Note: Descriptions are shown in the official language in which they were submitted.
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COMPUTER-IMPLEMENTED METHODS OF, AND SYSTEMS FOR,
UNDERWRITING AND ADMINISTERING A LIFE INSURANCE POLICY WITH
AN INVESTMENT OPTION
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] None
FIELD OF THE INVENTION
[0002] The present invention relates to computer-implemented methods of, and
computer systems for, underwriting and administering a life insurance policy
with an
investment option, and particularly a Canadian universal life type insurance
policy.
BACKGROUND OF THE INVENTION
[0003] Universal life insurance policies have existed in Canada for some time.
[0004] A Canadian universal life insurance policy is a life insurance policy
that is
generally intended to be in force for the entire lifetime of the named insured
(as opposed
to term life insurance, which is only in force for a limited period of time).
A universal
life insurance policy typically has two components, an amount of insurance and
an
investment account. Upon the death of the named insured, assuming the terms
and
conditions of the policy have been complied with, the amount of insurance and
the then
current amount of the investment account will be paid to the beneficiary as a
death
benefit.
[0005] The death benefit is thus the monetary amount that will be paid to the
beneficiary of the insurance policy upon the death of the named insured
(assuming that
all of the other policy terms and conditions have been complied with). The
amount that
the policyholder (who is typically, but not necessarily, the named insured)
pays to the
insurer for the amount of insurance is known as the cost of insurance. While
the actual
particular method by which the cost of insurance is calculated may vary
between insurers,
it is generally established by an insurer taking into account factors common
in the
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industry such as the age, sex, and health of the named insured. It is
conventionally
independent of the amount in the investment account.
[0006] There are many conventional ways in which the cost of insurance can be
structured. It is commonly conventionally structured either as a guaranteed
level cost of
insurance for the life of the named insured, or as a yearly increasing cost of
insurance.
Most commonly, for these types of policies, the cost of insurance is a set
amount that is
charged monthly against the investment account.
[0007] In Canadian universal life type insurance policies, the policyholder
can
make deposits into the investment account of the policy. These deposits and
other
moneys in the investment account are typically allocated into one or more
investments
options offered by the insurer with respect to the policy to provide a return
on the
investment while the money is sitting in the investment account. (The money in
the
investment account is commonly used to pay for the cost of insurance, and is
commonly
automatically deducted by the insurer from the investment account when the
cost of
insurance becomes due.)
[0008] Over time the amount in the investment account can increase (if, for
example, deposits are made into it by the policyholder or as a result of
return on
investments in the investment account) or the amount in the investment account
can
decrease (if, for example, the return on the investment(s) therein is negative
or, so as to
cover the cost of insurance for the policy paid from the investment account,
or for cash
withdrawals - if those option(s) are allowed by the insurer and are exercised
by the
policyholder at any point in time).
[0009] No matter what the source of the funds in the investment account, there
will be no income taxable payable on the return on the investment(s) in the
investment
account under the Income Tax Act (Canada), provided that certain conditions
set forth in
the Act and the Regulations thereunder are met. Most importantly for present
purposes,
for a given death benefit of a policy, the total amount in the investment
account cannot
exceed a certain maximum amount in order for the investment account to have
(or to
maintain - as the case may be) its tax advantaged status. For this reason - as
it would be
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very undesirable for the policy to lose its tax advantaged status - typically
an insurer's
computer systems are programmed to automatically transfer amounts that would
cause
the investment account to exceed the maximum amount to maintain its tax
advantaged
status (if those amounts were to be kept in the investment account) into a
distinct non-tax
advantaged account separate from the policy (sometimes known as a "side
account").
This transfer occurs no matter what the source of the funds.
[0010] Over time, if for whatever reason the amount in the investment account
has reached the maximum amount for the policy to maintain its tax advantaged
status,
should the policyholder desire to have more room in the investment account for
additional funds (i.e. to raise the maximum amount for the account to maintain
the
policy's tax advantaged status), under current legislation, he or she would
need to
increase the amount of insurance of the policy. While making such a request is
generally
possible (depending on the terms and conditions of the policy), additional
underwriting
will in all likelihood be necessary as some time will have passed since the
policy was first
taken out. This will likely mean that either (i) the cost of insurance will
increase if the
request is accepted by the insurer, or (ii) the increase in the amount of
insurance will be
refused by the insurer.
[0011] For some Canadians, tax-advantaged investment accounts within a
universal life insurance policy can be a good tool for use in tax-efficient
estate planning.
However, at present only a minority of policyholders utilize this feature of
universal life
insurance, perhaps because insurers offering such policies' methods and
systems of
underwriting and administrating such policies have not in the past been
structured
towards optimizing tax efficiency over the life of the policy. Thus, some
Canadians may
not have been taking advantage of this ancillary benefit of universal life
type insurance
policies to the fullest extent that they might have otherwise been capable so
doing.
[0012] Improvement in this area is thus possible.
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SUMMARY OF THE INVENTION
[0013] It is an object of the present invention to ameliorate at least some of
the
inconveniences present in the prior art. In this respect, the present
inventors have
theorized that certain improvements in insurer's methods and systems of
underwriting
and administrating life insurance policies, particularly universal life type
insurance
policies, might improve such policies' use in estate planning. In particular,
the present
inventors have theorized that improvements that would allow for interested
stakeholders
(insurers, policyholders, financial advisors, etc.) to better understand and
utilize the
investment aspects of such insurance policies would be desirable.
[0014] The first of such improvements concerns the method by which the cost of
insurance for such insurance policies is established. As was noted above,
conventionally
the cost of insurance in respect of such insurance policies is generally
established as a
function of the amount of insurance of the policy and the underwriting
information
concerning the named insured (or, more precisely the person who would become
the
named insured - referred to herein as the named insured merely for the sake of
convenience). Thus, although for a policy having a particular amount of
insurance, the
maximum amount in the policy's investment account could be calculated,
conventional
methods of underwriting and administering such insurance policies do not
readily lend
themselves to allow an individual who has, for example, $75,000 to invest over
time, to
determine at the outset whether or not an insurance policy of this type would
be a
(relatively) good option for them, nor to compare such an insurance policy to
investments
available to that person. For example, conventionally, the comparison of the
cost of
insurance of a universal life insurance policy to the management expense ratio
(also
known the as the "MER") of a mutual fund is far from straightforward. The
present
inventors have theorized that allowing for such a comparison to be more easily
made
would allow for individuals to make more informed financial decisions.
[0015] Thus, in one aspect, some embodiments of the present invention provide
a
computer-implemented method of underwriting and administering a life insurance
policy
with an investment option, the policy issued by an issuer for a policyholder,
the policy
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having an amount of insurance and an investment account value, at least one of
the
amount of insurance and the investment account value being variable over at
least a
plurality of first periods of time from an initial amount of insurance and an
initial
investment account value at an initial one of the plurality of first periods
of time to a then
current amount of insurance and a then current investment account value at
later ones of
the plurality of first periods of time, the method comprising:
(I) prior to an issuance of the policy,
(a) inputting, via at least one computer system, first data representative of
at
least the initial investment account value to be created by an initial deposit
of the policyholder for the initial one of the plurality of first periods of
time;
(b) storing the first data in at least one database in electronic
communication
with at least the at least one computer system;
(c) inputting, via the at least one computer system, second data
representative
of information required by the issuer to underwrite the policy, the second
data including at least information related to the named insured's age, sex
and health;
(d) storing the second data in the at least one database;
(e) calculating, via at least one computer processor in electronic
communication with at least the at least one database, the initial amount of
insurance of the policy at the issuance, the initial amount of insurance
being at least a minimum amount of insurance required for the policy to
qualify as a tax-exempt policy as defined in the Income Tax Act (Canada)
for the initial one of the plurality of first periods of time based on the
stored initial investment account value of the policy;
(t) storing, in the at least one database, third data at least representative
of the
calculated initial amount of insurance of the policy;
(g) calculating, via the at least one computer processor, a cost of insurance
rate chargeable by the insurer to the policyholder in respect of the policy,
the cost of insurance rate being based at least in part on information
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related to the named insured's age, sex and health stored in the second
data;
(h) storing, in the at least one database, fourth data at least representative
of
the calculated cost of insurance rate for the policy; and
(II) after the issuance of the policy,
(i) calculating, via the at least one computer processor, for each one of a
plurality of second periods of time, a cost of insurance to be charged for
that one of the plurality of second periods of time, the cost of insurance
being a function of at least the cost of insurance rate for the policy stored
in the fourth data and the then current investment account value of the
policy for that one of the plurality of second periods of time; and
(j) storing, in the at least first database, fifth data representative of the
calculated cost of insurance to be charged for that one of the plurality of
second periods of time.
