously with the
printing of the proof-of-insurance cards, or the first printer may
print the reminder sticker after printing the proof-of-insurance
cards. The customer may then collect the printed items and end the
session with the kiosk 202.
[0057] Referring now to FIG. 9, in another embodiment, a method
900 may be used to calculate a credit (e.g., additional miles) for
an existing customer (a referrer) who refers a new customer and
credit the referrer's account with the calculated amount. In steps
902 and 904, a customer's policy purchase request and payment information
are received as described previously in greater detail with respect
to FIG. 3. In step 906, the UID of the referrer is received and,
in step 908, the new customer's payment is processed. In step 910,
the referrer's UID is used to link the referrer's account with the
new customer's account.
[0058] In step 912, the credit that is to be added to the referrer's
account is calculated. In the present example, the credit is a distance-denominated
credit that provides additional miles of insurance coverage on the
referrer's existing policy. The credit may be calculated using a
formula such as: Number of Miles Credited to Referrer's Policy=((A
Percentage)*(Dollar value of new customer purchase))/(Referrer's
premium per mile). For example, with a percentage of 0.02, a dollar
value of $280 for the new customer's purchase, and a premium per
mile of $0.05 for the referrer, the credit to the referrer's account
will be 112 miles. In the present embodiment, the credited amount
is not redeemable for cash and only new, first-time customer purchases
will qualify towards a referral credit. An existing customer, by
referring multiple new customers for first-time purchases, may receive
multiple, cumulative credits. In step 914, the referrer's account
is credited with the calculated amount of miles. In some embodiments,
the credit may be "reserved" for a previous customer that
no longer has a current policy. If the referrer once again obtains
a current policy, the credit may be applied to the account. This
may be used, for example, to both encourage referrals and to encourage
a previous customer to purchase another policy.
[0059] Referring now to FIG. 10, a method 1000 illustrates one
embodiment of a process for generating policy expiration/renewal
reminders. The method 1000 includes the use of collected odometer
readings, pricing multipliers, interactive reminders, and static-cling
windshield stickers. It is understood that not all of these approaches
may be used and that others may be added.
[0060] In some embodiments, the purchase of distance-based insurance
creates a contract that is limited to a quantity of distance (e.g.,
"from the odometer reading 5000 miles up to and including the
odometer reading 7500 miles"). Accordingly, it may be desirable
to remind policyholders of approaching policy lapses to prevent
them from accidentally driving beyond their policy coverage. Additionally,
many consumers purchase a vehicle with the assistance of a lien,
and the lienholder often requires insurance coverage of the vehicle
to protect the collateral for the lien.
[0061] In step 1002 and with additional reference to FIG. 11, a
static-cling windshield sticker 1100 may be generated when a customer
purchases a distance-based insurance policy (as in step 324 of FIG.
3). As illustrated in FIG. 11, the sticker may include such information
as the beginning and ending odometer readings of the insured vehicle,
as well as a phone number at which information regarding renewal
may be obtained.
[0062] In addition to, or instead of the window sticker, the customer
may be sent reminders based upon, for example, estimated distance
traveled as follows. In step 1004, a baseline is established by
the customer's starting odometer reading at the time of purchase.
In step 1006, the policy end date is estimated using the customer's
average vehicle distance traveled (e.g., miles) for a given unit
of time. For example, if a policy is for 12000 miles and the average
driver travels 1000 miles per month, the estimated policy lapse
date is twelve months from the date the policy was purchased. The
estimated rate may also be calculated using the ownership records.
For example, if the vehicle was purchased by the policyholder two
years ago with an odometer reading of 30000 miles and the current
odometer reading is 78000 miles, then the policyholder travels approximately
2000 miles per month. In the absence of a more accurate rate, a
default rate may be applied.
[0063] In step 1008, the estimated lapse date is updated with any
harvested odometer readings, which may come from such sources as
vehicle emissions tests, vehicle maintenance, vehicle sales, vehicle
purchases, vehicle registrations, and vehicle accident reports.
Any odometer readings that are harvested enable a more accurate
travel rate to be estimated for the particular customer.
[0064] In step 1012, if the policy end date is near (as determined
in step 1010), the customer is sent a reminder (e.g., a letter or
an electronic reminder such as an email or text message) of impending
lapse of the policy (e.g., as defined either by time or by mileage).
This reminder directs the customer to use a communications device
(e.g., a cell phone, pager, or personal digital assistant) or to
go to a website, kiosk, or other interactive destination in order
to enter their current odometer reading. The entered odometer reading
may be used in step 1014 to further refine the predictive process
for the rate of vehicle travel and the associated lapse date. Over
a period of time, the method 1000 provides a more personalized rate
of travel for each policyholder. With fewer odometer readings, the
notice may be sent with a greater margin for error (e.g., more time
until the policy lapse). With more odometer readings and the corresponding
fidelity, the notice may be sent with a smaller margin of error
(e.g., less time until the policy lapse).
[0065] Referring to FIG. 12, a system 1200 illustrates one embodiment
of a system implementation for sending electronic reminders to a
customer via a cell phone. Various databases and record readings
from government sources 1202 (e.g., state records and national government
sources), private business records 1204, and the owners' reported
odometer readings 1206 are amalgamated into a central data repository
1208 using vehicle identification numbers (VINs) as the primary
keys. Additionally, each recorded odometer reading is associated
with a date. A database 1210 of policyholders, including their associated
vehicles, is linked to the database 1208 of odometer readings.
[0066] A server software process 1212 (e.g., software instructions
representing a process for estimating mileage to predict policy
lapses) operating on a server 1214 analyzes all odometer readings
associated with a policyholder's vehicle. When the process 1212
identifies an approaching policy expiration, it spawns a remote
server process 1216 to communicate with a policyholder. In the present
example, the remote server process 1216 sends a message to the policyholder's
cell phone 1220 over a standard cellular network 1218.
