Insurance Plan Management via Reinsurance Bid Segmentation
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Solution Overview
Problem
Defined Contribution retirement plans face challenges in providing guaranteed income streams to participants due to earnings volatility associated with traditional annuity products, and there is a need for a more secure and cost-effective insurance solution that manages risk effectively.
Innovation Solution
A method and system that involve receiving bids from multiple reinsurance companies for insurance products, selecting the best bids based on risk factors, and offering insurance plans to participants by combining units from different reinsurance companies to manage assets and liabilities effectively, thereby reducing risk and costs.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional annuity products are used to provide guaranteed income streams, then participants receive income protection, but earnings volatility and higher costs are imposed on the plan
Solution Approach 1:
The patent segments the annuity product into multiple units, each associated with different risk factors (age, gender, health status). By dividing the annuity into separate units that can be independently priced and managed by different reinsurance companies, the system achieves more precise risk matching and reduces overall volatility while maintaining income guarantees.
Solution Approach 2:
The patent changes the parameters used for pricing and selecting annuity units by considering multiple risk factors simultaneously (age, gender, health status) rather than using single-parameter pricing. This multi-parameter approach allows for more accurate risk assessment and better pricing that reflects actual risk profiles, reducing volatility for participants.
2Loss of energy
If multiple reinsurance companies bid for insurance products, then competitive prices and reduced costs are achieved, but complex bid evaluation and selection processes are required
Solution Approach 1:
The patent establishes specific parameter criteria for evaluating and selecting bids from reinsurance companies, including price, financial strength, and alignment with plan objectives. By transforming the complex bid evaluation into a structured parameter-based selection process, the system achieves cost reduction while maintaining manageable complexity through clear selection guidelines.
3Adaptability or versatility
If insurance products are offered to participants with different risk factors, then customized and competitive pricing is achieved, but increased complexity in product offering and management
Solution Approach 1:
The patent segments the insurance product into multiple units, each tailored to specific risk factor combinations (age, gender, health status). This segmentation allows customized pricing for different participant groups while managing complexity through standardized unit definitions and automated selection processes that match participants to appropriate units based on their risk profiles.
Solution Approach 2:
The patent creates a universal annuity framework that can serve multiple participant types through a standardized set of risk factor-based units. The same framework adapts to different participant profiles by selecting appropriate units, providing customized pricing without requiring separate product designs for each group, thus reducing management complexity.
Data Source
AI summary
Described are computer-based methods and apparatuses, including computer program products, for managing insurance plans. Multiple bids are received from multiple reinsurance companies for the price of a unit of an insurance product (e.g., a fixed annuity paying ten dollars a month starting at the age of sixty five). The unit of the insurance product is associated with a set of one or more risk factors (e.g., age, range of ages). A bid is selected from the bids based on a relationship between the bids (e.g., lowest bid, lowest weighted bid). The selected bid is associated with a selected reinsurance company. Units of the insurance product associated with the selected bid are offered to participants associated with the set of one or more risk factors.