[0016] In this first aspect, the present invention attempts to solve some of
what
the present inventors have realized were (at least in some situations)
drawbacks noted
above with respect to the prior art. Thus, in this first aspect, at a minimum,
the cost of an
insurance policy is determined as function of a cost of insurance rate for the
policy and
the amount in the investment account associated with that policy. (Directly
linking the
cost of insurance with the amount in the policy's investment account, which
has not
heretofore been done.) In a broad sense, this allows a person to compare such
an
insurance policy's cost of insurance rate with, for example, the MER of a
mutual fund;
allowing for a more direct comparison. (Of course, an insurance policy remains
an
insurance policy, and thus the cost insurance rate is still based (at least in
part) on
underwriting information concerning the named insured - discussed in further
detail
below - which is not the case with a mutual fund as an example; the MER of a
mutual
fund is not a function of the risks associated with any of the fund's unit
holders.)
[0017] Taking this broad understanding into account, in this first aspect, the
present method of administering and underwriting an insurance policy of this
type has
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certain elements that are similar to conventional methods and certain elements
that are
different from conventional methods.
[0018] In particular, the present method is similar to conventional methods in
that
prior to the issuance of the policy, conventional information regarding the
risks
associated with the named insured necessary for the insurer to underwrite the
policy is
gathered. Such information, at a minimum, will include the named insured's age
and sex
and information related to the named insured's health; although typically,
depending on
the insurer, additional information will be gathered for use by underwriting.
This
information is necessary to determine the cost of insurance rate for the
policy.
[0019] The present method differs from conventional methods in that, rather
than
gathering the amount of insurance that the policyholder desires to have,
information
regarding, at a minimum, an initial deposit into the investment account
associated with
the policy that the policyholder wishes to make is gathered. It is foreseen
that
information regarding future deposits (beyond the initial deposit) could, and
likely would,
be gathered at the same time as well. As an example, the following information
might be
gathered: that the policyholder will make an initial deposit of $25,000, and
plans to make
an additional deposit of $25,000 on the first anniversary date of the policy,
and plans to
make an additional deposit of $25,000 on the second anniversary date of the
policy.
[0020] From the deposit information that is gathered, at a minimum, the
minimum
amount of insurance required for the policy to qualify as a tax-exempt policy
as defined
in the Income Tax Act (Canada) for the initial one of the first periods of
time (likely a
year - see below) is calculated and stored. In some embodiments of this first
aspect, this
may be the minimum amount for the initial one of the first periods of time
assuming only
the initial deposit will be made during that period of time. In other
embodiments of this
first aspect, this may be other minimum amounts, such as, for example the
minimum
amount for the initial one of the first periods of timing assuming all of the
future
projected deposits are made in the initial one of the first period of time
(notwithstanding
the fact that the policyholder may have indicated that he or she will deposit
them in
subsequent ones of the first periods of time). For example, for a one-time
initial deposit
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of $25,000, for an average non-smoking male, the minimum initial amount of
insurance
of the policy would be $271,482.
[0021] Once this amount is calculated, in some embodiments of this first
aspect,
the initial amount of insurance for the policy will be the minimum amount of
insurance
required for the policy to qualify as a tax-exempt policy as defined in the
Income Tax Act
(Canada) for the initial one of the plurality of first periods of time. In
other
embodiments, the initial amount of insurance for the policy will be greater
than the
minimum amount of insurance required for the policy to qualify as a tax-exempt
policy as
defined in the Income Tax Act (Canada) for the initial one of the plurality of
first periods
of time. The latter may be the case where it is desired to allow some "room"
for growth
in the investment in the initial one of the first periods of time. In such
embodiments,
then, the initial amount of insurance is the minimum amount of insurance
required for the
policy to qualify as a tax-exempt policy as defined in the Income Tax Act
(Canada) for
the initial one of the plurality of first periods of time, plus an amount in
respect of a
projection of growth in the investment account value to occur during the
initial one of the
plurality of first periods of time owing to return on investment. No matter
what the case,
it will be seen that in this respect, the present method "reverses" that of
conventional
methods, in that it is the deposits in the investment account that lead to the
minimum
amount of insurance required being calculated and not the amount of insurance
dictating
the maximum amount in the investment account.
[0022] Once (at a minimum) the necessary underwriting information is gathered
and stored, a cost of insurance rate in dollars per dollar in the investment
account is
calculated. In some embodiments, the cost of insurance rate is based at least
in part on
information related to the named insured's age, sex and health including the
stored
second data In some embodiments, the cost of insurance rate is based solely on
this
information.
[0023] In some embodiments the cost of insurance rate for the policy will be a
single cost of insurance rate that will not vary over the life of the policy,
such that the
cost of insurance rate is unchangeable over a life of the policy. In other
embodiments
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multiple cost of insurances rates will be calculated (typically before the
issuance of the
policy), such that the actual cost of insurance rate in effect at any
particular one of the
second periods of time may change over the life of the policy. (For example,
over time
depending the frequency and timing of deposits and withdraw into the policy's
investment account.) (Both embodiments should be understood to be encompassed
by
the words "a cost of insurance rate" as used in the independent claims.) As an
example,
such a cost of insurance rate would be 0.000024% per business day.
[0024] Once the policy is issued, for each of the second periods of time
(likely
days - see below), the actual cost of insurance will be a function of the cost
of insurance
rate (for that period of time if the cost of insurance rate can change; or for
the entire life
of the policy if it can not) and the value of the investment account during
that one of the
second periods of time. In some embodiments, a calculation of the cost of
insurance to
be charged for each one of the plurality of second periods of time includes a
component
being the cost of insurance rate for the policy multiplied by the then current
investment
account value of the policy for that one of the plurality of second periods of
time. (Such
will be the case, for example, where the cost of insurance also includes a
minor fixed
administrative fee.) In some embodiments, the cost of insurance to be charged
for each
one of the plurality of second periods of time is the cost of insurance rate
for the policy
multiplied by the then current investment account value of the policy for that
one of the
plurality of second periods of time. In such cases, there is an additional
benefit in that the
cost of insurance to be charged for any particular one of the plurality of
second periods of
time will never exceed the then current investment account value of the policy
for that
one of the plurality of second periods of time. This means that the policy
will never
lapse for failure to have sufficient funds in the investment account to cover
the cost of
insurance - which can (and does) happen with conventional universal life type
insurance
accounts - when the cost of insurance is automatically being withdrawn from
the
investment account of the policy.
[0025] It can be seen then that in this first aspect, the present invention
differs
from conventional methods in that conventionally, at least in part from the
underwriting
information that would be gathered and in part from the amount of insurance,
the cost of
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insurance for the policy would be calculated as a specific dollar amount to be
periodically
paid. In the present case, rather than prior to the policy's issuance is a
specific dollar
amount to be paid determined, only a cost of insurance rate(s) is determined
prior to the
policy's issuance and the actual cost of insurance will be calculated in the
future based on
the cost of insurance rate and the amount in the policy's investment account
at that time
in the future.
[0026] As was noted above, an additional benefit of calculating the cost of
insurance in this manner is that the cost can be calculated in such a way that
there will
always be enough in the investment account to cover it, and the policy will
never lapse
for failure of sufficient funds to be present in the investment account. Thus,
in some
embodiments, in this first aspect, the method further comprises: (k) reducing,
via the at
least one computer processor, the then current investment account value of the
policy for
that one of the plurality of second periods of time by the cost of insurance
to be charged
for that one of the plurality of second periods of time stored in the fifth
data. Further, in
some embodiments, the method further comprises, after reducing the then
current
investment account value, (m) sending to at least one of a display device and
a printer the
then current investment account value.
[0027] Finally, as was noted above, in some embodiments, each one of the
plurality of first periods of time is a year. (For present purposes a year is
365 days. A
leap year simply contains a day that is 48 hours long.) A year is generally
the standard
measure of time for most aspects of universal life insurance policies of this
type,
corresponds generally with other investments' measure of time in this respect.
There is,
however, no requirement that the first period of time be a year. In most
circumstances,
any reasonable period of time would work (as long as all of the then
applicable laws and
regulations are complied with). Further, in some embodiments, each one of the
plurality
of second periods of time is a day. Generally, a day being the standard
measure of time
with respect to cost is useful, as again, it corresponds generally with
investments'
measure of time in this respect. There is, however, no requirement that the
second period
of time be a day. In most circumstances, any reasonable period of time would
work (as
long as all of the then applicable laws and regulations are complied with).
