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Under somepatent laws,patents may be obtained forinsurance-relatedinventions. Historically, patents could only cover the technological aspects of a new insurance invention.[1] This is still the case in most countries. In theUnited States, however, recent court decisions have encouraged more inventors to file patent applications onmethods of doing business. These patents may be used to get more comprehensive coverage of improvements in basic insurance processes, such as the methods of calculatingpremiums,reserves,underwriting, etc. This is causing controversy in the insurance industry as some see it as a positive development and others see it as a negative development.
An early example of an insurance patent isU.S. patent 467,872Means for Securing Travelers Against Loss by Accident[dead link]. This patent was issued in 1892. It discloses a means for selling travelers' insurance by combining coupons with a newspaper.
A more recent example of an insurance patent isEP application 0700009 , granted asEP 0700009B "Individual evaluation system for motorcar risk". This patent issued by theEuropean Patent Office in 1996 to Salvador Minguijon Perez. It discloses a means forauto insurance risk selection whereby a driver’s mileage and driving behavior are monitored and insurance premiums are charged accordingly. The United Kingdom part of this European patent has been sold toNorwich Union insurance company.
Historically, only about one or two patents per year issued in the US on inventions specifically related to insurance policies.[2]
This changed dramatically, however, with the 1998State Street Bank Decision. The State Street Bank Decision was a ruling by theCourt of Appeals for the Federal Circuit that confirmed that there was no “business method exception” underUnited States patent law. The number ofpatent applications filed per year after this decision was handed down jumped to about 150. The number of patents issuing per year jumped to about 30.[3]
This changed dramatically again in 2014 after theAlice Corp. v. CLS Bank International decision by theSupreme Court of the United States, holding that an abstract idea does not become patentable just because it is implemented on a computer. AfterAlice, the allowance rate for U.S. patent applications in the financial arts, including insurance, plummeted.[4]
In September 2006,Lincoln National Corporation filed apatent infringementlawsuit againstTransamerica Life Insurance Company and other entities for allegedly infringingU.S. patent 7,089,201, “Method and apparatus for providing retirement income benefits”.[5] This patent covers methods for administeringvariable annuities. The jury found the patent valid and infringed. The court ordered Transamerica to pay Lincoln $13 million in damages.[6] At a rate of 11basis points ofassets under management, this was considered a reasonable royalty.[7] In June 2010, however, the verdict against Transamerica was overturned on appeal[8]
In June 2010,Progressive Auto Insurance filed a patent infringement lawsuit againstLiberty Mutual over one of Progressive’sPay As You Drive auto insurance patents.[9]
Some in the insurance industry see the growth in insurance patents as a positive development. They cite that by being able to protect inventions, insurance companies will be more inclined to invest in new product development.[10]
Some are concerned that the growth in patent claims will be negative. They are concerned that invalid patents will issue and that this will lead topatent trolls inhibiting new product introductions by demanding excessive license fees for these questionable patents.[11]
Inventors can now have their insurance U.S. patent applications reviewed by the public in thePeer to Patent program.[12] The first insurance patent application to be posted wasUS2009005522 “Risk assessment company”. It was posted on March 6, 2009. This patent application describes a method for increasing the ease of changing insurance companies to get better rates.[13]