Deductibles are an issue in all property insurance claims. Policyholders hate to pay them but love the discount in policy price when a higher deductible is part of the policy. I wrote about a new deductible financing product in High Deductible? Try FundMyDeductible.com. Some questioned whether this was proper and what the insurance industry response would be.
Cypress Property and Casualty runs this advertisement on its website:
The Deductible Installment Plan*, available only from Cypress Property & Casualty Insurance Company makes delaying repairs a thing of the past.
AN IDEA SO INNOVATIVE, WE HAD TO PATENT IT!
Now if you incur property losses from a hurricane or other catastrophes, you no longer have to delay your necessary repairs until you can pay your deductible.
NO OTHER INSURANCE COMPANY CAN OFFER YOU THIS BENEFIT!
It is amazing what can give rise to a Untied States Patent these days. Merlin Law Group’s Knowledge Manager Ruck DeMinico tracked down four different insurance deductible patent matters for your review.
- System and method for providing financial products for a deductible portion of an insurance policy (Assignee: USAA) (2014)
- System and method for processing and administrating deductible calculations (Assignee: Hartford Fire Insurance Company) (2013)
- Insurance deductible payment plans and related services (2007)
- Deductible Shield (2011)
The one involving Hartford Insurance stated, in part:
For insurance policies, a deductible is typically the amount that must be paid out of pocket before the insurer will pay out on an associated claim. The deductible is normally quoted as a fixed dollar amount and is a standard part of insurance policies. In the event of a loss, in some policies, the deductible must be paid by the insured, before the benefits of the policy are paid. In some policies, the amount due to the insured for a covered loss is reduced by the amount of the deductible, but there is no requirement that the insured pay the amount out of pocket before payment by the insurer. Typically, the higher the deductible, the lower the premium, and vice versa. For example, a policy with a yearly premium of $1000 may have a $500 deductible, a policy with a yearly premium of $1500 may have a $250 deductible, and so on. Depending on the policy, the deductible may apply per incident, per year or for the life of the policy. In a typical automobile insurance policy, a deductible will apply to claims arising from damage to or loss of the policy holder’s vehicle without regard to fault.
Another type of deductible in the marketplace is the so-called disappearing or vanishing type deductible. The so-called disappearing type deductible is a formula deductible that decreases as the amount of loss increases or in the case of automobile policies, where the insured has no losses/accident. The disappearing deductible may eventually disappear completely over a period of years if the policyholder does not have any claims or losses.
A negative consequence of having a deductible is that many policyholders never report many smaller accidents, losses or claims as the bulk of the cost will be borne by the policyholder requiring a lump sum payment from the policyholder on their own behalf. For example, if a policyholder has a $600 loss and a $500 deductible, the policyholder will not be likely to report the claim as the policyholder would have to pay for most of the loss anyway and then also incur a potential negative rating from the insurer due to the loss. By way of further example, even if a policyholder were to have a $1000 loss with a $500 deductible policy, half of the loss would still have to be borne by the policyholder and thus the policyholder may still be incentivized not to report the claim.
Accordingly, it would be desirable to have a system that could provide policyholders with improved deductible choices including a policy with no deductible at all.
In one embodiment, the present invention is a system for administering policies without requiring lump sum deductible payments by a consumer, the system comprising: one or more processors; a memory device coupled to the one or more processors; and one or more programs, wherein the one or more programs are stored in the memory and configured to be executed by the one or more processors, the one or more programs including instructions for: displaying an insurance policy application graphical user interface, providing a deductible option selection screen on the graphical user interface; receiving a deductible option selection from the graphical user interface; storing the deductible option selection in a storage device; and responsive to receiving an insured deductible option selection from the graphical user interface, communicating via a communications network, the deductible option selection to a primary and a secondary insurer, the secondary insurer providing deductible insurance coverage without involving the consumer.
The present invention in other embodiments is a computer system for providing insured deductibles options comprising: a processor; and a memory storage device in communication with the processor; the processor configured to: receive via a computer communications network applicant data related to a no deductible option selection; store the no deductible option selection in the memory storage device; determine, based on the no deductible option selection, a premium associated with the no deductible option selection; and transmit information related to the no deductible option selection to at least two insurers, wherein the at least two insurers share the determined premium.
In other embodiments, the present invention is a computer-implemented method for administering insurance policies in a multi-insurer platform, the policies having separable deductible coverages, comprising: receiving, via a communications interface, data for an insurance policy related to at least one party; determining, via a computer processor, insurance premium information for the at least one party; selecting, via the computer processor, two or more insurers for sharing of the insurance policy; storing, via a data storage device information related to the two or more insurers; and transmitting data to the two or more selected insurers, wherein one of the selected insurers is allocated a deductible coverage.
The insurance industry is embracing the idea that deductibles are not good for the consumer and that they can legally be paid over a period of time. This obviously will make it easier for policyholders and contractors facing large deductibles to get started on construction.
Thought For The Day
People equate patents with secrecy, that secrecy is what patents were designed to overcome. That’s why the formula for Coca-Cola was never patented. They kept it as a trade secret, and they’ve outlasted patent laws by 80 years or more.