Systems, computer-implemented methods, and computer medium to determine premiums for supplemental crop insurance

• US 10,540,722 B2
• Filed: 02/20/2014
• Issued: 01/21/2020
• Est. Priority Date: 05/17/2013
• Status: Active Grant

• Current Assignee: Watts And Associates, Inc.
• Original Assignee: Watts And Associates, Inc.
• Inventors: Watts, Tim, Offerdahl, Alex, Atwood, Joe, Driscoll, Jim, Loar, Steve, Stabnow, Jeff
• Primary Examiner(s): Trotter, Scott S
• Application Number:
  US14/184,883
• Publication Number:
  US 20140172470A1
• Time in Patent Office: 2,161 Days
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

Provided are systems, machines, non-transitory computer medium having computer program instructions stored thereon, and computer-implemented methods for providing a premium for a supplemental crop insurance policy. The methods include identifying policy information for the policy (including a crop type, expected yield, a selected coverage level, and one or more discovery periods), generating simulated potential price trajectories for the crop type over a given time period that includes the one or more discovery periods, determining simulated prices based on the simulated potential price trajectories, generating simulated correlated price-yield realizations for the crop type over the given time period, determining simulated yields based on the simulated correlated price-yield realizations, determining a premium rate as a function of the expected yield, the selected coverage level, the simulated prices and the simulated yields, and providing the premium rate for use in determining a premium amount for the policy.

Claims

1. A supplemental crop insurance machine comprising:

a supplemental insurance server including one or more processors, being in communication with one or more databases, being positioned to communicate through an electronic communications network to one or more user devices positioned remote from the supplemental insurance server, and being configured to;

serve, to the one or more user devices through the electronic communications network, a supplemental crop insurance policy information content page comprising one or more policy parameter fields adapted to be populated by a user with a corresponding set of supplemental crop insurance policy parameters;

receive input of the set of supplemental crop insurance policy parameters to populate the one or more policy parameter fields, the set of supplemental crop insurance policy parameters including;

(1) one or more of coverage level, insurance plan elected, expected yield, approved yield, acres, type, practice, county, share, and liability adjustment factor, and (2) one or more of risk adjusted revenue probability and premium rate, the determination of the premium configured to include summing the premium amount per acre for a potential insured'"'"'s selected coverage level for all alternative price discovery periods elected, multiplying the sum by a selected liability adjustment factor to obtain a result, and multiplying the result by the number of insured acres and by the potential insured'"'"'s share of such acres;

use vectorized code to simulate a plurality of potential price trajectories spanning a time period, the time period including a plurality of months, potential price trajectories simulated by;

determining one or more stochastic up-down price movement multipliers, wherein a stochastic up price movement multiplier is determined by the equation

u=e<sup>σ

P√

{square root over (2Δ

t)}</sup>

and a stochastic down price movement multiplier is determined by the equation

d=e<sup>−

σ

P√

{square root over (2Δ

t)}</sup>

in which σ

_P represents a futures price annualized implied volatility associated with the set of supplemental crop insurance loss parameters and Δ

t represents an inverse of a determined number of trading days per year, determining one or more risk-adjusted price movement probabilities, and generating greater than 10,000 potential price trajectories based at least in part upon the one or more up-down price movement multipliers and the one or more risk-adjusted price movement probabilities;

determine a premium for a non-reinsured supplemental crop insurance policy responsive to the set of supplemental crop insurance policy parameters and the plurality of potential price trajectories;

transmit via the supplemental insurance server, data representing the premium for the non-reinsured supplemental crop insurance policy over the electronic communications network to one or more user devices; and

serve, to the one or more user devices, a supplemental crop insurance policy information content including the premium for the non-reinsured supplemental crop insurance policy to one or more users.

2. A supplemental crop insurance machine as defined in claim 1, wherein the one or more processors include one or more simulation processors, and wherein the determination of the premium includes determining the premium by one or more preselected algorithms, calculations, or historical interpolations to determine policy premium by use of one or more of current market price, Risk Management Agency (RMA) premium rates, implied volatility from options based on sales of puts and calls for the crop commodity being insured, the number of days prior to the discovery of projected price, harvest price, likelihood that prices may exceed an given additional month'"'"'s price as selected by grower being insured, likelihood that any outcome may reach or exceed price movement limits, and likelihood that any outcome may result in an indemnity.

3. A supplemental crop insurance machine as defined in claim 2, wherein the determination of the premium further includes performing one or more calculations of a plurality of estimated indemnity losses, and wherein pure risk supplemental policy loss cost is a function of a calculated mean of a plurality of simulated supplemental policy payments responsive to the one or more simulation processors.