[0067] The policyholder's cell phone 1220 receives the message,
which is interpreted by a local software process 1222 (that may
have been previously installed by the policyholder). The cell phone
then presents a screen querying the policyholder and requesting
that the policyholder enter his vehicle's current odometer reading
using the phone keypad. When the policyholder enters the odometer
reading, the local software process 1222 either recommends an immediate
insurance renewal or recommends waiting.
[0068] If the local software process 1222 recommends a renewal,
the local software process opens a screen to purchase additional
miles of insurance coverage. The policyholder selects the quantity
and the method of purchase (e.g., via a credit card on file, or
via cell phone bill). If the local software process 1222 recommends
waiting, the local software process sends the odometer reading to
the remote software process 1216, which then passes the information
on in order to update the databases. In some embodiments, the local
software process 1222 may not query the policyholder if the recommendation
is to wait. Furthermore, in some embodiments, the local software
process 1222 may simply repeat a recommendation made by the remote
software process 1216.
[0069] It is understood that the system 1220 may be coupled to
or part of other systems, such as the system 200 of FIG. 2. For
example, the server 1214 may be the server 220 of FIG. 2, or may
be in communication with the server 220.
[0070] Referring now to FIG. 13, in another embodiment, a method
1300 may enable a policyholder to renew an expired policy by retroactively
pricing the coverage exposure from the point of policy lapse to
the point of a vehicle claim. Generally, there are three parties
concerned with possible coverage lapses: state regulators, policyholders,
and lienholders. Regulators need policyholders to maintain coverage
to meet legal requirements. Lienholders need coverage to maintain
protection of their collateral (the vehicle). Policyholders need
to maintain coverage to comply with the law, possible lienholders,
and to minimize potential financial losses.
[0071] One problem of distance-based insurance is that policyholders
can drive beyond the odometer limit of their vehicle's coverage,
causing their policy to expire. The method 1300 may be used to address
the likely usage patterns of policyholders (as lapses will happen)
and balance the uninterrupted coverage needs of regulators, lienholders,
and policyholders without burdening the insurance product itself
with financial or operational baggage.
[0072] In step 1302, an insurance claim is received from a policyholder.
In step 1304, a determination is made as to whether the policy against
which the claim is being made has lapsed. For example, an odometer
reading included in the claim may be compared to an expiration odometer
value of the policy. If the policy has not lapsed, the method continues
to step 1312, where the claim is processed.
[0073] If the policy has lapsed, the method continues to step 1306,
where a premium is calculated. While the policyholder is explicitly
covered for any claims/involvements that occur beyond the stated
odometer limit of their policy, the policyholder will be charged
a financial premium if the associated insurance policy is beyond
the stated odometer limit. Among other benefits, this premium encourages
the policyholder to keep their policy current by aligning their
financial interests with their risk interests.
[0074] The premium may be calculated as: Premium=((Current odometer
reading)--(Odometer limit for policy expiration))*((Policy rate)*(Multiplier)).
"Premium" is the price the policyholder will be charged
for the period of vehicle use between the expiration of their policy
and the odometer reading at the time of the involvement/claim. "Current
odometer reading" is the current reading of the vehicle's odometer.
"Odometer limit for policy expiration" is the upper limit
for the policy coverage (e.g., if the policyholder purchased 5,000
miles of coverage with a starting odometer reading of 90,000 miles,
then the policy expires at 95,000 miles). "Policy rate"
is the regular cost of coverage to the policyholder for the given
vehicle and coverage selections (e.g., $0.05/mile). "Multiplier"
is a number that indicates how much the premium will be over the
normal rate.
[0075] Accordingly, if a claim is made on a lapsed policy, the
premium will be charged for the usage during the lapse. For instance,
if a policyholder's policy ends at 95,000 miles and the policyholder
has an involvement at 100,000 miles, the policyholder may still
elect to make a claim. If a claim is made, he must pay for the implicit
insurance consumed from 95,000 miles to 100,000 miles, a total of
5,000 miles. These 5,000 miles of coverage will cost him a multiple
of his usual rate. For instance, if his usual rate is $0.05/mile,
he must pay $0.25/mile (with a multiplier of five). Therefore, he
must pay $1,250 (instead of the $250 cost at the usual rate).
[0076] In step 1308, a determination is made as to whether the
policyholder wants to renew the policy. The premium may be displayed
to the policyholder at this time or, in other embodiments, the policyholder
may simply be given the choice of renewal and notified that a premium
will be charged per a defined policy that is provided to the policyholder.
If the policyholder does not want to renew the policy, the method
1300 ends. If the policyholder does want to renew the policy, payment
from the policyholder may be accepted in step 1310 and the claim
may be processed in step 1312. Accordingly, the method 1300 may
provide "retroactive coverage" for distance-based insurance
to be maintained at all times. Furthermore, the premium may encourage
policyholders to keep their policies current through renewal, extension,
or larger initial purchases.
[0077] In another embodiment, no grace period or retroactive coverage
will be provided. In such an embodiment, if a customer has exceeded
the mileage or time limit of his or her policy, he or she will be
denied coverage for any claims submitted for events occurring after
the lapse. As will be more fully described below, in some cases,
policies will expire at the earlier of a predetermined time or exceeding
the mileage limit of the policy.
[0078] Regardless of whether a particular policy has a time-based
expiration, credit for unused mileage may be available for renewing
a policy before expiration (either from driving or from time). In
one embodiment, the number of miles of coverage available on a current
policy will be added to the new or renewal policy. The price of
the new policy is not reduced in this embodiment, although other
methods are possible. A customer may effectively lower his or her
cost on the new policy by simply buying fewer miles at renewal.
