Automated Funds Management System for Variable Annuity Sector Allocation
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Solution Overview
Problem
Existing methods for managing variable annuity investments are inadequate in dynamically adjusting to market conditions, often leading to delayed corrective actions that result in financial losses for contract holders, as they rely on account value fluctuations rather than proactive sector-based allocations, failing to capitalize on upward trends or mitigate depreciation effectively.
Innovation Solution
An automated funds management system that includes a profile evaluator, asset identifier, and index evaluator to dynamically reallocate investments based on a contract holder's risk profile and market sector performance, ensuring timely adjustments to minimize risk and maximize returns by moving funds into higher-performing sectors.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Device complexity
If corrective adjustments are made only after account value diminishes, then the system simplicity is maintained, but the loss of time increases and financial losses occur
Solution Approach 1:
The system performs preliminary actions by proactively adjusting investments before the account value actually diminishes. The automated system monitors market conditions and contract holder profiles, making corrective adjustments in advance based on predicted market trends, thereby eliminating time delays and preventing financial losses before they occur.
2Ease of operation
If adjustments are made only after account value falls below threshold, then the ease of operation is maintained, but the productivity decreases due to delayed protective actions
Solution Approach 1:
The system implements self-service by automatically monitoring market conditions and executing corrective adjustments without requiring manual intervention. The automated system continuously evaluates account values against thresholds and market trends, making protective actions timely and efficient while maintaining ease of operation through hands-free management.
3Adaptability or versatility
If sector-based allocation is implemented, then the adaptability to market conditions improves, but the device complexity increases
Solution Approach 1:
The system applies segmentation by dividing the investment portfolio into different market sectors and subaccounts based on contract holder profiles and market conditions. This segmented approach enables targeted adjustments to specific sectors while maintaining overall system manageability through structured categorization and automated decision-making frameworks.
4Ease of operation
If manual intervention is required for corrective adjustments, then the ease of operation is maintained, but the loss of time increases and financial losses occur
Solution Approach 1:
The system eliminates manual intervention by implementing automated monitoring and execution of corrective adjustments. The system self-evaluates account values, compares them against thresholds and market trends, and executes protective actions automatically, thereby eliminating time delays associated with manual processing while maintaining operational simplicity.
Data Source
AI summary
An automated funds management system and in particular a system and a method to at least ensure the payment of guaranteed minimum income benefit (“GMIB”) based on the automated sector based allocation of funds in a variable annuity. A contract holder's profile data is evaluated and a profile score is computed based on the evaluated profile data. The GMIB payment stream value is computed based on the available profile data and the assigned profile score. An appropriate asset class percentage allocation of contract holder funds is recommended based on the assigned profile score and the computed GMIB payment stream value. Appropriate subaccounts are identified based on the defined asset class percentage allocation of contract holder funds, GMIB payment stream value, and/or profile score. The changes in the value of at least one market index are captured and based on a pre-determined change in the value of at least one market index, at least a portion of the invested contract holder funds are reallocated into relatively better performing market sector based subaccounts.