Method and system for providing account values in an annuity with life contingencies

• US 6,611,815 B1
• Filed: 01/02/2001
• Issued: 08/26/2003
• Est. Priority Date: 01/03/2000
• Status: Expired due to Term

• Current Assignee: Lincoln National Life Insurance Company (Lincoln National Corporation)
• Original Assignee: Lincoln National Life Insurance Company (Lincoln National Corporation)
• Inventors: Lewis, Stephen H., Schwartz, Denis G.
• Primary Examiner(s): Millin, V.
• Assistant Examiner(s): Bashore, Alain L.
• Application Number:
  US09/753,408
• Time in Patent Office: 966 Days
• Field of Search: 705/4, 705/35, 705/36
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A data processing method for administering an annuity product having a guarantee of lifetime payments. The method includes establishing a charge for the guarantee of lifetime payments, determining an initial benefit payment and paying the initial payment to a beneficiary, determining a subsequent periodic payment, periodically determining an account value, and periodically paying the subsequent payment and reporting the account value to the beneficiary. A death benefit or cash surrender benefit may be provided, and either or both may be related to the account value. In certain embodiments, the account value is determined throughout the period between periodic reports to the beneficiary, and may be accessed upon demand by the beneficiary.

Claims

1. A data processing method for administering an annuity product having an account value and a guarantee of lifetime payments, comprising the steps of:

a. establishing a charge for paying the lifetime payments after the account value reaches zero in accordance with the guarantee;

b. using a computer;

1. determining an initial benefit payment;

2. detemining a subsequent periodic benefit payment; and

3. periodically determining the account value;

c. periodicalIy paying the initial payment and the subsequent payment and reporting the account value to the beneficiary.

2. The data processing method of claim 1, wherein the step of establishing a charge for the guarantee of lifetime payments further comprises the steps of determining a front end charge and deducting the front end charge from an initial deposit.

3. The data processing method of claim 2, wherein the front end charge is determined based upon at least one of a plurality of factors, including age, sex, liquidity period, and interest rates.

4. The data processing method of claim 2, wherein the initial benefit payment is determined by the following formula:

$\mathrm{Initial}<br><br>\text{\hspace{1em}<br><br>}<br><br>\mathrm{benefit}=\mathrm{Deposit}\times <br><br>\left(1-\mathrm{Charge}\right)/\left[\underset{t=0}{\overset{12<br><br>N-1}{\sum <br><br>}}<br><br>\text{\hspace{1em}<br><br>}<br><br>1/{\left(1+\mathrm{AIR}\right)}^{t/12}\right]$

Where;

Charge=charge for lifetime guarantee (as a percent of deposit)

N=number of years account value is maintained

AIR=assumed investment rate (annual).

5. The data processing method of claim 4, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the initial benefit payment.

6. The data processing method of claim 4, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment.

7. The data processing method of claim 4, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment increased by a predetermined percentage.

8. The data processing method of claim 4, wherein the subsequent periodic benefit payment is determined by the following formula:

9. The data processing method of claim 1, wherein the step of establishing a charge for the guarantee of lifetime payments further comprises the step of determining a charge to be deducted from each benefit payment.

10. The data processing method of claim 9, wherein the initial benefit payment is determined by the following formula:

$\mathrm{Initial}<br><br>\text{\hspace{1em}<br><br>}<br><br>\mathrm{benefit}=\mathrm{Deposit}\times <br><br>\left(1-\mathrm{Charge}\right)/\left[\underset{t=0}{\overset{12<br><br>N-1}{\sum <br><br>}}<br><br>\text{\hspace{1em}<br><br>}<br><br>1/{\left(1+\mathrm{AIR}\right)}^{t/12}\right]$

Where;

Charge level charge for lifetime guarantee (as a percentage of each benefit payment)

N=number of years account value is maintained.

AIR=assumed investment rate (annual).

11. The data processing method of claim 10, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the initial benefit payment.

12. The data processing method of claim 10, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment.

13. The data processing method of claim 10, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment increased by a predetermined percentage.

14. The data processing method of claim 10, wherein the subsequent periodic benefit payment is determined by the following formula:

15. The data processing method of claim 9, wherein the initial benefit payment is determined by the following formula:

16. The data processing method of claim 15, wherein the subsequent periodic benefit payment is determined by the following formula:

17. The data processing method of claim 10, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment.

18. The data processing method of claim 10, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment increased by a predetermined percentage.

19. The data processing method of claim 10, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the initial benefit payment.

20. The data processing method of claim 10, wherein the step of determining the subsequent benefit payment comprises the step of setting the subsequent benefit payment equal to the initial benefit payment increased by a predetermined percentage.

21. The data processing system of claim 1, wherein the step of establishing a charge for the guarantee of lifetime payments further comprises the steps of determining an asset charge and periodically deducting the asset charge from the account value.

22. The data processing method of claim 21, wherein the step of deducting the asset charge from the account value comprises the step of applying a lower crediting rate in the periodic determination of the account value.

23. The data processing method of claim 21, wherein the initial benefit payment is determined by the following formula:

$\mathrm{Initial}<br><br>\text{\hspace{1em}<br><br>}<br><br>\mathrm{Benefit}=\mathrm{Deposit}/\underset{t=0}{\overset{12<br><br>N-1}{\sum <br><br>}}<br><br>\text{\hspace{1em}<br><br>}<br><br>1/{\left(1+\mathrm{AIR}\right)}^{t/12}$

Where;

AIR=assumed investment rate (annual).

N=number of years account value is maintained.

24. The data processing method of claim 23, wherein the step of determining the subsequent benefit payment comprises the step of setting the subsequent benefit payment equal to the initial benefit payment.

25. The data processing method of claim 23, wherein the step of determining the subsequent benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment.

26. The data processing method of claim 23, wherein the step of determining the subsequent periodic benefit payment comprises the step of setting the subsequent benefit payment equal to the immediately preceding benefit payment increased by a predetermined percentage.

27. The data processing method of claim 23, wherein the subsequent benefit payments are determined by the following formula:

28. The data processing method of claim 1, comprising the additional step of providing at least one of a death benefit and a cash surrender benefit.

29. The data processing method of claim 28, wherein at least one of the death benefit and the cash surrender benefit is related to the account value.

30. The data processing method of claim 29, wherein the death benefit is equal to the account value.

31. The data processing method of claim 29, wherein the cash surrender benefit is equal to the account value, reduced by an optional surrender charge.

32. The data processing method of claim 1, wherein the account value is periodically determined by the following formula:

33. The data processing method of claim 1, wherein the account value is determined throughout the period between the periodic reports to the beneficiary, and may be accessed upon demand by the beneficiary.

34. The data processing method of claim 1, wherein the annuity product has a long term care insurance benefit, and further comprising the step of determining a charge for the long term care insurance benefit.

35. The data processing method of claim 34, wherein the charge for the long term care insurance benefit is determined in the same manner as the charge for the guarantee of lifetime payments.

36. The data processing method of claim 1, further comprising the steps of providing for partial withdrawals or additional deposits by the beneficiary, and redetermining the subsequent periodic benefit payment in the event of a partial withdrawal or additional deposit.