Over time, the customer, as well as the present system will be able
to more accurately predict the actual number of miles needed over
a given period of time. It may also be possible to differentiate
between the number of miles needed during a given time of year.
For example, a particular driver may use more miles during the summer
or winter months. This information can be taken into account for
purposes of renewing policies, adding miles, or generating reminder
notices.
[0079] Referring now to FIG. 25, an exemplary embodiment of a process
flow for handling renewals and exchanges is shown. The method illustrated
by the process flow 2500 represents only one method that may be
operable with the systems the present disclosure, as many more are
possible within the scope of the disclosure. The method 2500 could
be used with the system of FIG. 2, for example. At step 2510 a customer
may provide a VIN or license plate number that may be checked against
internal records or databases. This may be, for example, part of
the initial data gathering step as shown in FIG. 4. If it is determined
that the automobile corresponding to the VIN or license plate number
is not already insured, at step 2514, the requisite driver and automobile
information may be obtain in order to write a policy as has been
described herein. A new policy may then be issued at step 2532.
[0080] In cases where the VIN or license plate is found to correspond
to a vehicle that is currently insured or covered under a policy,
it may be suggested that the customer log into his or her existing
account or policy at step 2516. It is also possible for the consumer
to log directly into his or her account though the Internet or other
means described herein. Additionally, although in the present context
the purpose of the customer logging into his or her account is a
policy renewal, the consumer may actually have many choices when
logged in. For example, claims or accidents may be reported, cancellations
may be requested, inquiries may be posted for a customer service
agent, and other business transacted. Moreover, a customer may be
able to access or service more than one policy through a single
username and password or login session. This may occur when a customer
has multiple automobiles, each insured with a different policy.
[0081] From the foregoing, it can been seen that in one respect
step 2510 serves as a backup checking or validation step to make
sure that a new policy is not inadvertently issued for an automobile
that is already covered. When the customer is logged in or otherwise
validated on the system, at step 2518 an odometer reading may be
taken from the customer. FIG. 26 illustrates an exemplary screenshot
of how the odometer reading at step 2518 may be taken. This odometer
reading may be needed in order to determine whether coverage remains
on the existing policy and to determine whether it will be possible
to roll existing miles to a new or renewal policy. Additionally,
any odometer reading provided may be subject to validation and/or
verification depending upon how it is used, as is described in greater
detail below.
[0082] At step 2518, the current customer's existing policy information
is shown. This may include the drivers and vehicles currently insured,
the types of coverages being provided, and the coverage limits and
current premiums. This information may be displayed to the user
or customer in a familiar or otherwise convenient format. FIG. 5
provides one example of one way that this information could be presented.
At step 2520 changes to the policy may be made. Here again, a format
similar to FIG. 5 could be used that would allow the user to change
the already-provided default selections based on the current policy
parameters. At step 2522 the new selections are accepted or the
previous or default selections are confirmed.
[0083] In some instances, all miles on the current policy will
be expired. This may be determined at step 2524. If no miles are
unused (that is, the miles have either been driven or the previous
policy has expired) then a new policy can be issued at step 2532.
In some embodiments, the new policy will be based on the new odometer
reading provided at step 2518. In other embodiments, the user will
be required to pay based on the original odometer reading of the
expired policy. In other embodiments, the new odometer reading may
need to be verified or come from a trusted source before the customer
is allowed to use it as the basis of a renewal policy. Trusted and
untrusted odometer readings will be described in greater detail
below.
[0084] At step 2524 it may be determined that there are unused
miles on the policy that may be eligible to be rolled to the new
or renewal policy. In this case it may be determined at step 2526
whether or not a rerating is necessary. Rerating could be due to
a change in residence, excessive claims, moving violations, additional
drivers on the policy, or for other reasons such as selection of
different coverages than on the previous policy. The need for rerating
and the new rate may be determined based on the information from
step 2522. In some embodiments, rerating may occur automatically
or at the option of the insurer. In some cases, the insurer may
change rate schedules resulting in a different premium for the customer
even when the customer has not made any changes to his or her coverages
or policy. It is also possible though that, in cases where rerating
is automatic, the premium will ultimately be the same per mile under
both the old and new policies.
[0085] Moving now to step 2528, in cases where a rerating is necessary,
there may be a difference between the cost per mile for the miles
of coverage previously purchased and the cost per mile for the new
transaction. In cases such as these, the buyer may be required to
pay the difference between the old and the new rate for the unused
miles in order to roll them to a new or renewal policy. In some
cases, the insurer may require that the unused miles be rolled to
the new policy rather than letting the insured purchase new miles
and disregard the old, unused ones. FIG. 27 is an exemplary screenshot
illustrating one manner in which this information may be communicated
to the customer. It can be seen that the customer will be proved
with the new price per mile for the new rate multiplied by the number
of miles of insurance currently being purchased. The customer will
also be shown the costs difference between the price previously
paid for the unused miles and the new rate. This will be multiplied
by the number of miles being rolled to the new policy and added
to the purchase price for the new miles to arrive at the total purchase
price for the renewal policy.
[0086] In some embodiments, there will be no difference in the
cost per mile for the miles on the previous policy and on the renewal
policy. As shown at step 2530 this may result in a straight rollover.
The previous miles may be rolled to the renewal policy but no additional
fee is due. This may be because there was no rerating between the
renewal and previous policy or because the rerating resulted in
the same premium per mile as on the current policy. In other embodiments,
the cost per mile for the new policy may actually be less than for
the current policy. In these cases, the insurer may have the option
of providing a cost credit for the previously paid higher premium
for the unused miles. Whether there is a rerating or not, and whether
the price per mile changes or not, in embodiments where an expiration
date is provided, the consumer may receive the benefit of having
the new expiration date of the new policy associated with the unused
miles that were rolled over. It can be seen from FIG. 25 that in
this context, the end result is always to issue a new policy at
step 2532. In the present embodiment, the new policy issued at step
2532 supersedes any previously issued policy. Thus, it is only possible
for a single policy to cover any one car when an insurer uses the
present method.
