Dynamic Billing System for Life Insurance Policy Alignment
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Solution Overview
Problem
Life insurance policies, particularly flexible premium products like universal life, variable universal life, and indexed universal life, often have planned premiums that do not adjust post-issue, leading to a mismatch between policyholder objectives and actual coverage, requiring manual changes by policyholders to maintain desired coverage levels.
Innovation Solution
Implementing a dynamic billing system that queries policyholders for coverage objectives and uses algorithms to adjust premiums on an ongoing basis, taking into account current policy performance, crediting rates, and other factors to ensure the policy remains aligned with the policyholder's goals, such as maintaining a specific death benefit or cash value.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Device complexity
If planned premiums are fixed post-issue, then administrative complexity is reduced, but the policyholder's coverage objectives cannot be maintained when assumptions change
Solution Approach 1:
The patent implements dynamic billing that automatically adjusts premiums based on current policy performance, crediting rates, and policyholder objectives. The system recalculates premiums periodically using algorithms that consider actual policy values, market conditions, and original coverage goals, transforming the static premium structure into a dynamic one that adapts to changing conditions while maintaining coverage objectives.
Solution Approach 2:
The system continuously monitors policy performance against original objectives and uses this feedback to adjust premiums. The algorithm compares actual policy values with projected values needed to meet objectives, and automatically modifies premiums to correct any deviations, creating a closed-loop control system that maintains alignment with coverage goals.
2Adaptability or versatility
If manual premium adjustments are required, then premium flexibility is maintained, but timely corrective action is delayed
Solution Approach 1:
The system automatically performs premium recalculations and adjustments without requiring manual intervention from policyholders. The algorithm independently monitors policy performance, identifies deviations from objectives, and computes adjusted premiums, enabling the system to self-correct and eliminate delays associated with manual awareness and action.
Solution Approach 2:
The system proactively calculates and communicates adjusted premiums before policy objectives are compromised. By continuously monitoring and predicting future shortfalls, the system provides advance notice of required premium changes, allowing policyholders to take corrective action before coverage objectives are at risk.
3Adaptability or versatility
If dynamic billing algorithms are implemented, then coverage objectives are maintained, but system complexity increases
Solution Approach 1:
The patent implements a multi-functional system that combines policy performance tracking, objective comparison, premium recalculation, and communication capabilities within a single integrated platform. The billing system performs multiple functions including monitoring cash values, comparing against objectives, calculating adjusted premiums, and notifying policyholders, thereby managing complexity through consolidation rather than proliferation of separate systems.
Solution Approach 2:
The system introduces an automated intermediary algorithm that mediates between policy performance data and premium determination. This intermediary layer processes raw policy data, applies objective criteria, and generates adjusted premiums, simplifying the overall system architecture by creating a dedicated processing layer that handles the complexity of dynamic calculations without requiring direct integration between all system components.
4Measurement precision
If premiums are recalculated frequently, then coverage objectives are better maintained, but administrative burden increases
Solution Approach 1:
The system implements periodic recalculation of premiums at defined intervals (e.g., annually or at policy anniversaries) rather than continuously. This periodic approach maintains sufficient precision for coverage objective tracking while significantly reducing administrative burden compared to continuous monitoring and adjustment, balancing accuracy with operational feasibility.
Data Source
AI summary
Described herein are methods and systems for administering a life insurance policy that provide an alternative to the traditional approach by querying a client for a set of coverage objectives and using a set of algorithms to automatically adjust billed premiums on an ongoing basis to maintain the client-specified coverage objectives—a methodology referred to herein as “dynamic billing.” Dynamic billing enables clients to take corrective action sooner than it would otherwise be taken and/or provides an automated mechanism or prompt for clients to take such action on an ongoing basis. For example, in certain embodiments, the disclosed technology computes adjusted premiums and allows the policy owner to be billed the amount required to keep his/her policy on track with his/her current insurance policy objectives.