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[0028] In another aspect, the present invention also comprises a computer
system
that has been appropriately configured and programmed to implement the method
being
the first aspect of the invention. Thus, some embodiments of the present
invention also
provide a computer system for underwriting and administering a life insurance
policy
with an investment option, the policy issued by an issuer for a policyholder,
the policy
having an amount of insurance and an investment account value, at least one of
the
amount of insurance and the investment account value being variable over at
least a
plurality of first periods of time from an initial amount of insurance and an
initial
investment account value at an initial one of the plurality of first periods
of time to a then
current amount of insurance and a then current investment account value at
later ones of
the plurality of first periods of time, the computer system comprising:
(a) a first component that prior to an issuance of the policy receives first
data
representative of at least the initial investment account value to be created
by an initial deposit of the policyholder for the initial one of the plurality
of first periods of time;
(b) a second component that causes storage of the first data in at least one
database;
(c) a third component that prior to the issuance of the policy receives second
data representative of information required by the issuer to underwrite the
policy, the second data including at least information related to the named
insured's age, sex and health;
(d) a fourth component that causes storage of the second data in the at least
one database;
(e) a fifth component that causes a calculation, via at least one computer
processor, of the initial amount of insurance of the policy at the issuance,
the initial amount of insurance being at least a minimum amount of
insurance required for the policy to qualify as a tax-exempt policy as
defined in the Income Tax Act (Canada) for the initial one of the plurality
of first periods of time based on the stored initial investment account value
of the policy;
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(1) a sixth component that causes storage, in the at least one database, of
third
data at least representative of the calculated initial amount of insurance of
the policy;
(g) a seventh component that causes a calculation, via the at least one
computer processor, of a cost of insurance rate chargeable by the insurer to
the policyholder in respect of the policy, the cost of insurance rate being
based at least in part on information related to the named insured's age,
sex and health stored in the second data;
(h) a eighth component that causes storage, in the at least one database, of
fourth data at least representative of the calculated cost of insurance rate
for the policy; and
(i) a ninth component that, after the issuance of the policy, causes a
calculation, via the at least one computer processor, for each one of a
plurality of second periods of time, a cost of insurance to be charged for
that one of the plurality of second periods of time, the cost of insurance
being a function of at least the cost of insurance rate for the policy stored
in the fourth data and the then current investment account value of the
policy for that one of the plurality of second periods of time; and
(j) a tenth component that causes storage, in the at least first database, of
fifth
data representative of the calculated cost of insurance to be charged for
that one of the plurality of second periods of time.
[0029] In some embodiments, a computer system of this aspect, further
comprises
an eleventh component that after the issuance of the policy causes a
reduction, via the at
least one computer processor, of the then current investment account value of
the policy
for that one of the plurality of second periods of time by the cost of
insurance to be
charged for that one of the plurality of second periods of time stored in the
fifth data.
[0030] In some embodiments, a computer system of this aspect, further
comprises
a twelfth component that after the reduction of the then current investment
account value
causes the then current investment account value to be sent to at least one of
a display
device and a printer.
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[0031] The components of this aspect may be any appropriate computer
hardware, software or combination thereof.
[0032] Turning to another feature of some embodiments of the present
invention,
the second of the improvements that the present inventors have theorized that
would
allow for interested stakeholders (insurers, policyholders, financial
advisors, etc.) to
better understand and utilize the investment aspects of such insurance
policies concerns
the method by which the amount of insurance for such insurance policies is
established.
[0033] As was noted above, conventionally the amount of insurance for an
insurance policy is established when the policy is taken out by the
policyholder. Should
the policyholder desire to increase the face value of the policy to add
additional
insurance, additional underwriting will be required (and the information
necessary for
that underwriting to take place will have to be collected). The insurer will
then accept
the increase (with the appropriate increase in the cost of insurance) or will
refuse the
increase.
[0034] The present inventors have realized that the above may not be optimal
in
all circumstances. In this respect, as was discussed above, there is a maximum
amount
that can be present in the policy's investment account under the Income Tax
Act (Canada)
for the policy to maintain its tax-advantaged status. The effect of this on
such an
insurance policy is best illustrated by example. Taking the previous example
of the
policyholder desiring to deposit $25,000 in the investment account of the
policy when the
policy is taken out, $25,000 on the first anniversary date of the policy and
$25,000 on the
second anniversary date of the policy; it can readily be seen that
conventionally the
policyholder will have two basic choices (or some combination thereof). Either
(1) when
the policy is issued the policy will have to have an amount of insurance
sufficiently high
to accommodate $75,000 in the investment account (assuming simply for the ease
of
illustration zero return on investment), or (2) in each of the first two years
of the policy,
the policyholder will have to request an increase in the amount of insurance
of the policy.
Neither of these situations is optimal. In the first case, for the first two
years the
policyholder will carry more insurance than he or she needs with resect to
amounts in the
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investment account, thus increasing the cost of insurance and decreasing the
return on
investment. In the second case, the policyholder will be subjected to
additional
underwriting, with its attendant costs and risks, simply to increase the
amount in the
investment account. (And the policyholder must remember to actually request
and have
granted the increase in the amount of insurance in the first period prior to
the first period
in which he or she will need the increased room in the investment account.
Under current
legislation, it is not possible to do this in the first period in which the
increased room is
desired.) The present inventors have theorized that improvements in the
administration
of universal life type insurance policies are possible in this respect.
[0035] Thus, in another aspect, some embodiments of the present invention
provide a computer-implemented method of underwriting and administering a life
insurance policy with an investment option, the policy issued by an issuer for
a
policyholder, the policy having an amount of insurance and an investment
account value,
at least one of the amount of insurance and the investment account value being
variable
over at least a plurality of first periods of time from an initial amount of
insurance and an
initial investment account value at an initial one of the plurality of first
periods of time to
a then current amount of insurance and a then current investment account value
at later
ones of the plurality of first periods of time, the method comprising:
(I) prior to an issuance of the policy,
(a) inputting, via at least one computer system, first data representative of
at
least the initial investment account value to be created by an initial deposit
of the policyholder for the initial one of the plurality of first periods of
time;
(b) storing the first data in at least one database in electronic
communication
with at least the at least first computer system;
(c) inputting, via the at least one computer system, second data
representative
of information required by the issuer to underwrite the policy, the second
data including at least information related to the named insured's age, sex
and health;
(d) storing the second data in the at least one database;
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(e) calculating, via at least one computer processor in electronic
communication with at least the at least one database, the initial amount of
insurance of the policy at the issuance, the initial amount of insurance
being at least a minimum amount of insurance required for the policy to
qualify as a tax-exempt policy as defined in the Income Tax Act (Canada)
for the initial one of the plurality of first periods of time based on the
stored initial investment account value of the policy;
(f) storing, in the at least first database, third data at least
representative of the
calculated initial amount of insurance of the policy; and
(g) calculating, via the at least one computer processor, a cost of insurance
chargeable by the insurer to the policyholder in respect of the policy, the
cost of insurance being based at least in part on the information related to
the named insured's age, sex and health stored second data;
(h) storing, in the at least one database, fourth data at least representative
of
the cost of insurance for the policy;
(II) after the issuance of the policy,
(i) for each one of at least a subset of successive ones of the plurality of
first
periods of time, calculating, via the at least one computer processor, an
amount of insurance of the policy for an immediately following one of the
plurality of first periods of time required to maintain the policy as a tax-
exempt policy as defined in the Income Tax Act (Canada) for the
immediately following one of the plurality of first periods of time, based at
least in part on a then current projection of any future deposits of the
policyholder during the immediately following one of the plurality of first
periods of time;
(j) storing, in the at least first database, fifth data representative of the
calculated amount of insurance of the policy for the immediately
following one of the plurality of first periods of time required to maintain
the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada) for the immediately following one of the plurality of first
periods of time; and
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(k) before an end of that one of the at least a subset of successive ones of
the
plurality of first periods of time, altering, if necessary, via the at least
one
computer processor, the amount of insurance of the policy for the
immediately following one of the plurality of first periods of time to be not
less than the stored calculated amount of insurance required to maintain
the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada) for the immediately following one of the plurality of first periods
of time.
[0036] In this second aspect, the present invention again attempts to solve
some
of what the present inventors have realized were (at least in some situations)
drawbacks
noted above with respect to the methods of underwriting and administration of
universal
life type insurance policies. Thus, in this second aspect, broadly speaking,
the amount of
insurance of an insurance policy of this type will "automatically" be analyzed
and altered
(usually increased) if necessary in the first period immediately prior to the
first period in
which the alteration of the amount of insurance is projected to be needed to
provide for
sufficient room in the investment account to provide for increases in the
amount in the
investment account (be they for additional deposits, return on investment, or
otherwise)
to maintain the policy's tax-advantaged status over time, while at the same
time
attempting to reduce the amount of "over-insurance" that the policyholder must
carry (at
least as compared with conventional methods of administering and underwriting
insurance policies of this type). This analysis and alteration may be repeated
for
successive first periods in order to, for example, increase the amount of
insurance in a
stepwise fashion on a first period basis.
[0037] Taking this broad understanding into account, in this second aspect,
there
are many in which such a method of administering and underwriting an insurance
policy
may be carried out.
[0038] One possible variation is in which first periods of the insurance's
policy's
life will such an automatic analysis and alteration if necessary take place.
In this respect,
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there are several options (the following list is intended to be exemplary
only, and not
limiting):
= The first periods in which such analysis (and alterations if necessary) may
take
place are determined prior to issuance of the policy. Thus, in some
embodiments,
the method further comprises, prior to the issuance of the policy, inputting
eighth
data indicative of ones of the plurality of first periods of time that are in
the
subset.
= An analysis (and alteration if necessary) may be made in each of the first
periods
in which the policyholder has made a deposit. Thus, in some embodiments, each
one of the plurality of first periods of time in which the policyholder makes
an
deposit is included in the subset.