[0087] In addition to cases where a customer may roll unused miles
to another policy when renewing, miles may also be rolled to a new
policy when a car is traded, becomes a total loss, or is otherwise
exchanged. The process will be similar to that described with respect
to FIG. 25. A customer may log into his or her account (step 2516)
and provide an odometer reading (step 2518). The exemplary screenshot
of FIG. 28 illustrates one possible interface for accepting an odometer
reading of a covered vehicle that has been traded or otherwise exchanged.
The customer may be presented with the remaining pertinent policy
data at step 2520. Because some of the policy data will remain (e.g.,
name and date of birth) some of the information may be pre-filled
as illustrated in the exemplary screenshot of FIG. 29. From here
the process proceeds as previously described. This may include taking
at least one more odometer reading corresponding to the new vehicle
to be covered under a new policy. Unused miles may be rolled to
the new policy by paying the difference in premium between that
previously paid and currently being offered.
[0088] If a policy is cancelled (by the insured or insurer) within
the policy period, it is possible that a refund of some premium
may occur. In this case the policy period would be considered the
time between execution of the policy and the policy's expiration
date (if so provided) or the expiration of all of the miles under
the policy. In some embodiments, refunds for unused miles or unearned
premium will not be issued unless the policy is cancelled by the
insurer. In other embodiments, other arrangements are possible,
including refund at full price, a reduced cost-per-mile, or a pro-rata
portion of the premium based upon used miles or the days expired
in the policy period.
[0089] Referring now to FIGS. 14 and 15, in other embodiments,
it is understood that variations of a distance-based insurance policy
may be used. For example, three possible distance-based policy contract
types include a pure distance-based policy, a hybrid policy, and
an adjusted term policy. The pure distance-based policy (a portion
of which is shown in FIG. 14) bases the policy beginning and ending
solely on odometer readings. The policy is only valid while the
vehicle's odometer reading is within the stated value range. The
hybrid policy type combines term-based comprehensive coverage with
distance-based liability/collision coverage. The comprehensive portion
is delimited by two dates to create a term policy. The liability/collision
portion is delimited by two odometer readings to create a distance
policy. The adjusted term policy type (a portion of which is shown
in FIG. 15) provides for a term with annual credits/debits for actual
usage (e.g., based on mileage). The credit/debit is based upon the
harvested odometer readings. If the customer is under the stated
mileage at the end of the term, he will receive a credit for the
unused miles at the policy rate. If the customer is over the mileage,
he will pay a debit for the overage at the policy rate.
[0090] It is understood that, while the above embodiments do not
rely on odometer audits or verification, various steps may be implemented
to protect against fraud using, for example, candidate screening
at the time of purchase, odometer record audits at the time of a
claim, and/or national claim screening at the time of a claim. Some
or all of these approaches may be implemented in the examples described
above, including the system 200.
[0091] Using candidate screening at the time of purchase (e.g.,
driver's license number, license plate number, and credit card),
an insurance company may gather many pieces of corroborating information
regarding an applicant for a policy. By cross-checking information
with vehicle registration and ownership records, criminal records,
registered addresses, claims databases, etc., discrepancies or other
"flags" may be identified that may prevent a policy from
issuing to a customer. In some embodiments, such a flag may result
in a request for the potential customer to contact the insurance
company, or may result in a notification to the insurance company
that customer support should contact the potential customer.
[0092] Using odometer record audits at the time of a claim may
include checks with public and private databases (vehicle registration,
emission inspections, oil services, owner statements, etc.). For
example, if the involved vehicle has been in an accident, the reporting
police officer will provide an odometer reading; if the involved
vehicle is sent to a repair shop, the latter will provide an odometer
reading. A suspect odometer history may result in a claim being
denied or investigated.
[0093] National claim screening at the time of a claim may be used
in place of or in addition to candidate/claim screening at the point-of-sale.
For example, an insurance company may screen all claim requests
against fraud discovery and prevention database services from companies
providing such information.
[0094] Referring now to FIG. 23, an entity relationship diagram
illustrating one embodiment of a system for storing odometer data
is shown. The diagram of FIG. 23 also corresponds to a method for
implementing the differentiation of various odometer readings from
various sources as described above. Although other embodiments may
feature differing implementations, it can be seen in FIG. 23 that
many odometer readings may be taken and stored for each vehicle
and/or account. This data may be stored in one or more electronic
databases that form a part of the system of FIG. 2, for example.
[0095] In one embodiment, a record associated with an odometer
reading will provide a unique identifier to the transaction or reading.
A reference to the vehicle corresponding to the reading, a reference
to an associated account, the mileage or other distance recorded,
a time stamp, and a source or trust level may also form a part of
the record.
[0096] As has been described, odometer readings may come from a
plurality of sources. The odometer readings from one source may
be more trustworthy than from another. For example, an odometer
reading from an official state inspection may be more trustworthy
that one provided by the customer. In one embodiment, each odometer
reading will therefore be associated with a level of trust. This
trust level could also be associated or recorded with the odometer
reading record described above.
[0097] In one embodiment, odometer readings may be identified primarily
as trusted or untrusted. The type of trusted or untrusted reading
could also be determined and/or stored. For example, a reading provided
by a customer for a policy quote may be labeled as "untrusted-quote."
A reading for a cancellation could be labeled "untrusted-cancellation."
An "untrusted-trade-in" may be associated with a reading
provided by a customer who has traded in his or her car.
