Deferred Annuity Income Reset Mechanism

Resolve Bottlenecks,
Find Innovative SolutionsGenerate Solutions

Solution Overview

Problem

Annuities are less desirable due to locked interest rates and variables that may become less beneficial over time, discouraging potential purchasers, especially when interest rates are low or expected to rise.

Innovation Solution

A deferred annuity system with an optional reset feature that recalculates and potentially increases income payments if interest rates or other variables become more beneficial to the annuitant, allowing for periodic adjustments based on current conditions.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If interest rates are locked in at the time the annuity is purchased, then the annuity provides stability and predictability of income payments, but potential purchasers are disincentivized when interest rates are low or expected to rise

Engineering Contradiction:

Improveincome payment stabilityVSAvoidinterest rate flexibility

Core Design Contradiction:

ReliabilityVSAdaptability or versatility

Solution Approach 1:

The patent applies the dynamics principle by introducing a reset feature that allows the annuity contract to transition from a static, locked-in interest rate structure to a dynamic structure where interest rates can be reset at predetermined intervals. This enables the annuity to adapt to changing market conditions while maintaining contractual stability, resolving the contradiction between reliability and adaptability.

Inventive Principle:

Principle #15Dynamics

Solution Approach 2:

The patent implements parameter changes by allowing the interest rate parameter to change at reset dates based on current market conditions. The reset feature enables the interest rate to be recalibrated periodically, transforming the fixed parameter into a flexible one that can respond to economic changes while preserving the annuity's core function of providing stable income.

Inventive Principle:

Principle #35Parameter changes

2Reliability

If the annuity locks in variables that factor into income payment calculations, then the annuity provides predictability, but purchasers may expect variables to change and thus pursue other investments

Engineering Contradiction:

Improveincome payment predictabilityVSAvoidvariable adjustment flexibility

Core Design Contradiction:

ReliabilityVSAdaptability or versatility

Solution Approach 1:

The patent applies periodic action by implementing reset dates at predetermined intervals (e.g., annually or at specific milestones). This periodic mechanism allows the annuity to maintain predictability during each interval while providing scheduled opportunities for variable adjustments, balancing stability with adaptability to changing conditions.

Inventive Principle:

Principle #19Periodic action

Solution Approach 2:

The reset feature introduces dynamics into the variable structure by allowing key variables (interest rates, income payment amounts) to be recalibrated at reset dates. This creates a hybrid system that is both predictable (during intervals) and adaptable (at reset points), resolving the contradiction between reliability and flexibility.

Inventive Principle:

Principle #15Dynamics

3Reliability

If purchasers lock in low interest rates, then the annuity provides immediate income security, but purchasers lose potential benefits from future interest rate increases

Engineering Contradiction:

Improveincome securityVSAvoidopportunity loss from rate increases

Core Design Contradiction:

ReliabilityVSLoss of energy

Solution Approach 1:

The patent applies preliminary action by pre-establishing reset dates and reset mechanisms at the time of annuity purchase. This preliminary structure ensures income security during the initial period while automatically positioning the contract to capture future interest rate increases without requiring additional purchaser action, thus preventing opportunity loss.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The reset feature implements feedback by periodically comparing current market interest rates with locked-in rates at reset dates. When market rates have increased, the feedback mechanism triggers a reset that allows the annuity to capture the beneficial rate changes, preventing the purchaser from losing potential benefits while maintaining income security during intervals.

Inventive Principle:

Principle #23Feedback

Data Source

PatentUS8340986B2Methods and systems for providing deferred annuities with an income reset feature

Publication Date: 2012.12.25 NEW YORK LIFE INSURANCE CO

AI summary

Methods and corresponding systems are provided for providing and administering deferred annuities with an annuity reset feature that provide periodic income payments to an annuitant for a term beginning at a start date. The methods include the step or steps of: receiving annuity information for an annuitant; determining at a first date one of a purchase price and an amount of at least one income payment due to the annuitant at the start date. The purchase price or the amount of at least one income payment due the annuitant includes a fee for the annuity reset feature that resets at least one variable of the annuity at a reset date later than the first date if the at least one variable of the annuity at the reset date is more beneficial to the annuitant than at least the first date; and offering the annuity with the reset feature to the annuitant.