4. A supplemental crop insurance machine as defined in claim 1, wherein contents of the one or more databases includes futures data corresponding to the set of supplemental crop insurance policy parameters, and wherein a rating algorithm is applied to the futures data to determine the premium for the non-reinsured supplemental crop insurance policy.

5. A supplemental crop insurance machine as defined in claim 1, wherein the one or more policy parameter fields comprise fields for one or more of the following:

crop to be insured, an estimate of a number of acres to be planted by type and practice for a crop year, production databases for an insured crop, an estimate of anticipated actual yield by unit type and practice for a current crop year, a coverage level elected for a supplemental policy, an insurance plan elected, a liability adjustment factor, an alternative price discovery period, and a maximum price movement limit.

6. A supplemental crop insurance machine as defined in claim 1, wherein the determination of the premium further includes calculating risk associated with allowance of an insured to customize supplemental coverage from a range of options on top of an existing crop insurance coverage and subject to review by a Risk Management Agency (RMA).

7. A supplemental crop insurance machine as defined in claim 1, where the determination of the premium further includes determining premium in real-time by use of one or more predetermined pricing functions and providing the real-time premium determinations and quotes to the one or more user devices thereby to allow customization supplemental crop insurance policies insured.

8. A supplemental crop insurance machine as defined in claim 1, wherein the set of policy parameters includes one or more of the following:

a crop to be insured, an estimate of the number of acres to be planted by type and practice for a crop year, each production database for the insured crop, an estimate of the anticipated yield by unit, type, and practice for a current crop year, a coverage level elected for the supplemental policy, an insurance plan elected for determining the right to an indemnity, a liability adjustment factor, one or more alternate price discovery periods, and maximum price movement limit.

9. A supplemental crop insurance machine as defined in claim 1, wherein the determination of the premium includes an insured'"'"'s expected payments or indemnities from one or more of the following:

the Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), Revenue Protection (RP), Yield Protection (YP), Area Risk Protection Insurance (ARPI), Supplemental Coverage Option (SCO), Stacked Income Protection for Producers of Upland Cotton (STAX), or successor programs offered by USDA Agencies including the Farm Service Agency (FSA), Risk Management Agency (RMA), or the Federal Crop Insurance Corporation (FCIC), individually and collectively defining federal agricultural programs.

10. A supplemental crop insurance machine as defined in claim 9, wherein the determination of the premium includes an insured'"'"'s expected payments or indemnities from one or more of the following:

interactions of the federal agricultural programs with each other and the resulting payments and indemnities from such interactions, fluctuations in market price, expected yields, and realized yields.

11. A supplemental crop insurance machine comprising:

a supplemental insurance server including one or more processors, being in communication with one or more databases, being positioned to communicate through an electronic communications network to one or more user devices positioned remote from the supplemental insurance server, and being configured to;

serve, to the one or more user devices through the electronic communications network, a supplemental crop insurance policy information content page comprising one or more policy parameter fields adapted to be populated by a user with a corresponding set of supplemental crop insurance policy parameters;

receive input of the set of supplemental crop insurance policy parameters to populate the one or more policy parameter fields, the set of supplemental crop insurance policy parameters including;

(1) one or more of coverage level, insurance plan elected, expected yield, approved yield, acres, type, practice, county, share, and liability adjustment factor, (2) one or more of risk adjusted revenue probability, and premium rate, and (3) a liability based on one or more of expected yield, approved yield, coverage level, deductible, co-pay, acres, share, inventory value, and liability adjustment factor, the determination of the premium configured to include summing the premium amount per acre for a potential insured'"'"'s selected coverage level for all alternative price discovery periods elected, multiplying the sum by a selected liability adjustment factor to obtain a result, and multiplying the result by the number of insured acres and by the potential insured'"'"'s share of such acres;

use vectorized code to simulate a plurality of potential price trajectories spanning a time period, the time period including a plurality of months, potential price trajectories simulated by;

determining one or more stochastic up-down price movement multipliers, wherein a stochastic up price movement multiplier is determined by the equation

u=e<sup>σ

P√

{square root over (2Δ

t)}</sup>

and a stochastic down price movement multiplier is determined by the equation

d=e<sup>−

σ

P√

{square root over (2Δ

t)}</sup>

in which σ

_P represents a futures price annualized implied volatility associated with the set of supplemental crop insurance loss parameters and Δ

t represents an inverse of a determined number of trading days per year, determining one or more risk-adjusted price movement probabilities, and generating greater than 10,000 potential price trajectories based at least in part upon the one or more up-down price movement multipliers and the one or more risk-adjusted price movement probabilities;

determine a premium for a non-reinsured supplemental crop insurance policy responsive to the set of supplemental crop insurance policy parameters and the plurality of potential price trajectories;

transmit via the supplemental insurance server, data representing the premium for the non-reinsured supplemental crop insurance policy over the electronic communications network to one or more user devices; and

serve, to the one or more user devices, supplemental crop insurance policy information content including the premium for the non-reinsured supplemental crop insurance policy to one or more users.