[0098] In will be appreciated that many types of readings will
be untrusted readings, at least initially. Issuing a policy or setting
policy terms, issuing refunds, and paying claims are example of
activities that may require a trusted odometer reading. It may also
be possible for certain types of untrusted readings to become trusted
readings. For example, an "untrusted-quote" reading may
become a "trusted-purchase" reading when a policy is issued.
At this point, there may be some safeguards associated with upgrading
the "untrusted-quote" reading to trusted status. For example,
the consumer will have entered into a legally binding insurance
contract attesting that the reading provided is accurate. Other
types of trusted readings could include "trusted-voluntary"
readings, that will be described in greater detail below, and "trusted-verified-database"
readings.
[0099] The "trusted-verified-database" reading is a reading
that has been verified by a trusted database, or possibly a trusted
individual. For example, a department of motor vehicles (DMV) database
indicating a vehicle mileage at trade or sale may provide a trusted
reading. In the event a claim is made on a policy, a claims adjuster
could also make a trusted reading that could become the basis for
paying out a claim.
[0100] It can be seen from the present disclosure that mileage-based
insurance policies may be implemented without resort to any in-vehicle
monitoring device. In the event that a consumer would receive a
financial benefit from falsifying odometer information, a verified
reading may be required. For example, when vehicles are traded in
or policies are cancelled (corresponding the "untrusted trade-in"
and "untrusted-cancellation" readings, respectively) the
customer would stand to gain financially from underreporting vehicle
mileage. By requiring trusted readings before refunds are issued
or claims are paid, the insurer may be protected from fraud issuing
insurance policies on a per-mileage basis. Trusted readings, in
most cases, are tied to legal documents, warranties, or financial
consideration.
[0101] Any odometer reading may be subject to validation before
it may be entered or stored in any database or utilized by an insurance
provider. When an odometer reading is entered, it may be checked
to insure that it is a positive number, or checked to make sure
that the range of the number entered is reasonable. For example,
a brand new car would be likely to have a low mileage, while a 5
year old car with less than 10,000 miles would be unusual. In some
instances, an odometer reading failing validation could be overridden
by a human operator.
[0102] An odometer reading may be associated with a vehicle identification
number (VIN) and/or a policy number, Any supplied odometer reading
may be further validated by checking against internal and/or external
databases to ensure the reading is reasonable. For example, an odometer
reading may not be used that is lower than a reading already reported
or recorded by the DMV. Additionally, a customer may not supply
an odometer reading for a vehicle for which they have previously
reported a higher reading. Checks may also be performed against
commercial or third party databases providing vehicle history and
mileage information.
[0103] Referring now to FIG. 24, an exemplary screenshot corresponding
to a system functionality allowing a customer to enter a voluntary
odometer reading is shown. This could be implemented, for example,
by the system of FIG. 2, or another suitable system. In the screenshot
of FIG. 24, a customer is allowed to provide a voluntary odometer
reading. The reading obtained in this manner may be denoted as "trusted-voluntary."
In one embodiment, the "trusted-voluntary" reading is
provided by an existing customer to track the mileage of a vehicle
currently insured according the systems and methods of the present
disclosure.
[0104] The "trusted-voluntary" reading may be subject
to validation as described above. Although the reading is voluntary,
and provided by the customer alone, it may be referred to as trusted
because the insurer may not use this reading as the basis of any
financial transaction for which the customer would have an incentive
to underreport mileage. For example, the "trusted-voluntary"
reading may be used to generate reminder notices when the customer
is nearing the expiration of a policy. In some embodiments, the
number of voluntary readings provided by a customer may be limited
(e.g., no more than one per 24 hours).
[0105] The "trusted-voluntary" reading could also be
used to more accurately predict the number of miles a customer may
need to purchase at renewal. As more odometer readings are gathered,
the insurer may also be able to predict seasonal variations in the
number of miles needed by a particular customer. For example, a
given customer may use more miles in the summer months. This information
could be supplied back to the customer at renewal time in order
to allow the customer to make a more informed decision regarding
the next insurance purchase.
[0106] It will be appreciated that the "trusted-voluntary"
readings may find other uses within the context of the present disclosure.
For example, "trusted-voluntary" readings could be used
to track the number of miles of earned premium on a given policy.
Fraud detection is another application. For example, one or more
"trusted-voluntary" readings below a verified reading
from an outside source could indicate that the customer is purposefully
underreporting mileage. As described, the "trusted-voluntary"
reading may not be used as the basis for a refund or claim settlement.
Incorrect "trusted-voluntary" reading could, however,
indicate to the insurer that a customer may not be dealing honestly.
In order to increase the utility of the "trusted-voluntary"
reading, such a reading could be required each time a customer utilizes
the system of FIG. 2, or a similar one, to service his or her account.
[0107] Referring now FIG. 16, a flowchart of one embodiment of
another method for assessing, pricing, and provisioning distance
based vehicle insurance is shown. Additional references are made
to FIGS. 17 through 22, which are exemplary screen shots illustrating
various displays that could be implemented by the system of FIG.
2 or by other systems according to the present disclosure. At step
1610, customer information may be provided by the customer. Referring
also now to FIG. 17, it can be seen that the customer information
may include a number of items such as first name, last name, date
of birth, gender, state, and zip code. In addition to driver information,
vehicle information may also be collected in step 1610. Vehicle
information may include the vehicle identification number and the
current odometer reading of the vehicle. In the present embodiment,
the vehicle identification number is used instead of the license
plate number. The aforementioned customer information can be used
in this embodiment instead of the driver's license number and associated
database as was previously described.
[0108] Whenever an odometer reading is provided, at step 1610,
it may be checked against internal or external databases for consistency.
