Dynamic Insurance Funding System Using Variable Premium Adjustments
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Solution Overview
Problem
Existing methods for managing financial funding of finite insurance policies require insureds to pay the same premium regardless of loss conditions, leading to financial burdens in years with high losses and unfairness in premium payments.
Innovation Solution
A computer system that calculates and stores variable funding amounts based on defined conditions, allowing for accelerated funding in beneficial periods and reduced payments in unbeneficial periods, using index values from volatile indicators like weather data to determine premium adjustments.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If fixed funding amounts are paid for every calculation period, then the insurer receives stable premium income, but the insured pays the same premium regardless of financial benefit, creating unfairness and burden
Solution Approach 1:
The patent implements dynamic premium adjustment by introducing a variable funding amount that changes based on the insured's financial situation in each calculation period. The computer system calculates whether to apply fixed or variable funding amounts based on predefined conditions, allowing the premium structure to adapt dynamically rather than remaining static. This resolves the contradiction by maintaining reliability through the structured approach while achieving adaptability through condition-based variable adjustments.
Solution Approach 2:
The patent changes the parameter of funding amount from fixed to variable based on the insured's financial conditions. The computer system determines whether to apply a fixed funding amount or a variable funding amount (which can be zero) in each calculation period based on predefined conditions. This parameter change allows the system to maintain stable income structure while adapting premium requirements to actual financial needs, resolving the contradiction between reliability and adaptability.
2Ease of operation
If variable funding amounts are used to accelerate funding in beneficial periods, then the insured's financial burden is reduced in unbeneficial periods, but the calculation and management complexity increases
Solution Approach 1:
The patent implements a self-service mechanism where the computer system automatically calculates and determines the appropriate funding amount (fixed or variable) based on predefined conditions and the insured's financial situation. The system autonomously evaluates whether to apply variable funding to accelerate payments in beneficial periods without requiring manual intervention. This automation reduces the operational complexity burden on users while achieving ease of operation through automatic financial burden adjustment.
Solution Approach 2:
The patent incorporates feedback mechanisms where the computer system continuously monitors the insured's financial situation and loss conditions across calculation periods. Based on this feedback, the system adjusts the funding amount applied in each period, using information from previous periods to inform current decisions. This feedback loop enables automatic adaptation to financial conditions while managing complexity through systematic rather than ad-hoc adjustments.
3Reliability
If the same premium is charged regardless of loss conditions, then the insurer's revenue is predictable, but the insured pays unfair premiums in years with high losses
Solution Approach 1:
The patent segments the premium structure into fixed funding amounts and variable funding amounts that can be applied in different calculation periods. Rather than charging a uniform premium, the system divides the funding into discrete periods where the insured may receive fixed funding, variable funding, or no funding at all based on loss conditions. This segmentation allows revenue predictability through the structured approach while achieving fairness by adjusting premiums to match actual loss experiences in each segment.
Solution Approach 2:
The patent introduces dynamic premium adjustment where the funding amount changes based on the insured's financial situation and loss conditions in each calculation period. The computer system determines whether to apply fixed or variable funding amounts dynamically, allowing the premium structure to adapt to changing conditions. This dynamic approach maintains revenue predictability through systematic adjustment rules while achieving premium fairness by aligning payments with actual financial needs.
Data Source
AI summary
In a computer system and in a computer-implemented method for managing financial funding of a finite insurance policy provided by an insurer to an insured, a fixed amount of the financial funding is stored as an amount payable by the insured for a calculation period. In addition, a variable amount of the financial funding is calculated based on defined conditions and the variable amount is stored as an amount payable by the insured for the calculation period. Preferably, an index value based on a volatile indicator is stored. Depending on the index value, it is determined whether the variable amount is payable by the insured or whether an insured loss is payable by the insurer to the insured for the calculation period. The variable amount or the insured loss, respectively, is calculated based on the index value. Consequently, funding of the insurance can be accelerated in good calculation periods having no losses. In bad calculation periods, on the other hand, extra funds accumulated in good calculation periods can be used by the insurer to pay insured losses.