Can someone really patent an annuity or life insurance product?
Not exactly. But the U.S. Patent Office will grant a patent on a “business method,” which is essentially a unique process that underlies a product.
The good old days of observing the success of a competitor’s annuity product–and getting a copy of that product to market quickly in order to share in that success–may be coming to an end. At a minimum, new wrinkles need to be carefully considered as part of the process.
Also, the pace of patent activity has been picking up. Almost every significant product announcement references “patent pending.” Furthermore, a review of the number of patents issued and applied for (in the life insurance and annuity arena) indicates that further escalation is ahead.
The table shows the trends from the past 3 years alone.
As a result, when a life insurance company or other financial services firm feels it may have a unique or innovative product concept, there is now one more consideration it needs to factor in when bringing that concept to market. This consideration is whether to apply for a business method patent on that unique concept.
As the table shows, companies are increasingly taking action on patents. This is both from an offensive and defensive perspective. It has become a key component of product development plans and strategies.
To illustrate, one insurance company received approval on a patent regarding a method for distributing income via a variable annuity rider. The company has now notified several competing insurers that the other companies have products that may be infringing on the patent. How the legal maneuvering will play out is not yet known. However, it does make it apparent that companies need a way to stay on top of patents being issued.
Other notable patents have been issued in the fixed annuity arena and also in the realm of retirement income and allocations of retirement assets.
This is not to say there has been a lack of patent activity when it comes to other forms of insurance. A database that Milliman has developed currently contains information regarding issued patents and applications for annuities, life insurance, employee benefits (relating to life insurance or annuities), life settlements, pre-need insurance and reinsurance.
While the pace of patent activity has definitely picked up, obtaining a patent is not an easy process. The time from submission to approval can range from 2 to 4 years or more.
To stay abreast of these trends, companies are turning to patent research databases and are also obtaining sound advice from intellectual property counsel regarding the related issues. In fact, this is all but required in the development of a “strategy” for the use of patents.
So, the days of the simple “fast follower” strategy may be numbered. If it turns out that recently issued patents can be–and are–strongly enforced, the value of intellectual property rights will be a new asset for life insurers to consider.