Property Insurance Rate Tier Placement System
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Solution Overview
Problem
Establishing consistent and reliable insurance rates for property insurance policies is complex due to the need for considering multiple factors, and existing methods lack a comprehensive approach to determine fair rates for both new and renewal coverage.
Innovation Solution
A system and method that calculates tier placement for property insurance policies using a combination of mutually exclusive risk factors, including insurance credit score, protection class, and previous paid loss history, ensuring no single factor determines placement alone, with a computer system facilitating these calculations.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If multiple risk factors are considered for establishing insurance rates, then the reliability and consistency of rate determination is improved, but the complexity of the evaluation process increases
Solution Approach 1:
The patent segments the risk evaluation process into distinct tiers (first tier, second tier, third tier) based on combinations of risk factors. Each tier corresponds to specific ranges of credit scores, protection classes, and loss histories, allowing the complex multi-factor evaluation to be broken down into manageable segments that map to predetermined rate categories.
Solution Approach 2:
The patent changes the parameters for rate determination by establishing specific thresholds and ranges for risk factors (e.g., credit score ranges from 631-761, protection class ranges from 1-9, loss history counts). These parameter changes transform the complex continuous evaluation into discrete tier placements, simplifying the implementation while maintaining reliability.
2Reliability
If a comprehensive combination of risk factors is used for tier placement, then the fairness of insurance rates is improved, but the difficulty of calculating and implementing the system increases
Solution Approach 1:
The patent performs preliminary action by pre-establishing the tier placement rules and risk factor combinations before actual rate calculations are needed. The tiers are predetermined based on combinations of credit scores, protection classes, and loss histories, so that during implementation, the system only needs to compare actual data against these pre-set criteria rather than calculating everything from scratch.
Solution Approach 2:
The patent introduces intermediary tier categories as mediators between the raw risk factor data and the final insurance rates. Instead of directly calculating rates from multiple risk factors, the system first determines which tier the applicant falls into based on their risk profile, then applies the corresponding rate schedule for that tier, simplifying the calculation process.
Data Source
AI summary
Property insurance rates are established by performing calculations for defining a single tier placement dependent upon a combination of mutually exclusive factors based on applicant data. In the case of a renewal policy, the factors include determining a protection class and a previous paid loss history. In the case of a new policy, the factors also include determining an insurance credit score. No single factor is the sole determinant for placement in a tier.