= Only between 3 and 10 (inclusive) of the first periods of time may be
included in
the subset. Thus, in some embodiments, the subset includes solely from 3 to 10
of
the first periods of time.
= The initial first period may always be included in the first periods in
which such
analyses (and alterations if necessary) take place. Thus, in some embodiments,
the subset of successive ones of the plurality of first periods of time
includes the
initial one of the plurality of first periods of time.
= The initial first period may always be included in the first periods in
which such
analyses (and alterations if necessary) take place. In addition, any
subsequent
successive periods are included in which at then average net deposit per
period is
at least a predetermine amount (e.g. 75%) of the initial deposit. Thus, in
some
the subset of successive ones of the plurality of first periods of time
includes:
(i) the initial one of the plurality of first periods of time;
(ii) each one of the plurality of first periods of time subsequent to the
initial
one of the plurality of first periods of time in which a then average net
deposit per
periods of time is at least a predetermined amount of the initial deposit.
= Each of the initial, second and third first periods may be always included
in the
first periods in which such analyses (and alterations if necessary) take
place. In
addition, any subsequent successive periods are included in which at then
average
net deposit per period is at least a predetermine amount (e.g. 75 %) of the
initial
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deposit. Thus, in some embodiments, the subset of successive ones of the
plurality of first periods of time includes:
(i) the initial one of the plurality of first periods of time;
(ii) the second one of the plurality of first periods of time;
(iii) the third one of the plurality of first periods of time; and
(iv) each one the plurality of first periods of time subsequent to the third
one of
the plurality of first periods of time in which a then average net deposit per
first period of time is at least a predetermined amount (e.g. 75%) of the
initial deposit.
[0039] Another possible variation is based on what such automatic analyses
(and
alterations if necessary) take place. This respect, there are several options
(the following
list is intended to be exemplary only, and not limiting):
= The then current projection of any future deposits of the policyholder
during the
immediately following one of the plurality of first periods of time may be
based at
least in part on stored pre-issuance-projected future deposit data. Thus, in
some
embodiments, the method of this aspect, further comprises, prior to the
issuance
of the policy, inputting sixth data representative of pre-issuance-projected
future
deposits of the policyholder for at least some of the plurality of first
periods of
time; and wherein, after the issuance of the policy, for each one of the at
least the
subset of successive ones of the plurality of first periods of time,
calculating, via
the at least one computer processor, the amount of insurance of the policy for
the
immediately following one of the plurality of first periods of time required
to
maintain the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada) for the immediately following one of the plurality of first periods
of
time, based at least in part on the then current projection of any future
deposits of
the policyholder during the immediately following one of the plurality of
first
periods of time, includes calculating, via the at least one computer
processor, the
amount of insurance of the policy for the immediately following one of the
plurality of first periods of time required to maintain the policy as a tax-
exempt
policy as defined in the Income Tax Act (Canada) for the immediately following
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one of the plurality of first periods of time, based at least in part on the
stored pre-
issuance-projected future deposits.
= The then current projection of any future deposits of the policyholder
during the
immediately following one of the plurality of first periods of time may be
based at
least in part on the stored deposits of the policyholder in that one of the
plurality
of first periods of time. Thus, in some embodiments, the method of this
aspect,
further comprises, after the issuance of the policy, for each one of the at
least the
subset of successive ones of the plurality of first periods of time, inputting
seventh
data representative of deposits of the policyholder in that one of the
plurality of
first periods of time; and wherein, after the issuance of the policy, for each
one of
the at least the subset of successive ones of the plurality of first periods
of time,
calculating, via the at least one computer processor, the amount of insurance
of
the policy for the immediately following one of the plurality of first periods
of
time required to maintain the policy as a tax-exempt policy as defined in the
Income Tax Act (Canada) for the immediately following one of the plurality of
first periods of time, based at least in part on the then current projection
of any
future deposits of the policyholder during the immediately following one of
the
plurality of first periods of time, includes calculating, via the at least one
computer processor, the amount of insurance of the policy for the immediately
following one of the plurality of first periods of time required to maintain
the
policy as a tax-exempt policy as defined in the Income Tax Act (Canada) for
the
immediately following one of the plurality of first periods of time, based at
least
in part on the stored deposits of the policyholder in that one of the
plurality of first
periods of time.
= The then current projection of any future deposits of the policyholder
during the
immediately following one of the plurality of first periods of time may be
based at
least in part on the stored deposits of the policyholder in at least one
period of the
plurality of first periods of time prior to that one of the plurality of first
periods of
time. Thus, in some embodiments, after the issuance of the policy, for each
one
of the at least the subset of successive ones of the plurality of first
periods of time,
calculating, via the at least one computer processor, the amount of insurance
of
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the policy for the immediately following one of the plurality of first periods
of
time required to maintain the policy as a tax-exempt policy as defined in the
Income Tax Act (Canada) for the immediately following one of the plurality of
first periods of time, based at least in part on the then current projection
of any
deposits of the policyholder during the immediately following one of the
plurality
of first periods of time, includes calculating, via the at least the computer
processor, the amount of insurance of the policy for the immediately following
one of the plurality of first periods of time required to maintain the policy
as a
tax-exempt policy as defined in the Income Tax Act (Canada) for the
immediately
following one of the plurality of first periods of time, based at least in
part on the
stored deposits of the policyholder in at least one period of the plurality of
first
periods of time prior to that one of the plurality of first periods of time.
= The then current projection of any future deposits of the policyholder
during the
immediately following one of the plurality of first periods of time may be
based at
least in part on the initial deposit of the policyholder. Thus, in some
embodiments,
after the issuance of the policy, for each one of the at least the subset of
successive ones of the plurality of first periods of time, calculating, via
the at least
one computer processor, the amount of insurance of the policy for the
immediately following one of the plurality of first periods of time required
to
maintain the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada) for the immediately following one of the plurality of first periods
of
time, based at least in part on the then current projection of any deposits of
the
policyholder during the immediately following one of the plurality of first
periods
of time, includes calculating, via the at least the computer processor, the
amount
of insurance of the policy for the immediately following one of the plurality
of
first periods of time required to maintain the policy as a tax-exempt policy
as
defined in the Income Tax Act (Canada) for the immediately following one of
the
plurality of first periods of time, based at least in part on the initial
deposit of the
policyholder.
[0040] Additionally, it is also preferred that any alterations take into
account
growth in the investment account value that will occur as a result of return
on investment.
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Thus, in some embodiments, calculating, via the at least one computer
processor, the
amount of insurance of the policy for the immediately following one of the
plurality of
first periods of time required to maintain the policy as a tax-exempt policy
as defined in
the Income Tax Act (Canada) for the immediately following one of the plurality
of first
periods of time, based at least in part on the then current projection of any
future deposits
of the policyholder during the immediately following one of the plurality of
first periods
of time includes calculating, via the at least one computer processor, the
amount of
insurance of the policy for an immediately following one of the plurality of
first periods
of time required to maintain the policy as a tax-exempt policy as defined in
the Income
Tax Act (Canada) for the immediately following one of the plurality of first
periods of
time, based at least in part on a then current projection of growth in the
investment
account value to occur during the immediately following one of the plurality
of first
periods of time owing to return on investment.
[0041] It should also be noted that it is foreseen that such analysis and
alterations
could result in a reduction in the amount of insurance (if, for example, the
policyholder
has net withdrawals from the investment account for a certain number of
years.) Thus. in
some embodiments, the altering, if necessary, via the at least one computer
processor, of
the amount of insurance of the policy for the immediately following one of the
plurality
of first periods of time to be not less than the stored amount of insurance
required to
maintain the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada) for
the immediately following one of the plurality of first periods of time, is,
for at least one
of the subset of successive ones of the plurality of first periods of time,
reducing the
amount of insurance of the policy for the immediately following one of the
plurality of
first periods of time.
[0042] Where it is determined that an alteration to the amount of insurance
for the
subsequent first period is required, in most cases, such adjustment will be
effected
immediately prior to the end of that first period (i.e. the period in which it
is being
determined whether an alteration is warranted for the subsequent period), as
this will help
to keep the overall cost of insurance low. Thus, in some embodiments, the
altering, if
necessary, via the at least one computer processor, of the amount of insurance
of the
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policy for the immediately following one of the plurality of first periods of
time to be not
less than the stored amount of insurance required to maintain the policy as a
tax-exempt
policy as defined in the Income Tax Act (Canada) for the immediately following
one of
the plurality of first periods of time, occurs immediately prior to the end of
that one of the
at least the subset of successive ones of the plurality of first periods of
time.
[0043] Where it is determined that an alteration to the amount of insurance
for the
subsequent first period is required, in most cases, such alteration will be
effected without
additional underwriting, to minimize the inconvenience to the policyholder
and/or the
named insured. Thus, in some embodiments, the altering, if necessary, of the
amount of
insurance of the policy for the immediately following one of the plurality of
first periods
of time to be not less than the stored amount of insurance required to
maintain the policy
as a tax-exempt policy as defined in the Income Tax Act (Canada) for the
immediately
following one of the plurality of first periods of time occurs without
additional
underwriting.
