Methods and apparatus for funding future liability of uncertain cost

• US 4,642,768 A
• Filed: 03/08/1984
• Issued: 02/10/1987
• Est. Priority Date: 03/08/1984
• Status: Expired due to Term

• Current Assignee: College Savings Bank (NexBank SSB)
• Original Assignee: Peter A. Roberts
• Inventors: Roberts, Peter A.
• Primary Examiner(s): Harkcom, Gary V.
• Application Number:
  US06/587,568
• Time in Patent Office: 1,069 Days
• Field of Search: 364/400-402, 364/406, 364/408, 364/200 MS File, 364/900 MS File, 364/300, 364/715-716, 364/735
• US Class Current: 705/4
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

Methods and apparatus for funding a future liability by means of an insurance investment program. The system estimates the expected cost of the liability when the liability is expected to occur and computes the present value of each unit of insurance needed to yield that expected cost at maturity. The system also aids the insurance fund manager in making decisions regarding investment of fund assets in order to meet present and future obligations of the fund.

Claims

1. A data processing system for administering an insurance program to insure against the uncertainty of the cost of a service or commodity at a future date, which determines the premium charges required and manages the portfolio of investments purchased with invested premiums comprising:

means for determining the policy premium charge based on the present cost of the service or commodity, data concerning the time rate of change of said present cost, and the time period to maturity of the policy;

means for determining the redemption value of a policy based on the current premium charge for a policy having the same yield and maturity date;

means for entering policy purchase and redemption transaction data into the data processing system;

account list means for storing an account list including current information for each policy account;

asset position list means for storing an asset position list including current information concerning the portfolio of investments purchased with the policy premiums;

means for periodically processing said policy purchase and redemption transaction data to update the account list, and to determine the net amount represented by said transaction data for a period for which said periodic processing is performed;

means responsive to said transaction data and to information from said asset position list for providing portfolio management data so that securities can be selectively purchased or sold to provide that the cash flow from the portfolio is adequate for funding policy payouts and redemptions and to provide that the rate of yield of the portfolio at least matches the rate of change of the present cost of the service or commodity;

means for entering the selected security purchase and sale transaction data, to update the asset position list;

means for generating a management report including said portfolio management data and said information in said updated asset position list; and

means for generating a customer report including current information for each policy account.

2. The data processing system of claim 1, wherein the means for determining the policy premium charge comprises:

means for calculating a future value escalation rate in response to information concerning the current inflation rate, the projected rate of change of the inflation rate, and the projected rate of change of cost of the service or commodity;

means for projecting the future cost of the service or commodity based on the current cost and the future value escalation rate;

means for determining a present value discount rate by substracting an insurer'"'"'s risk premium rate from the future value escalation rate; and

means for discounting the future cost based on the present value discount rate to determine a current price for the policy premium charge.

3. The data processing system of claim 1, wherein the means for providing portfolio management data comprises:

means for determining the net change in asset position in response to information concerning the net amount of transactions, the reinvestment cash flow from the portfolio, and actuarial data; and

means responsive to the net change in asset position determination and to data inputs concerning investment criteria and projected interest rates for selecting securities to be purchased or sold, and for evaluating the effect of the selected security purchases or sales on the portfolio to reject any selection for which the yield on the portfolio is less than the future value escalation rate or for which the cash inflow from the portfolio is less than the total of projected policy payouts and policy redemptions.

4. A data processing method for administering an insurance program to insure against the uncertainty of the cost of a service or commodity at a future data, which determines the premium charges required and manages the portfolio of investments purchased with invested premiums comprising the steps of:

determining the policy premium charge based on the present cost of the service or commodity, data concerning the time rate of change of said present cost, and the time period to maturity of the policy;

determining the redemption value of a policy based on the current premium charge for a policy having the same yield and maturity date;

entering policy purchase and redmption transaction data;

storing an account list including current information for each policy account;

storing an asset position list including current information concerning the porfolio of investments purchased with the policy premiums;

periodically processing said policy purchase and redemption transaction data to update said account list;

determining the net amount represented by said transaction data for a period for which said periodic processing is performed;

providing portfolio management data in response to said transaction data and to information from said asset position list, so that securities can be selectively purchased or sold to provide that the cash flow form the portfolio is adequate for funding policy payouts and redemptions and to provide that the rate of yield of the portfolio at least matches the rates of change of the present cost of the service or commodity;

entering the selected security purchase and sale transaction data, to update the asset position list;

generating a management report including said portfolio management data and said information in said updated asset position list; and

generating a customer report including current information for each policy account.