Some innovations can so disturb existing systems that vested interests will go to the mat to try to stop them. We see this a lot in technology, but its happening in insurance, too.
For instance, right now, there is much interest in how new telecommunications technologies, such as VoIP (Voice over Internet Protocol), are disturbing the established land line phone systems. In the 19th century, railroads and telegraphs were disruptive, bypassing horse and wagons with their speed and efficiency.
Insurance also has had its share of disruptions. Think back to the debut of universal life insurance in the 1970s. Separating out the interest-building and cost-of-insurance components was a huge departure from traditional whole life. It met with enormous opposition from entrenched interests but wound up a top seller during much of the 1980s.
In the 2000s, UL once again became the product du jour, thanks to its use of yet another disruptionthe secondary guarantees that keep the UL death benefit in force despite policy performance. Another disrupter, equity index annuities, born in the mid-1990s to the tune of various interest-crediting “methodologies,” have been racking up sales gains quarter after quarter in the past several years.
Without quantum advances in computing power and programming, none of the disruptions mentioned here would have been possible. Tech is, was and probably always will be the driver.
Today, some insurance developers worry that not much innovationor disruptionis going on. Most work entails the combining, embellishing and refreshing of past innovations, not new, they say.
While that seems to be the case, one trend does seem to qualify for the “D” word. That is the patenting of insurance product processes (or business methods, in the parlance of the U.S. Patent Office). NU has covered the trend, so you can research it easily in our online archives (www.nationalunderwriter.com).
A recent search of existing patents and patent applications at the U.S. Patent Office Web site (at www.uspto.gov/patft/index.html) showed 225 patents issued in “Class 705, subclass 4″for insurance (1790 to present). This class includes patents for financial accounting, calculating earned income, interest, insurance premium, taxes and risk analysis. Another search, using “insurance” as the search term, brought much bigger numbers8,267 patents issued (since 1976) and 7,295 patent applications. A search on “life and health and insurance” returned 760 patents (since 1976) and 1,128 applications.
Many of those filings are somehow related to insurance but not insurance contracts themselves. Still, some do involve contracts, and most experts agree insurance patents are on the rise. In fact, calls about insurance patents to NUs new products desk have increased during the past 18 months. This is what spurred me to start thinking about the potential disruptive impact patents might have at companies and agencies.