[0044] Where it is determined that an alteration to the amount of insurance
for the
subsequent first period is required, in some cases, such alteration will be
effected without
altering the cost of insurance (rate) chargeable in respect of the policy, to
provide more
certainty to the policyholder as to the cost of insurance. Thus, in some
embodiments, the
altering, if necessary, of the amount of insurance of the policy for the
immediately
following one of the plurality of first periods of time to be not less than
the stored amount
of insurance required to maintain the policy as a tax-exempt policy as defined
in the
Income Tax Act (Canada) for the immediately following one of the plurality of
first
periods of time occurs without altering the cost of insurance chargeable in
respect of the
policy.
[0045] In some embodiments, the method of the present aspect further
comprises,
after the issuance of the policy, for each one of the subset of successive
ones of the
plurality of first periods of time, if the amount of insurance of the policy
for the
immediately following one of the plurality of first periods of time is
altered, (1) sending to
at least one of a display device and a printer the altered amount of
insurance.
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[0046] In some embodiments, the initial amount of insurance is the minimum
amount of insurance required to maintain the policy as a tax-exempt policy as
defined in
the Income Tax Act (Canada) for the initial one of the plurality of first
periods of time,
plus an amount in respect of a projection of growth in the investment account
value to
occur during the initial one of the plurality of first periods of time owing
to return on
investment. This will help to keep the amount of "over-insurance" low.
[0047] As was discussed above in relation to the first aspect of the
invention, in
some embodiments, each of the plurality of first periods of time is a year,
for the same
reasons as discussed hereinabove.
[0048] In another aspect, the present invention also comprises a computer
system
that has been appropriately configured and programed to implement the method
being the
first aspect of the invention. Thus, some embodiments of the present invention
also
provide a computer system for underwriting and administering a life insurance
policy
with an investment option, the policy issued by an issuer for a policyholder,
the policy
having an amount of insurance and an investment account value, at least one of
the
amount of insurance and the investment account value being variable over at
least a
plurality of first periods of time from an initial amount of insurance and an
initial
investment account value at an initial one of the plurality of first periods
of time to a then
current amount of insurance and a then current investment account value at
later ones of
the plurality of first periods of time, the computer system comprising:
(a) a first component that prior to an issuance of the policy receives first
data
representative of at least the initial investment account value to be created
by an initial deposit of the policyholder for the initial one of the plurality
of first periods of time;
(b) a second component that causes storage of the first data in at least one
database;
(c) a third component that prior to issuance of the policy receives second
data
representative of information required by the issuer to underwrite the
policy, the second data including at least information related to the named
insured's age, sex and health;
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(d) a fourth component that causes storage of the second data in the at least
one database;
(e) a fifth component that causes a calculation, via at least one computer
processor, of the initial amount of insurance of the policy at the issuance,
the initial amount of insurance being at least a minimum amount of
insurance required for the policy to qualify as a tax-exempt policy as
defined in the Income Tax Act (Canada) for the initial one of the plurality
of first periods of time based on the stored initial investment account value
of the policy;
(f) a sixth component that causes storage, in the at least first database, of
third
data at least representative of the calculated initial amount of insurance of
the policy; and
(g) a seventh component that causes a calculation, via the at least one
computer processor, of a cost of insurance chargeable by the insurer to the
policyholder in respect of the policy, the cost of insurance being based at
least in part on the information related to the named insured's age, sex and
health stored second data;
(h) an eighth component that causes storage, in the at least one database, of
fourth data at least representative of the calculated cost of insurance for
the policy;
(i) a ninth component that, after the issuance of the policy, causes a
calculation, via the at least one computer processor, for each one of at least
a subset of successive ones of the plurality of first periods of time,
calculating, via, an amount of insurance of the policy for an immediately
following one of the plurality of first periods of time required to maintain
the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada) for the immediately following one of the plurality of first periods
of time, based at least in part on a then current projection of any future
deposits of the policyholder during the immediately following one of the
plurality of first periods of time;
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a tenth component that causes storage, in the at least first database, of
fifth
data representative of the calculated amount of insurance of the policy for
the immediately following one of the plurality of first periods of time
required to maintain the policy as a tax-exempt policy as defined in the
Income Tax Act (Canada) for the immediately following one of the
plurality of first periods of time; and
(k) an eleventh component that, before an end of that one of the at least a
subset of successive ones of the plurality of first periods of time, causes an
alteration, if necessary, via the at least one computer processor, of the
amount of insurance of the policy for the immediately following one of the
plurality of first periods of time to be not less than the stored calculated
amount of insurance required to maintain the policy as a tax-exempt policy
as defined in the Income Tax Act (Canada) for the immediately following
one of the plurality of first periods of time.
[0049] In some embodiments, a computer system of this aspect, further
comprises
a twelfth component that prior to the issuance of the policy receives sixth
data
representative of pre-issuance-projected future deposits of the policyholder
for at least
some of the plurality of first periods of time; and wherein, after the
issuance of the policy,
for each one of the at least the subset of successive ones of the plurality of
first periods, of
time, the calculation, via the at least one computer processor, of the amount
of insurance
of the policy for the immediately following one of the plurality of first
periods of time
required to maintain the policy as a tax-exempt policy as defined in the
Income Tax Act
(Canada) for the immediately following one of the plurality of first periods
of time, based
at least in part on the then current projection of any future deposits of the
policyholder
during the immediately following one of the plurality of first periods of
time, includes a
calculation, via the at least one computer processor, of the amount of
insurance of the
policy for the immediately following one of the plurality of first periods of
time required
to maintain the policy as a tax-exempt policy as defined in the Income Tax Act
(Canada)
for the immediately following one of the plurality of first periods of time,
based at least in
part on the stored pre-issuance-projected future deposits.
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[0050] In some embodiments, a computer system of this aspect, further
comprises
a thirteenth component that after the issuance of the policy, for each one of
the at least the
subset of successive ones of the plurality of first periods of time, receives
seventh data
representative of deposits of the policyholder in that one of the plurality of
first periods of
time; and wherein, after the issuance of the policy, for each one of the at
least the subset
of successive ones of the plurality of first periods of time, the calculation,
via the at least
one computer processor, of the amount of insurance of the policy for the
immediately
following one of the plurality of first periods of time required to maintain
the policy as a
tax-exempt policy as defined in the Income Tax Act (Canada) for the
immediately
following one of the plurality of first periods of time, based at least in
part on the then
current projection of any future deposits of the policyholder during the
immediately
following one of the plurality of first periods of time, includes a
calculation, via the at
least one computer processor, of the amount of insurance of the policy for the
immediately following one of the plurality of first periods of time required
to maintain
the policy as a tax-exempt policy as defined in the Income Tax Act (Canada)
for the
immediately following one of the plurality of first periods of time, based at
least in part
on the stored deposits of the policyholder in that one of the plurality of
first periods of
time.
[0051] In some embodiments, a computer system of this aspect, further
comprises
a fourteenth component that prior to the issuance of the policy receives
eighth data
indicative of ones of the plurality of first periods of time that are in the
subset.
[0052] In some embodiments, a computer system of this aspect, further
comprises
a fifteenth component that after the issuance of the policy, for each one of
the subset of
successive ones of the plurality of first periods of time, if the amount of
insurance of the
policy for the immediately following one of the plurality of first periods of
time is
altered, sends the altered amount of insurance to at least one of a display
device and a
printer.
[0053] The components of this aspect may be any appropriate computer
hardware, software or combination thereof.
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[0054] In another aspect, the methods (and systems) of the present invention
combine both aspects described hereinabove, as this is believed to be
particularly
beneficial in helping individuals understand and utilize universal life type
insurance
polices as investment vehicles.
[0055] Embodiments of the present invention each have at least one of the
above-
mentioned objects and/or aspects, but do not necessarily have all of them. It
should be
understood that some aspects of the present invention that have resulted from
attempting
to attain the above-mentioned objects may not satisfy these objects and/or may
satisfy
other objects not specifically recited herein.
[0056] Additional and/or alternative features, aspects, and advantages of
embodiments of the present invention will become apparent from the following
description, the accompanying drawings, and the appended claims.
