A SYSTEM AND A METHOD FOR DETERMINING AN INSURANCE NEED
TECHNICAL FIELD OF THE INVENTION
This invention relates to a system and a method for determining an insurance need over time and a method for calculating the cost of the insurance need over time.
BACKGROUND ART
Two dimensions are applicable for identifying the financial exposure that a consumer faces as a result of a life-changing event. These are
1 ) The event which will give way to financial exposure
2) The level of cover required after the event.
Typically, when cover is taken out initially, these two dimensions are taken into account at that point in time. Most often thereafter, the changes in these dimensions are not considered at all, and even if the policy is reviewed the premiums are typically adjusted according to affordability rather than changes in events and the level of cover relating to specific events.
It is therefore an object of this invention to provide a system and method for determining insurances needs for example living expenses, earnings, education costs, medical expenses over time and a method of determining the costs associated with those needs over time. It is a further object of the invention to provide a method which bridges the quoting and financial needs analysis processes and enables quicker and more accurate advice to policy-holders regarding the costs associated with changing insurance needs.
SUMMARY OF THE INVENTION
According to the invention, a system for determining an insurance need and its associated cost over time is provided in which the change in the insurance need is independent of the change in premium over time.
In the preferred form of the invention, the change in each insurance need is calculated separately and independently with the cost of each insurance need being processed separately and independently from other insurance needs.
Also in the preferred form of the invention, the duration of each insurance need is calculated separately.
The system or method of the invention is further characterised in that the change in each insurance need is independent and is affected by the change in term of the policy or insurance need, increase factor (in the insurance need) and mortality of the underlying beneficiaries.
Also in the preferred form of the invention, the cover payment may comprise a unique combination of recurring payments and lump sum payments.
The system of the invention may include an event module and a calculation module, the event module determining the event which may alter an insurance need and the calculation module determining the cost of each insurance need over time.
The event giving way to financial exposure need not necessarily be an insurable event, and may comprise for example, an accident, disability, loss of employment, occurrence of a medical episode, contraction of a disease, birth of a child, increase in debt, marriage, purchase of a business, promotion or change in employment or divorce
The event may be one or more of the above but is not necessarily limited to those mentioned.
The calculation module identifies the insurance need following an event and calculates the cost of that need over time, the calculation taking into consideration a current insurance need (at a point in time) as well as risk factors likely to impact the future cost of that insurance need.
The risk factors may comprise one or more of the following: current debt, key monthly living expenses (for example medical aid, food, transport, communications, education costs) and net asset values).
Once the risk exposure has been determined, the calculation module generates a proposed policy structure based on various inputted criteria which may include a method of assessing the needs of the insured selected from one of earnings focussed or expenses focussed methods; a selected premium benefit increase pattern, determining and selecting a claim coverage option; establishing and selecting whether protection is Active Earnings focussed or expense focussed; establishing whether decrements are accelerated or not.
Coverage options may include but are not limited to permanent disability, temporary disability and critical illness cover and life cover.
The proposed policy structure may then be edited to recalculate the premium to correspond with client affordability. Inputted values are validated upon entry with validating criteria including the following:
- Maximum benefit amount validation across decrements
- Exposure amounts cannot exceed the input information e.g.: education expense cover amount cannot be in excess of input amount for education expenses.
The calculation module is preferably adapted to permit inputting of basic information for living expenses, education expenses and medical expenses. These inputs may be varied by the user once the proposed policy structure and premium has been generated. The variations in inputs are incorporable into a revised premium calculation but the inputs are preferably reversible by exercising a simple choice or selection (click of a button).
The system or method of the invention thus permits re-evaluation of the policy-holder's needs over time and in response to occurrence of insured events. The method permits projection of each individual insurance need and examines the following unique attributes per insurance need:
- Amount of cover; increase/ decrease of cover over time; duration of cover over time; type of insurance event and potential cover adjustments following occurrence of insured events.
This results in a unique durational-based signature of each need over time.