12. A supplemental crop insurance machine as defined in claim 11, wherein the one or more processors include one or more simulation processors, and wherein the determination of the premium includes determining the premium by one or more preselected algorithms, calculations, or historical interpolations to determine policy premium by use of one or more of market price, Risk Management Agency (RMA) premium rates, implied volatility from options based on sales of puts and calls for the crop commodity being insured, the number of days prior to the discovery of projected price, harvest price, likelihood that prices may exceed an given additional month'"'"'s price as selected by grower being insured, likelihood that any outcome may reach or exceed price movement limits, and likelihood that any outcome may result in an indemnity.

13. A supplemental crop insurance machine as defined in claim 12, wherein the determination of the premium further includes performing one or more calculations of a plurality of estimated indemnity losses, and wherein pure risk supplemental policy loss cost is a function of a calculated mean of a plurality of simulated supplemental policy payments responsive to the one or more simulation processors.

14. A supplemental crop insurance machine as defined in claim 11, wherein contents of the one or more databases includes futures data corresponding to the set of supplemental crop insurance policy parameters, and wherein a rating algorithm is applied to the futures data to determine the premium for the non-reinsured supplemental crop insurance policy.

15. A supplemental crop insurance machine as defined in claim 11, wherein the one or more policy parameter fields comprise fields for one or more of the following:

crop to be insured, an estimate of a number of acres to be planted by type and practice for a crop year, production databases for an insured crop, an estimate of anticipated actual yield by unit type and practice for a current crop year, a coverage level elected for a supplemental policy, an insurance plan elected, an inventory value, a liability adjustment factor, an alternative price discovery period, and a maximum price movement limit.

16. A supplemental crop insurance machine as defined in claim 11, wherein the determination of the premium further includes calculating risk associated with allowance of an insured to customize supplemental coverage from a range of options on top of an existing crop insurance coverage, and subject to review by the USDA Risk Management Agency (RMA).

17. A supplemental crop insurance machine as defined in claim 11, where the determination of the premium further includes determining premium in real-time by use of one or more predetermined pricing functions and providing the real-time premium determinations and quotes to the one or more user devices thereby to allow customization supplemental crop insurance policies insured.

18. A supplemental crop insurance machine as defined in claim 11, wherein the set of policy parameters includes one or more of the following:

a crop to be insured, an estimate of the number of acres to be planted by type and practice for a crop year, one or more production databases for the insured crop, an estimate of the anticipated yield by unit, type, and practice for a current crop year, a coverage level elected for the supplemental policy, an inventory value, a deductible, a co-pay, an insurance plan elected for determining the right to an indemnity, a liability adjustment factor, one or more alternate price discovery periods, and maximum price movement limit.

19. A supplemental crop insurance machine as defined in claim 11, wherein the determination of the premium includes one or more of the following:

historical area yield information, historical commodity pricing information, trend analysis, interpolation of historical trends, decomposition of trend deviants, and assessment of risk based on empirical or parametric analysis of historical trend deviants.

20. A supplemental crop insurance machine as defined in claim 11, wherein the determination of the premium includes an insured'"'"'s expected payments or indemnities from one or more of the following:

the Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), Revenue Protection (RP), Yield Protection (YP), Area Risk Protection Insurance (ARPI), Supplemental Coverage Option (SCO), Stacked Income Protection for Producers of Upland Cotton (STAX), or successor programs offered by USDA Agencies including the Farm Service Agency (FSA), Risk Management Agency (RMA), or the Federal Crop Insurance Corporation (FCIC), individually and collectively defining federal agricultural programs.

21. A supplemental crop insurance machine as defined in claim 20, wherein the determination of the premium includes an insured'"'"'s expected payments or indemnities from one or more of the following:

interactions of the federal agricultural programs with each other and the resulting payments and indemnities from such interactions, fluctuations in market price, expected yields, and realized yields.