BRIEF DESCRIPTION OF THE DRAWINGS & APPENDICES
[0057] For a better understanding of the present invention, as well as other
aspects and further features thereof, reference is made to the following
description which
is to be used in conjunction with the accompanying drawings and appendices,
where:
[0058] Appendix I is a sample contract of insurance in respect of the
UltraVisionTM universal life insurance policy that is available in Canada from
The
Manufacturer's Life Insurance Company (hereinafter the "UltraVision Policy");
[0059] Appendix 2 is an informational publication entitled "Welcome to a
simple
way to invest. With Insurance" in respect of the UltraVision policy;
[0060] Appendix 3 is an informational publication "Ultra Vision Frequently
Asked
Questions" in respect of the UltraVision policy;
[0061] Appendix 4 is an informational publication entitled "A guide to your
Ultra Vision Investment Accounts" in respect of the UltraVision policy;
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[0062] Appendix 5 is an informational publication entitled "Advisor's Guide to
Ultra Vision" regarding the UltraVision policy;
[0063] Appendix 6 is a sample client informational document use for sales
illustrations and prepared for a prospective sample client in respect of an
UltraVision
policy to illustrate rates of return, amount of death benefit & comparison
with other
investments based on certain assumptions;
[0064] Appendix 7 is an additional sample client informational document use
for
sales illustrations and prepared for a prospective sample client in respect of
an
UltraVision policy to illustrate rates of return, amount of death benefit &
comparison
with other investments based on certain assumptions;
[0065] Appendix 8 is a sample application for insurance for an UltraVision
policy;
[0066] Appendix 9 is a sample annual statement for an UltraVision policy;
[0067] Appendix 10 is a sample Manulife InfoDirectTM web portal information
page;
[0068] Figure 1 is a flow chart illustrating an embodiment of a method of the
first
aspect of the present invention (the cost of insurance rate) in the
UltraVision Policy; and
[0069] Figure 2 is a flow chart illustrating an embodiment of a method of the
second aspect of the present invention (the automatic alteration of the amount
of
insurance) in the UltraVision Policy.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0070] The present invention is illustrated with reference to Appendices 1 to
7 by
the UltraVisionTM universal life insurance policy, and the methods and systems
used to
underwrite and administer such a policy. The UltraVision policy is available
in Canada
from The Manufacture's Life Insurance Company of Toronto, Ontario, the
applicant in
respect of the present application.
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Ultra Vision Policy General Description
[0071] The UltraVision policy is a universal life insurance policy, and thus
has an
amount of insurance and an investment account. Both the amount of insurance
and the
amount in the investment account can vary over time. Initially, when the
policy is
applied for, various pieces of information are sought. This information
includes
information regarding the age, sex, and health of the named insured (see, for
example, the
printout of the sample application for insurance for an UltraVision policy in
Appendix 8);
along with information regarding the initial deposit and future planned
deposits of the
policyholder into the investment account. (Other information - not directly
relevant to
the present invention is also sought - such as for example, the particular
investment(s)
into which funds deposited into the investment should be deposited into, but
this is not
detailed here for ease of reading.)
[0072] From the information regarding the age, sex, and health of the named
insured, the cost of insurance rate (sometimes referred to as the "spread
rate") is
determined using standard universal life insurance policy underwriting
criteria. The
calculated cost of insurance rate is referred to at the initial cost of
insurance rate or initial
spread rate of the policy. It is this cost of insurance rate that will
generally be used (as is
described below) to determine the cost of insurance for any particular day in
which the
policy is in force. However, as is described in more detail below, the
UltraVision policy
also offers the policyholder the chance to rather have applied a first
discounted cost of
insurance rate if their total net deposits into the investment account of the
policy for the
second policy year are equal to or greater than their total net deposits for
the first policy
year. The UltraVision policy also offers the policyholder the chance to rather
have
applied a second further discounted cost of insurance rate if they qualified
for the first
discounted cost of insurance rate and their total net deposits into the
investment account
for the policy for the third policy year are equal to or greater than their
total net deposits
for the first policy year.
[0073] From the information regarding the initial deposit, the amount of
insurance
for the first policy year is calculated. The initial amount of insurance will
be the
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minimum amount of insurance required under the Income Tax Act (Canada) plus an
amount for the growth in the investment account value projected to occur
during first
policy year owing to return on investment, rounded to a near whole number for
simplicity. There will be a side account (a non-tax advantaged account)
associated with
the policy. All moneys over and above the initial deposit (or if the initial
deposit will be
made in periodic payments throughout the year (as opposed to a lump sum), all
amounts
of the initial deposit not yet having become payable) will be placed into the
side account
and transferred into the policy's investment account at the appropriate time
(to make the
next scheduled deposit into the investment account). (The function of the side
account is
conventional and is generally the same through the part of the policy's
lifetime during
which deposits are accepted. It will thus not be discussed in further detail
below.)
[0074] For each business day during the course of the first policy year, at
the end
of each business day the actual cost of insurance for that day of the policy
year is
calculated. (February 28 & 29 are counted as a single day of 48 hours for this
purpose.)
The actual cost of insurance for that day is the initial cost of insurance
rate times the then
current value of the amounts actually in the deposit account at the end of
that day. The
actual cost of insurance is then subtracted from the amount in the investment
account.
[0075] The administration of the policy continues in this manner until the
business day prior to the first anniversary of the policy (e.g. the 3650'
calendar day of the
policy assuming it is a business day). At the end of that day, the standard
daily
administration described above will be carried out (as with every other
business day). In
addition an end of the first policy year administration will be carried out.
As part of the
end of the first policy year administration, the actual total net deposit into
the investment
account for the first policy year is calculated. The actual total net deposit
into the
investment account is the sum of all actual deposits into the investment
account that
occurred during the relevant time period (in this case the first policy year)
minus the sum
of all of the withdrawals from the investment account that occurred during the
relevant
time period (in this case the first policy year).
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[0076] Using the actual total net deposit into the investment account for the
first
policy year and the actual value of the amount in the investment account at
the end of
first policy year (i.e. the actual value of the amount in the investment
account at the end
of that day - the day on which this calculation is being done), the amount of
insurance for
the second year of the policy is calculated. The amount of insurance for the
second year
of the policy will be the minimum amount of insurance required for the policy
to
maintain its tax-advantaged status during the second year of the policy,
assuming that (1)
there will be (a projected) growth in the investment account from the then
current actual
value of the investment account, and (2) the policyholder will make the same
total net
deposit during the second policy year as he or she made during the first
policy year, the
whole rounded to an near whole number for simplicity.
[0077] If the amount of insurance for the second policy year is not the same
as the
amount of insurance for the first policy year, the amount of insurance is then
altered
(most likely increased) on that day (i.e. altered on the last business day of
the first year of
the policy - the last business day before the second year of the policy
begins), to be the
required amount of insurance for the second policy year. In that way the
policy should
have enough room in its investment account for the policyholder to make the
same net
deposit in the second policy year as they made the first policy year, and for
growth to
occur in the investment account during the second policy year, all while
attempting to
keep the overall cost of insurance for the policy low.
[0078] For each business day during the course of the second policy year, as
was
the case with the first policy year, at the end of each business day the
actual cost of
insurance for that day of the policy year is calculated. The actual cost of
insurance for
that day is the then applicable cost of insurance rate times the then current
value of the
amounts actually in the deposit account at the end of that day. The then
applicable cost
of insurance rate is determined as follows: The actual total net deposit into
the
investment account to date for the policy to date is calculated and divided by
the actual
total net deposit into the investment account for the first policy year. If
that ratio is 2 or
greater, then the then applicable cost of insurance rate is the first
discounted cost of
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insurance rate. If that ratio is less than 2, then the then applicable cost of
insurance rate is
the initial cost of insurance rate.
[0079] The actual cost of insurance is then subtracted from the amount in the
investment account.
[0080] The administration of the policy continues in this manner until the
business day prior to the second anniversary of the policy. At the end of that
day the
standard daily administration described above will be carried out (as with
every other
business day). Using the actual total net deposit into the investment account
for the first
policy year and the actual value of the amount in the investment account at
the end of
second policy year (i.e. the actual value of the amount in the investment
account at the
end of that day - the day on which this calculation is being done), the amount
of
insurance for the third year of the policy is calculated. The amount of
insurance for the
third year of the policy will be the minimum amount of insurance required for
the policy
to maintain its tax-advantaged status during the third year of the policy,
assuming that (1)
there will be (a projected) growth in the investment account from the then
current actual
value of the investment account, and (2) the policyholder will make the same
total net
deposit during the third policy year as he or she made during the first policy
year, the
whole rounded to an near whole number for simplicity.
[0081] If the amount of insurance for the third policy year is not the same as
the
amount of insurance for the second policy year, the amount of insurance is
then altered
(most likely increased) on that day (i.e. altered on the last business day of
the second year
of the policy - the last business day before the third year of the policy
begins), to be the
required amount of insurance for the third policy year. In that way the policy
should have
enough room in its investment account for the policyholder to make the same
net deposit
in the third policy year as they made the first policy year, and for growth to
occur in the
investment account during the third policy year, all while attempting to keep
the overall
cost of insurance for the policy low.
[0082] For each business day during the course of the third policy year, as
was the
case with the previous policy years, at the end of each business day the
actual cost of
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insurance for that day of the policy year is calculated. The actual cost of
insurance for
that day is the then applicable cost of insurance rate times the then current
value of the
amounts actually in the deposit account at the end of that day. The then
applicable cost
of insurance rate is determined as follows: The actual total net deposit into
the investment
account to date for the policy to date is calculated and divided by the actual
total net
deposit into the investment account for the first policy year. If that ratio
is 3 or greater,
then the then applicable cost of insurance rate is the second discounted cost
of insurance
rate. If that ratio is 2 or greater but less than 3, then the then applicable
cost of insurance
rate is the first discounted cost of insurance rate. If that ratio is less
than 2, then the then
applicable cost of insurance rate is the initial cost of insurance rate.