Internal databases may be maintained based on trusted odometer readings
such as those from adjusters, state inspections, or other trusted
sources. In some embodiments, the odometer reading may be checked
against third party databases, possibly using the vehicle identification
number or the license plate number as a key. In the event that the
customer has provided an odometer reading that is not possible based
on known and/or trusted data, the customer could be given another
chance to enter a correct odometer reading and warned that any insurance
contract is null and void if based on a falsified odometer reading.
The start and end points (e.g., mileage) of the currently offered
policy could be updated to reflect the known information regarding
the present vehicle's mileage pending the entry of an accurate odometer
reading by the customer. In other embodiments, a customer providing
one or more odometer readings known to be false could be blacklisted
and not offered a policy at all.
[0109] It can also be seen from FIG. 17 that the customer may have
the option of adding additional drivers for the current automobile.
As can be seen in FIG. 16 at step 1612, the system makes the determination
as to whether additional drivers will be covered based on the input
selected by the customer. If additional drivers are to be entered,
the process proceeds to step 1613 where the additional driver information
will be entered. It is understood that if additional driver information
is to be provided in the present embodiment, the additional information
would necessarily correspond to the already-entered vehicle identification
number and odometer mileage. The process returns to step 1612 to
determine if additional drivers are to be covered. If so, step 1613
is repeated.
[0110] Following the entry of all of the additional driver information,
or if there is only a single driver as determined at step 1612,
at step 1614 the customer will select a coverage amount. With reference
now also to FIG. 18, it can be seen that a number of basic coverage
options may be provided to the customer. As has been previously
described, the price offered will correspond to the limits of liability
chosen and to the car and driver (or drivers) to be covered based
on known actuarial methods. In addition to basic coverages as shown
in FIG. 18, other coverages may also be selectable by the customer.
These additional coverages may include, but are not limited to,
physical damage, towing and vehicle rental, uninsured motorist,
and personal injury protection. As can be seen in FIG. 18, the basic
coverage options as well as each of the additional coverage options
are priced per unit of distance. In addition, the policy fee for
administration of the insurance policy is computed on a per unit
distance basis. In the present embodiment, this policy fee rate
is shown along with the other insurance options and will be included
in the total price.
[0111] At step 1616, the customer will choose the number of miles
of insurance he or she wishes to purchase at the present time. Referring
now also to FIG. 19, it can be seen that a total price per mile
(unit distance) may be displayed which corresponds to the sum of
all of the previously selected options plus the policy fee. In the
present embodiment, the customer will be limited to purchasing miles
of coverage in lots of 1,000, ranging from 1,000 up to 6,000. In
other embodiments, the customer may be able to purchase more or
fewer miles and may also be able to select his or her own denominations
of miles needed.
[0112] It can also be seen from FIG. 19 that in the present embodiment
the policy provides an expiration date. In one embodiment, the expiration
date will be six months from the date of purchase, but in other
embodiments other expiration time limits are possible. As described,
not every embodiment will provide policies with an expiration date.
Although not shown in FIG. 19, some embodiments may feature additional
information on the screen, such as previous mileage-per-month data.
A predictive feature indicating whether the mileage being purchased
by the customer is projected to be adequate for the duration of
the current policy may also be provided. Over time, this may be
based, at least in part, on the "trusted-voluntary" readings
previously described. It could also be based upon other readings
including those from third parties such as state inspection agencies
or sales and titling records. Third party databases, including commercial
databases, could also be employed to aid in projecting mileage needs.
[0113] At step 1618, a confirmation page or pages may be provided
to the customer as can be seen in FIG. 20. FIG. 20 represents one
possible confirmation page, although it is understood that other
formats or displays are possible. Information appearing on the confirmation
page may include, but is not limited to, the drivers and vehicle
covered, the current coverages and limits selected by the customer,
the premium rate expressed as a cost per mile, the total number
of miles selected by the customer for purchase, and the total policy
cost. As can be seen, the policy period may also be defined or confirmed
on the confirmation page. In some embodiments, the customer may
be required to electronically initial certain rejections of coverages.
In the example of FIG. 20, the customer has been required to initial
a rejection of personal injury protection coverage. Also as can
be seen in FIG. 20, it may be necessary for the customer to indicate
whether or not a lien holder is associated with the vehicle. If
so, an additional form (not shown) may be required for the customer
to enter the lien holder information.
[0114] Following the confirmations at step 1618, representations
and warranties may be provided at step 1620, as shown in FIG. 21.
At this point, a number of assertions, representations, warranties
and/or other statements may be required of the customer. As can
be seen in FIG. 21, these questions and statements may involve licensing
in a particular state, criminal charges, moving violations, purposes
of the insured vehicle, and other data. The customer may be encouraged
to carefully read all of the information presented, as shown in
FIG. 21, and then be asked to electronically initial the from, thereby
representing and warranting all of the stated facts.
[0115] In another embodiment, an odometer reading may be requested
as a part of the representations and warranties step 1620. This
odometer reading may be in addition to, or instead of, the odometer
reading of step 1610. The requested odometer reading may be an initial
"trusted-voluntary" reading as previously described. As
with all customer provided odometer readings, the odometer reading
provided as part of the representations and warranties step 1620
may be checked against internal or external databases. In another
embodiment, where an odometer reading is not supplied at step 1620,
the reading obtained at step 1610 may be verified at this point.
[0116] As previously described, in the event that the customer
provides an odometer reading that is not possible based on known
and/or trusted data, the customer may be given another chance to
enter a correct odometer reading and warned that any insurance contract
is null and void if based on a falsified odometer reading. The start
and end points (e.g., mileage) of the currently offered policy may
be updated to reflect the known information regarding the present
vehicle's mileage, possibly pending the entry of an accurate odometer
reading by the customer. In some embodiments, customers providing
one or more odometer readings known to be false may be blacklisted
and not offered a policy at all.