For example:
Following a disability event a life assured might prefer his debt being settled, implying the required level of monthly expenses drops. Similarly a life assured would want the level of cover for a specific need to reduce for a worse contingency i.e. Life Cover reducing following the settlement of debt on disability. The inverse is also true, that specific need remain in-force for a specific contingency i.e. Estate duty cover on death.
Following the creation of the unique durational-based signature of each need over time, the cost of insurance (death, permanent disability, temporary disability) per unit of currency of cover over time, of the signature, is overlaid on the signature.
Finally a premium is calculated based on the calculated cost of future insurance, making use of actuarial discounting techniques well-known in the art. The premium cost calculation takes into account additional factors including:
- Selected premium growth
Expiry age of cover
- Affordability adjustments (these capture the difference between the Amount of cover required and the Amount of cover that can be afforded, all else being equal - in other words increase/ decrease of cover, duration of cover, type of insurance event.
An information processing system for operating a system or method for determining an insurance need over time and calculating the cost associated with that need.
A computer readable storage medium for operating a system or method for determining an insurance need over time and calculating the cost associated with that need, the computer readable storage medium comprising instructions to perform a method comprising the steps of inputting policyholder demographic information and family information, projecting and evaluating each need individually; making use of a combination of unique attributes to create a durational- based signature of each need over time; overlaying the cost of insurance per unit of currency of cover over this time; and calculating a premium based on the calculated cost of future insurance.
EXAMPLE OF THE INVENTION
An example of the operation of the system or method of the invention is described below with reference to various screenshots:
STE P 1 > CAPTU R E / CON FI RM TH E CLI E NT'S PE RSO NAL I N FO RMATIO N
1. Demographic information (e.g. age, gender, active income, passive income, occupation, smoker status, planned retirement age)
2. Family information
a. Spouse demographics (if applicable)
b. Children demographic (if applicable)
STE P 2 > YOU R RISK NE EDS MATRIX
Capture the following:
1. Current debt
a. Information required
i. o/s balance,
ii. monthly repayment,
iii. remaining term
iv. interest rate
o Allow the user to add or delete Debt items.
2. Key monthly living expenses:
o Medical Aid contribution
o Living expenses,
o Education costs
3. Lump sum needs
■ For example Estate Duty requirements on death.
Details regarding the specific need and cover are also captured, e.g. waiting periods
The following is a prototype screen shot of the Needs Matrix, where the debt needs specifically are detailed:
STEP 4 > VIEW THE RISK SOLUTION
■=> View the Risk Solution
■=>■ User can edit the solution, validate as the user enters the information and recalculate the premium <= User should be able to enter the basic information for Living expenses, education expenses and medical aid expenses. Once in the Risk Protection Matrix (Step 4) - they should be able to vary from the original inputs and the premium calculation should receive as inputs the information that exists in the Risk Protection Matrix. However, the user must be able to revert to the original inputs with the click of a button. :
I Solution / Summary TOTAL PREMIUM 2300 "
STEP 5 > UPLOAD THE NEW BUSINESS APPLICATION
Once all the above steps have been completed, the broker will be able to upload his application to the insurer's new business department. Selecting this action for a specific quote / client the broker would be asked to attach any missing information:
1 ) Complete information that was not included in the minimum quote criteria.
2) FICA documents
3) Scan completed application form (with the required fields manually completed), The remaining information i.e. quotes etc. will automatically attach to the application.
STEP 6 > FNA REPORTING TOOL
This step will allow the user to analyse the client's financial needs in more detail:
1. Show the risk Exposure Matrix (Step 4)
2. Table projection of the benefits:
3. Graphical representation of the benefits:
1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
I Living Expenses m Medical Expenses a Education Expenses I O/S Debt
4. Information centre
o Static documents (to be uploaded by the insurer)
o Dynamic Personalised Financial planning report (called from ADMIN SYSTEM service)
5. Financial Tools
Independent calculators that will be loaded up as separate applications