[0083] The actual cost of insurance is then subtracted from the amount in the
investment account.
[0084] The administration of the policy continues in this manner until the
business day prior to the third anniversary of the policy. At the end of that
day the
standard daily administration described above will be carried out (as with
every other
business day). In addition an end of the third policy year administration will
be carried
out. Using the actual total net deposit into the investment account for the
first policy
year and the actual value of the amount in the investment account at the end
of third
policy year (i.e. the actual value of the amount in the investment account at
the end of
that day - the day on which this calculation is being done), the amount of
insurance for
the fourth year of the policy is calculated. The amount of insurance for the
fourth year of
the policy will be the minimum amount of insurance required for the policy to
maintain
its tax-advantaged status during the fourth year of the policy, assuming that
(1) there will
be (a projected) growth in the investment account from the then current actual
value of
the investment account, and (2) the policyholder will make the same total net
deposit
during the fourth policy year as he or she made during the first policy year,
the whole
rounded to an near whole number for simplicity.
[0085] If the amount of insurance for the fourth policy year is not the same
as the
amount of insurance for the third policy year, the amount of insurance is then
altered
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(most likely increased) on that day (i.e. altered on the last business day of
the third year
of the policy - the last business day before the fourth year of the policy
begins), to be the
required amount of insurance for the fourth year. In that way the policy
should have
enough room in its investment account for the policyholder to make the same
net deposit
in the fourth policy year as they made the first policy year, and for growth
to occur in the
investment account during the fourth policy year, all while attempting to keep
the overall
cost of insurance for the policy low.
[0086] For each business day during the course of the fourth policy year, as
was
the case with the previous policy years, at the end of each business day the
actual cost of
insurance for that day of the policy year is calculated. The actual cost of
insurance for
that day is the then applicable cost of insurance rate times the then current
value of the
amounts actually in the deposit account at the end of that day. The then
applicable cost
of insurance rate is determined as follows: The actual total net deposit into
the investment
account to date for the policy to date is calculated and divided by the actual
total net
deposit into the investment account for the first policy year. If that ratio
is 3 or greater,
then the then applicable cost of insurance rate is the second discounted cost
of insurance
rate. If that ratio is 2 or greater but less than 3, then the then applicable
cost of insurance
rate is the first discounted cost of insurance rate. If that ratio is less
than 2, then the then
applicable cost of insurance rate is the initial cost of insurance rate.
[0087] The actual cost of insurance is then subtracted from the amount in the
investment account.
[0088] The administration of the policy continues in this manner until the
last
business day prior to the fourth anniversary of the policy. At the end of that
day the
standard daily administration described above will be carried out (as with
every other
day). In addition an end of the fourth policy year administration will be
carried out. As
part of the end of the fourth policy year administration, the actual total net
deposit into
the investment account for the fourth policy year (and each of the prior
policy years if it
has not already been done) is calculated. The actual total net deposit into
the investment
account in the fourth policy year is the sum of all actual deposits into the
investment
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account that occurred during the fourth policy year minus the sum of all of
the
withdrawals from of the investment account that occurred during the fourth
policy year.
[0089] The calculations with respect to the determination of the minimum
amount
of insurance for the fifth policy year will change depending on whether the
then average
actual total net deposit into the investment account per policy year (i.e. the
average of the
actual total net deposit for the investment account for the first policy year,
the actual total
net deposit for the investment account for the second policy year, the actual
total net
deposit for the third policy year, and the actual total net deposit for the
fourth policy year)
is at least 75 % of the actual total net deposit for the investment account
for the first policy
year.
[0090] If the then (at the end of the fourth policy year) average actual total
net
deposit in the investment account per policy year is at least 75 % of the
actual total net
deposit for the first policy year, then the calculation to determine if the
minimum amount
of insurance for the fifth policy year should be altered will be done using
the actual total
net deposit into the investment account for the first policy year and the
actual value of the
amount in the investment account at the end of fourth policy year (i.e. the
actual value of
the amount in the investment account at the end of that day - the day on which
this
calculation is being done). The amount of insurance for the fifth year of the
policy in
such cases will be the minimum amount of insurance required for the policy to
maintain
its tax-advantaged status during the fifth year of the policy, assuming that
(1) there will
be (a projected) growth in the investment account from the then current actual
value of
the investment account, and (2) the policyholder will make the same total net
deposit
during the fifth policy year as he or she made during the first policy year,
the whole
rounded to a near whole number for simplicity.
[0091] If, however, the then average (at the end of the fourth policy year)
actual
total net deposit in the investment account per policy year is less than 75 %
of the actual
total net deposit for the first policy year, then the calculation to determine
if the minimum
amount of insurance for the fifth policy year should be altered will be done
solely using
the actual value of the amount in the investment account at the end of fourth
policy year
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(i.e. the actual value of the amount in the investment account at the end of
that day - the
day on which this calculation is being done). The amount of insurance for the
fifth year
of the policy in such cases will be the minimum amount of insurance required
for the
policy to maintain its tax-advantaged status during the fifth year of the
policy, assuming
that (1) there will be (a projected) growth in the investment account from the
then current
actual value of the investment account, but that (2) the policyholder will
make no
deposits during the fifth policy year, the whole rounded to a near whole
number for
simplicity.
[0092] If the amount of insurance for the fifth policy year is not the same as
the
amount of insurance for the fourth policy year, the amount of insurance is
then altered
(most likely increased if deposits are projected, and decreased if no deposits
are projected
- see above) on that day (i.e. altered on the last business day of the fourth
year of the
policy - the last business day before the fifth year of the policy begins), to
be the required
amount of insurance for the fifth year. In that way, the policy should, only
if necessary
because deposits are being projected in that policy year, have enough room in
its
investment account for the policyholder to make the same net deposit in the
fifth policy
year as they made the first policy year, and for growth to occur in the
investment account
during the fifth policy year (whether or not deposits are projected), all
while attempting to
keep the overall cost of insurance for the policy low.
[0093] For each business day during the course of the fifth policy year, as
was the
case with the previous policy years, at the end of each business day the
actual cost of
insurance for that day of the policy year is calculated. The actual cost of
insurance for
that day is the then applicable cost of insurance rate times the then current
value of the
amounts actually in the deposit account at the end of that day. The then
applicable cost
of insurance rate is determined as follows: The actual total net deposit into
the investment
account to date for the policy to date is calculated and divided by the actual
total net
deposit into the investment account for the first policy year. If that ratio
is 3 or greater,
then the then applicable cost of insurance rate is the second discounted cost
of insurance
rate. If that ratio is 2 or greater but less than 3, then the then applicable
cost of insurance
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rate is the first discounted cost of insurance rate. If that ratio is less
than 2, then the then
applicable cost of insurance rate is the initial cost of insurance rate.
[0094] The actual cost of insurance is then subtracted from the amount in the
investment account.
[0095] The administration of the policy continues in this manner until the
last
business day prior to the fifth anniversary of the policy. At the end of that
day the
standard daily administration described above will be carried out (as with
every other
day). In addition an end of the fifth policy year administration will be
carried out.
[0096] As was the case with the determinations in respect of the fifth policy
year,
the calculations with respect to the determination of the minimum amount of
insurance
for the sixth policy year will change depending on whether the then average
actual total
net deposit into the investment account per policy year (i.e. the average of
the actual total
net deposit for the investment account for the first policy year, the actual
total net deposit
for the investment account for the second policy year, the actual total net
deposit for the
third policy year, the actual total net deposit for the fourth policy year,
and the actual total
net deposit for the fifth policy year) is at least 75 % of the actual total
net deposit for the
investment account for the first policy year.
[0097] If the then (at the end of the fifth policy year) average actual total
net
deposit in the investment account per policy year is at least 75 % of the
actual total net
deposit for the first policy year, then the calculation to determine if the
minimum amount
of insurance for the sixth policy year should be altered will be done using
the actual total
net deposit into the investment account for the first policy year and the
actual value of the
amount in the investment account at the end of fifth policy year (i.e. the
actual value of
the amount in the investment account at the end of that day - the day on which
this
calculation is being done). The amount of insurance for the sixth year of the
policy in
such cases will be the minimum amount of insurance required for the policy to
maintain
its tax-advantaged status during the sixth year of the policy, assuming that
(1) there will
be (a projected) growth in the investment account from the then current actual
value of
the investment account, and (2) the policyholder will make the same total net
deposit
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during the sixth policy year as he or she made during the first policy year,
the whole
rounded to an near whole number for simplicity.