[0117] Following the representations and warranties at step 1620,
at step 1622 billing data may be provided by the customer. Referring
also now to FIG. 22, one form for entering billing information is
shown. As can be seen, a credit card number may be provided, along
with a billing address for the credit card. In other embodiments,
other payment methods such as a checking account transfer may be
utilized. In the present embodiment, at this step, the customer
is also required to enter a physical garaging address for the vehicle
to satisfy existing insurance requirements. Although the policy
may be rated solely on information obtained previously (e.g., zip
code), customers may still be required to enter an actual physical
street address. A garaging location of any vehicle that is insured
may be required to bind the policy to the address of the vehicle.
Following entry of the billing data at step 1622, at step 1624 the
customer may have the option of printing liability cards, as may
be required by state law. In other embodiments, the customer may
be able to request that liability cards be physically mailed to
his or her address.
[0118] Utilizing various embodiments of systems and methods of
the present disclosure, insurance coverage may be provided on the
basis of distance traveled, with or without the consideration of
lapse of time. In some embodiments, consideration may also be given
to how these systems and methods affect the way that insurers and
other providers in the insurance industry calculate earned premiums
and other fees.
[0119] According to one method of calculation, premium is the revenue
an insurer collects based on a policy, net of fees falling into
separate categories (e.g., policy administration fees, theft fees,
etc.). In the insurance business, the premium is associated with
the risk incurred by the insurer on behalf of the insured. Premium
becomes "earned" when the risk associated with the premium
has been incurred. Likewise, premium is "unearned" before
the risk associated therewith has been incurred by the insurer.
It is understood that in some cases, the full amount of premium
may have already been collected on a given policy before all of
the premium is actually earned. In cases where premium has been
collected but not yet earned, the customer will sometimes be entitled
to a refund of the unearned premium (possibly net of cancellation
fees or subject to a minimum earned premium requirement, etc.) in
the event of a policy cancellation.
[0120] Among other reasons, tracking earned premium may be important
for generating the reminder notices described previously. The generation
and delivery of reminder notices may be tied to the amount of earned
or unearned premium remaining on a policy. When the earned/unearned
premium reaches a trigger point, the customer may be notified that
his or her policy or coverage is about to lapse. As an example,
when only 30 days or 500 miles worth of unearned premium remains,
a paper or electronic notice could be delivered to the customer.
Similarly, when all premium has been earned, the customer may be
notified that coverage has ended.
[0121] Referring now to FIG. 30, a diagram illustrating a possible
relationship between a plurality of earned premium records is shown.
In one embodiment, each time an insurer determines that earned premium
should be assessed an earned premium record is created in a database.
This could be the database 224 of FIG. 2, for example. It can be
seen from FIG. 30 that each policy has a total premium which will
be reflective of the previous earned premium records plus any unearned
premium. Typically, an insurer is not able to charge earned premium
that is more than the total premium for a given policy. The unearned
premium may be defined as the total premium minus the sum of all
earned premium records in the database.
[0122] In one embodiment, earned premium may be defined as the
greater of two distinct methods of computing earned premium. In
the first method, the total number of days elapsed since inception
of the policy (dividend) is divided by the number of days of coverage
purchased (divisor) in a policy. This resulting quotient will be
multiplied by the total premium, yielding the earned premium based
on a time calculation. In other words, earned premium=elapsed days/days
in policy.times.total premium. A second method of calculating earned
premium is achieved by dividing a number of miles traveled (dividend)
by the number of miles purchased (divisor) for a given policy. This
resulting quotient is then multiplied by the total premium yielding
an earned premium based on mileage. In other words, earned premium=miles
traveled/miles purchased.times.total premium. It is understood that
earned premium calculations based on mileage may require a verified
odometer reading.
[0123] Referring now to FIG. 31, an entity relationship diagram
illustrating one method of storing earned premium data and other
data is shown. As can be seen from FIG. 31, a single policy may
have multiple earned premium records. An earned premium record may
be stored in a relational database and may have a plurality of fields,
including an earned premium record ID, a policy ID, an amount, and
a time stamp reflective of when the earned premium record was generated.
It is understood that in other embodiments, the earned premium record
may contain different information than described herein.
[0124] It can be seen from FIG. 31 that each policy may have a
plurality of commission events or commission records. In one embodiment,
the commission is calculated based upon the earned premium. The
commission record may be generated directly from the earned premium
record. The amount of commission earned may be based upon the corresponding
amount of premium earned, as reflected in the earned premium record.
[0125] Referring now to FIG. 32, a flow chart illustrating an exemplary
method of performing an earned premium calculation is shown. In
one embodiment, a process will be performed to calculate earned
premium on a policy each day. However, it may be possible that one
or more days will go by without an earned premium calculation. Therefore,
at step 3210, the number of days since the last earned premium calculation
is computed. In some embodiments, as a safeguard, a determination
may be made at step 3212 as to whether it has been at least one
day since the last earned premium calculation. At step 3212, if
the number of days is not greater than zero, the process ends, reflective
of the fact that it has been less than one day since an earned premium
calculation has taken place for the instant policy and therefore
another earned premium calculation is not needed. In the present
embodiment, because the earned premium calculation is based upon
a number of days that have elapsed, earned premium calculations
will not take place more often that once per day. However, in other
embodiments, earned premium could be calculated more or less often
than daily and the same would then be reflected in the process outlined
in FIG. 32.
[0126] If it is determined at step 3212 that at least one day has
passed since the last earned premium calculation, the process continues
to step 3214 where the daily premium is computed. The daily premium
may be defined as the amount of premium that may be earned in a
single day for a given policy. In one embodiment, this may be computed
by dividing the total premium for the policy by the number of days
in the policy period. At step 3216, the daily premium is multiplied
by the number of days since the last earned premium calculation
to arrive at the calculated current premium. However, as stated
previously, the total of the earned premium may never exceed the
amount of premium available to earn on a given policy. Therefore,
at step 3218 the remaining premium is determined. In one embodiment,
the remaining premium is defined as the total premium for a given
policy minus the sum of all the previous earned premiums. This information
may be computed based upon the earned premium records stored in
the database.
