Usage-based insurance cost determination system and method

• US 8,812,330 B1
• Filed: 09/11/2012
• Issued: 08/19/2014
• Est. Priority Date: 01/18/2005
• Status: Active Grant

• Current Assignee: Allstate Insurance Company (Allstate Corporation)
• Original Assignee: Allstate Insurance Company (Allstate Corporation)
• Inventors: Cripe, Frederick F., Fiete, Stephen
• Primary Examiner(s): Ebersman, Bruce I
• Assistant Examiner(s): POE, KEVIN T
• Application Number:
  US13/609,595
• Time in Patent Office: 707 Days
• Field of Search: 705/4
• US Class Current: 705/4
• CPC Class Codes: G06Q 30/0284 Time or distance, e.g. usage of parking meters or taximeters
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A system and method for calculating and applying insurance costs. For vehicle insurance under one embodiment of the present invention, insurance costs are calculated on a per-mile basis in a nonlinear fashion, assigning different levels of risk based upon the distance driven by a customer. In one embodiment of the present invention, the first miles or kilometers driven by a customer are assigned a greater level of risk than later-driven miles or kilometers. The present invention provides an actuarial method that more closely conforms the cost of insurance for a particular vehicle to its annual mileage by creating a Rate Per Mile Factor (RMF), where the RMF is expressed as a function of annual mileage.

Claims

1. A method of determining a distance-based premium for vehicle insurance for a customer, comprising:

receiving from a remote terminal information concerning one of actual distance traveled and estimated distance traveled;

calculating, in a processor, a customer premium based at least in part upon;

the one of actual distance traveled and estimated distance traveled,

a variable rate per distance unit factor, the rate per distance unit factor decreasing over a first range as the one of actual distance traveled and estimated distance traveled increases, and

a calculated rate per distance unit equation, the rate per distance unit equation calculated for a rate per distance unit curve, and determined by;

processing a received plurality of distance data and loss data;

correlating the distance data with the loss data, the correlation exhibiting a curve with non-linear distance-based relationship; and

applying a curve fitting technique to the correlated distance data and loss data to find an equation that closely matches the exhibited curve; and

transmitting, by the processor, the calculated customer premium.

2. The method of claim 1, wherein the variable rate per distance unit factor increases over a second range subsequent in distance to the first range as the one of actual distance traveled and estimated distance traveled increases.

3. The method of claim 1, wherein the variable rate per distance unit factor is calculated based upon formulae comprising:

4. The method of claim 1, wherein the variable rate per distance unit factor is calculated based upon formulae comprising:

5. The method of claim 1, wherein the customer premium is further based upon at least one of:

an age of the customer;

a gender of the customer;

a marital status of the customer;

a vehicle type;

a driving record of the customer; and

a geographical location of a residence of the customer.

6. The method of claim 1, wherein the remote terminal comprises an onboard data recorder located on a vehicle of the customer.

17. The method of claim 1, wherein the calculating, in the processor, the customer is carried out by a computer processor.

18. The method of claim 1, further comprising:

transmitting the calculated customer premium through a network to a terminal device.

7. A computer program product, embodied in a non-transitory computer-readable medium, comprising computer code configured to:

process information received from a remote terminal concerning one of actual distance traveled and estimated distance traveled; and

calculate, by a processor, a customer premium based at least in part upon;

the one of actual distance traveled and estimated distance traveled, and

a variable rate per distance unit factor, the rate per distance unit factor decreasing over a first range as the one of actual distance traveled and estimated distance traveled increases, wherein the rate per distance unit factor is calculated based on a formulae comprising;

8. The computer program product of claim 7, wherein the variable rate per distance unit factor increases over a second range subsequent in distance to the first range as the one of actual distance traveled and estimated distance traveled increases.

9. The computer program product of claim 7, wherein the variable rate per distance unit factor is calculated based upon formulae comprising:

10. The computer program product of claim 7, wherein the customer premium is calculated using a rate per distance unit equation determined by:

processing a received plurality of distance data and loss data;

correlating the distance data with the loss data, the correlation exhibiting a curve with non-linear distance-based relationship; and

applying a curve fitting technique to the correlated distance data and loss data to find an equation that closely matches the exhibited curve.

11. An electronic device, comprising:

a processor; and

a memory unit operatively connected to the processor and including computer code for determining a distance-based premium for vehicle insurance for a customer, wherein the electronic device is configured to, when the computer code is processed by the processor;

receive from a remote terminal information concerning one of actual distance traveled and estimated distance traveled;

calculate, a customer premium based at least in part upon;

the one of actual distance traveled and estimated distance traveled, and

a variable rate per distance unit factor, the rate per distance unit factor decreasing over a first range as the one of actual distance traveled and estimated distance traveled increases, wherein the rate per distance unit factor is calculated based on a formulae comprising;

exp(c*(Lix)) if x<

L;

exp(d*(x−

U)) if x>

U;

1 if L<

=x<

U;

wherein x is the one of actual distance traveled and estimated distance traveled, wherein L represents a low bound for a distance range where the rate per distance unit factor possesses its lowest value;

wherein U represents an upper bound for the distance range where the rate per distance unit factor possesses its lowest value, and wherein c and d are parameters set by an entity; and

transmit the calculated customer premium.

12. The electronic device of claim 11, wherein the variable rate per distance unit factor increases over a second range subsequent in distance to the first range as the one of actual distance traveled and estimated distance traveled increases.

13. The electronic device of claim 11, wherein the variable rate per distance unit factor is calculated based upon formulae comprising:

1+c*(L−

x)^p if x<

L;

1+d*(x−

U)^p if x>

U;

1 if L<

⁼x<

=U;

wherein x is one of actual distance traveled and estimated distance traveled;

wherein L represents a lower bound for a distance range where the variable rate per distance unit factor possesses its lowest value;

wherein U represents an upper bound for the distance range where the variable rate per distance unit factor possesses its lowest value, and wherein c, d and p are parameters set by an entity.

14. The electronic device of claim 11, wherein the customer premium is further based upon at least one of:

an age of the customer;

a gender of the customer;

a marital status of the customer;

a vehicle type;

a driving record of the customer; and

a geographical location of a residence of the customer.

15. The electronic device of claim 11, wherein the customer premium is calculated using a rate per distance unit equation for a rate per distance unit curve.

16. The electronic device of claim 15, wherein the rate per distance unit equation is determined by:

processing a received plurality of distance data and loss data;

correlating the distance data with the loss data, the correlation exhibiting a curve with non-linear distance-based relationship; and

applying a curve fitting technique to the correlated distance data and loss data to find an equation that closely matches the exhibited curve.