[0098] If, however, the then average (at the end of the fifth policy year)
actual
total net deposit in the investment account per policy year is less than 75 %
of the actual
total net deposit for the first policy year, then the calculation to determine
if the minimum
amount of insurance for the sixth policy year should be altered will be done
solely using
the actual value of the amount in the investment account at the end of fifth
policy year
(i.e. the actual value of the amount in the investment account at the end of
that day - the
day on which this calculation is being done). The amount of insurance for the
sixth year
of the policy in such cases will be the minimum amount of insurance required
for the
policy to maintain its tax-advantaged status during the sixth year of the
policy, assuming
that (1) there will be (a projected) growth in the investment account from the
then current
actual value of the investment account, but that (2) the policyholder will
make no
deposits during the sixth policy year, the whole rounded to a near whole
number for
simplicity.
[0099] If the amount of insurance for the sixth policy year is not the same as
the
amount of insurance for the fifth policy year, the amount of insurance is then
altered
(most likely increased if deposits are projected, and decreased if no deposits
are projected
- see above) on that day (i.e. altered on the last business day of the fifth
year of the policy
- the last business day before the sixth year of the policy begins), to be the
required
amount of insurance for the sixth year. In that way, the policy should, only
if necessary
because deposits are being projected in that policy year, have enough room in
its
investment account for the policyholder to make the same net deposit in the
sixth policy
year as they made the first policy year, and for growth to occur in the
investment account
during the sixth policy year (whether or not deposits are projected), all
while attempting
to keep the overall cost of insurance for the policy low.
[00100] Further, on the last business day of the fifth policy year, the cost
of
insurance rate for the remainder of the life of the policy is set. The cost of
insurance rate
for the remainder of the life of the policy will be the cost of insurance rate
applicable on
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that last business day of the fifth policy year. The cost of insurance rate
applicable on the
last business day of the fifth policy year is calculated as follows: The
actual total net
deposit into the investment account to date for the policy to date is
calculated and divided
by the actual total net deposit into the investment account for the first
policy year. If that
ratio is 3 or greater, then the then applicable cost of insurance rate is the
second
discounted cost of insurance rate. If that ratio is 2 or greater but less than
3, then the then
applicable cost of insurance rate is the first discounted cost of insurance
rate. If that ratio
is less than 2, then the then applicable cost of insurance rate is the initial
cost of insurance
rate.
[00101] For each business day during the remainder of the life of the policy,
the
actual cost of insurance for that day is the cost of insurance rate for the
remainder of the
policy times the then current value of the amounts actually in the deposit
account at the
end of that day.
[00102] The actual cost of insurance is then subtracted from the amount in the
investment account.
[00103] The administration of the seventh, eighth, ninth and tenth policy
years is
the same as of the sixth policy year, mutatis mutandis, with respect to the
alteration in the
amount of insurance for the subsequent policy year. In the eleventh and
subsequent
policy years, no analysis is done to determine whether the amount of insurance
should be
altered in view of projected deposits (as no deposits are allowed during those
years).
The only analysis that will be done is to determine whether the amount of
insurance
should be altered in view of projected growth in the investment account. It
thus likely
that the amount of insurance will slowly be reduced year over year from the
end of the
eleventh policy year (unless it had started to be slowly reduced in an earlier
policy year
owing to the calculations described above - i.e. the policyholder had stopped
making
deposits earlier than in the eleventh policy year).
[00104] At the beginning of each policy year, the policy holder will be sent a
statement in respect of the policy similar to the one shown in Appendix 9. At
any time
during the life of the policy, the policyholder's advisor can consult
Manulife's InfoDirect
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system and obtain information on the policy. Sample information is shown in
Appendix
10.
[00105] On the death of the named insured, assuming all of the terms and
conditions of the policy have been complied with, the beneficiary is paid the
death benefit
of the policy which is the then current amount of insurance and the then
current value of
the amounts in the investment account.
[00106] It should be noted in the above description of the UltraVision policy,
only
details of the policy relevant to the present invention have been described.
Further
information about the UltraVision policy is available in the documents
included
Appendices.
Description of a Preferred Computer System for Underwriting and Administering
a
Universal Life Type Insurance Policy
[00107] In order to underwrite and administer a universal life type insurance
policy, it is preferred to use an industry-standard enterprise-level insurance
management
software. No particular brand of such software is preferred. Typically an
insurer will
already have such software in place and will not purchase new software simply
to
implement the present methods; they will simply modify their current software.
If the
insurer does happen to be choosing new software, then the choice will not
likely be
dictated by ability to perform the methods described herein (as it is believed
that most, if
not all, of such currently available commercial industry-standard software
would be able
to be so programmed, and there are likely far more important considerations
that will
dictate the insurer's choice). With respect to the actual programming of the
particular
software being used to carry out the present methods, such programming is
within the
skill of persons of ordinary skill in the art (the art being the programming
of that
particular brand of software as each brand will have its own methods of
programming)
and will not be detailed herein.
[00108] While it is preferred to use all of the built-in capabilities of the
above-
noted software to carry out the entirety of the present method, depending on
the software
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and/or its set-up or configuration, additional elements, such as an internet
web server
system, or an enterprise-level print server system may be required. Should
such elements
be required, their set-up and configuration and interaction with the
enterprise-level
insurance management software described above is within the skill of a person
skilled in
the art, will not likely be generally affected by the implementation of the
present
methods, and will not be detailed here.
[00109] With respect to computer hardware, no particular computer hardware is
required other the computer hardware generally required to run the above-noted
software.
The implementation of the present methods should not generally require any
additional
computer hardware.
Description of a Preferred Computer-Implemented Method for Underwriting and
Administering a Universal Life Type Insurance Policy - First Aspect - Cost of
Insurance
Rate
[00110] Referring to Figure 1, there is shown a preferred method for
underwriting
and administering a universal life type insurance policy, 100. At step 102,
the application
for the insurance policy (which includes all of the necessary information for
evaluating
and issuing the policy) is received. At step 104, information regarding the
initial deposit
of the policyholder is stored. At step 106, the initial amount of insurance is
calculated as
is described hereinabove. At step 108, the calculated initial amount of
insurance is
stored. At step 110, the policy is sent to be evaluated by underwriting in
view of the
information regarding the age, sex and health of the policyholder. At step
112, the
information regarding the age, sex and health of the policyholder is stored
(which may be
carried out before step 110). At step 114, the initial cost of insurance rate,
the first
discount cost of insurance rate, and the second discount cost of insurance
rate are
calculated. At step 116, the calculated rates of insurance are stored. At step
118, the
policy is approved and issues.
[00111] After the issuance of the policy, at step 120 the cost of insurance is
calculated each business day, the cost of insurance being the cost of
insurance rate for
that day times the value of the investment account at the end of that day
(this step
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includes a sub-calculation as to which cost of insurance rate is applicable
for that day -
which is not shown). At step 122, the calculated cost of insurance is stored.
At step 124,
the value of the investment account at the end of that day is reduced by the
calculated
cost of insurance. Optionally, at step 126, the new account value (after the
reduction)
may be displayed on a display device in communication with the computer
system(s)
administering the policy. Steps 120 through 124 and optionally step 126 are
repeated for
each business day of the policy. At step 128, after the 5th anniversary of the
policy, in the
sixth policy year and forward, the cost of insurance rate is fixed.
Description of a Preferred Computer-Implemented Method for Underwriting and
Administering a Universal Life Type Insurance Policy - Second Aspect -
Automatic
Alteration of the Amount of Insurance for the Following Year
[00112] Referring to Figure 2, there is shown a preferred method for
underwriting
and administering a universal life type insurance policy, 200. At step 202,
the application
for the insurance policy (which includes all of the necessary information for
evaluating
and issuing the policy) is received. At step 204, information regarding the
initial deposit
of the policyholder is stored. At step 206, the initial amount of insurance is
calculated as
is described hereinabove. At step 208, the calculated initial amount of
insurance is
stored. At step 210, the policy is sent to be evaluated by underwriting in
view of the
information regarding the age, sex and health of the policyholder. At step
212, the
information regarding the age, sex and health of the policyholder is stored
(which may be
carried out before step 210). At step 214, the cost of insurance is calculated
and stored.
At step 218, the policy is approved and issues.
[00113] After the issuance of the policy, at step 220 at the end of each year
(from
the IS` to the 10`h years) the forecasting method described above is carried
out to
determine the amount of insurance necessary for the following year. At step
222 the
forecasted amount of insurance for the following year is stored. At step 224,
the amount
of insurance for the following year is altered, if necessary as described
above, before the
beginning of the following year.
MON REAL:2608826.15
1120502
CA 02742752 2011-06-14
-43-
[00114] It should be understood that the flow charts illustrated in Figures 1
and 2
are not intended to provide a complete detail overview of all of the elements
of the
underwriting and administration of a universal life type insurance policy.
They are
simply meant to provide a brief schematic overview of aspects of the present
invention.
They should not be interpreted as limiting the invention in any manner.
[00115] Modifications and improvements to the above-described embodiments of
the present invention may become apparent to those skilled in the art. The
foregoing
description is intended to be exemplary rather than limiting. The scope of the
present
invention is therefore intended to be limited solely by the scope of the
appended claims.
MONTREAL2608826.15
1120502