[0127] At step 3220, it will be determined whether the calculated
current premium from step 3216 is greater than the determined remaining
premium from step 3218. If the calculated earned premium is not
greater than the remaining premium, the calculated premium may be
used, as reflected at step 3222. However, if the calculated current
premium is greater than the determined remaining premium, then the
remaining premium is the maximum that may be assessed, as reflected
at step 3224. Following step 3222 or 3224, an earned premium record
may be generated at step 3226, and a commission calculated. **
[0128] One possible embodiment of an earned premium record has
already been described, but it is understood that the earned premium
record may be adapted to the specific needs of the user and system.
The commission calculation may be based directly on the earned premium
calculation. For example, the commission may be based upon a percentage
of the premium earned, in which case the amount from the earned
premium calculation may be multiplied by the commission percentage
to arrive at a commission amount. This may be recorded in a commission
record as was shown in FIG. 31.
[0129] Referring now to FIG. 33, a flow chart illustrating another
exemplary method of performing an earned premium calculation is
shown. The method of FIG. 33 corresponds, in one embodiment, to
an earned premium calculation due to a purchase event or an odometer
reading. This process is in contrast to that described with respect
to FIG. 31, which is reflective of a daily earned premium calculation
that can occur regardless of whether an odometer reading or other
event triggers an earned premium calculation. In one embodiment,
the earned premium calculation of FIG. 33 will occur each time an
odometer reading is obtained. In other embodiments, this process
may only be triggered when a verified odometer reading is obtained.
In one embodiment, the insurer will earn the greater of the premium
associated with a number of miles traveled or premium associated
with the passage of time.
[0130] Beginning at step 3310, it will be determined whether or
not unearned premium is available for the given policy. If unearned
premium is not available, the process ends since the maximum premium
that may be earned is the total premium that was paid for the policy.
If unearned premium is available, the process proceeds to step 3312
where a time-based earned premium calculation is performed. As previously
described, this may be computed by dividing the number of day elapsed
(dividend) since the last earned premium calculation by the total
number of days in the policy period (divisor) and multiplying the
resulting quotient by the total policy premium.
[0131] The process proceeds to step 3314 where a mileage-based
calculation is undertaken. As previously described, the earned premium
mileage-based calculation may be calculated by dividing the number
of miles traveled (dividend) as indicated by the odometer reading
(e.g., since the last odometer reading) by the total miles purchased
(divisor) in the policy. This resulting quotient will be multiplied
by the total premium for the policy, yielding an earned premium
calculation based on mileage.
[0132] At this point, it can be seen that two earned premium calculations
have been performed: one based on the passage of time at step 3312,
and one based on the number of miles traveled at step 3314. It will
be appreciated that in some cases, these two calculations will yield
different results. Therefore, at step 3316, it will be determined
whether the mileage calculation is greater than the time calculation.
If the mileage-based calculation is greater, this earned premium
calculation will be used in subsequent steps as reflected at step
3318. However, if the time-based calculation yields a higher result,
then the time-based calculation will be used in subsequent steps,
as illustrated by step 3320.
[0133] As in previous embodiments, regardless of the method of
calculating earned premium, the insurer will not be allowed to charge
more than the premium specified in the original policy. Therefore,
at step 3322 it will be determined whether or not the premium amount
selected at step 3316 is greater than the total premium remaining
unearned on the policy. If the calculated earned premium is greater
than the unearned premium for the policy, then the remaining premium
must be assessed as reflected at step 3324. However, if the calculated
earned premium is not greater than the remaining unearned premium,
step 3324 is skipped and the process proceeds directly to generating
an earned premium record and calculating the commission at step
3326. As before, this may result in creation of an earned premium
record and possibly a commission record.
[0134] In one embodiment, both the time-based and distance-based
earned premium calculations are repeated at regular intervals (e.g.,
daily) or upon the occurrence of specified events (e.g., an odometer
reading). Because the earned premium is associated with the risk
incurred, any previous earned premium assessments would need to
be taken into account to make sure that earned premium was not assessed
for risk not actually incurred. In other words, an earned premium
assessment based on total distance traveled under a policy or total
time lapsed under a policy would need to be reduced by the sum of
all previous earned premium assessments for the policy. Both distance-based
and time-based earned premium calculations may be assessed on the
same policy but the sum of all of the earned premium assessments
cannot exceed the total earned premium available based on the risk
incurred to date. In some embodiments the risk incurred to date
can be based on either passage of time, or the number of miles driven.
[0135] Similar rules may govern the calculation of commissions
such that the commission based on the earned premium does not exceed
the total commission available for a given policy.
[0136] While the preceding description shows and describes one
or more embodiments, it will be understood by those skilled in the
art that various changes in form and detail may be made therein
without departing from the spirit and scope of the present disclosure.
For example, various steps of the described methods may be executed
in a different order or executed sequentially, combined, further
divided, replaced with alternate steps, or removed entirely. In
addition, various functions illustrated in the methods or described
elsewhere in the disclosure may be combined to provide additional
and/or alternate functions. As described, some or all of the steps
of each method may be implemented in the form of computer executable
software instructions. Furthermore, the instructions may be located
on a server that is accessible to many different clients, may be
located on a single computer that is available to a user, or may
be located at different locations. Therefore, the claims should
be interpreted in a broad manner, consistent with the present disclosure.
While various embodiments have been described for purposes of this
disclosure, numerous changes and modifications will be apparent
to those of ordinary skill in the art. Such changes and modifications
are encompassed within the spirit of this invention as defined by
the claims.
|