The concept of a reversionary annuity, a payment made to life x after the death of life y contingent on life x being alive at that time, is well known in actuarial circles. Chapter 13 in Life Contingencies by C. W. Jordan is devoted to it. So, how can a reversionary annuity be patented if it is not new?

Well, when examining a patent or patent application one must look very closely. Often the invention is not what it appears to be. Since inventors must describe their invention in a patent so that others of average skill in the art can understand it, it is reasonable to expect that once disclosed an invention will appear to be obvious. In order to discover exactly what the invention is one must look for the inventive step, that is the leap or insight displayed by the inventor, which is a requirement of all invention.

In this patent the inventive step was the new concept for deriving a premium which required underwriting to be done not only on the insured life (which is common) but also on the beneficiary life. Therefore, the premium calculation relies on life expectancies (mortality) for both the insured life and the beneficiary life. The issuance of a life insurance policy and the premium rate charged never before had depended on the mortality of the beneficiary.

This insurance invention is in a category of insurance invention that relies on a tailoring of benefits concept in order to achieve a more efficient use of premium dollars. By eliminating presumably unnecessary benefits, premium dollars can be focused on delivering needed or desired benefits with the result being a more affordable product.

So, how have things worked out for the inventor? Well, Dean Potter, one of the inventors, has reported that the invention was sold to Baltimore Life Insurance Company (BLIC) in June, 2001. He became an employee responsible for marketing and administration from his office in Oklahoma City. BLIC developed a product based on the patent and was having improving success in marketing until January, 2003 when they were down graded (A- to B+) by A. M. Best.

In an attempt to bring their rating back up, BLIC brought the TPA administration in house and closed down the Oklahoma City office through which Dean had been providing administration. Dean now found himself unemployed but with an opportunity to continue promotion of the product as through an independent national marketing organization which he formed, Potter Marketing.

Again Dean found success through developing a market that did not require an "A" rated insurer. However, BLIC is reluctant to expand participation in the market due to the impact the potential volume could have on surplus.