Insurance IP Bulletin
An Information Bulletin on Intellectual Property activities in the insurance industry

A Publication of - Tom Bakos Consulting, Inc. and Markets, Patents and Alliances, LLC
October 15, 2004

VOL: 2004.3
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Publisher Contacts Tom Bakos Consulting, Inc.
Tom Bakos: (970) 626-3049

Markets, Patents and Alliances, LLC
Mark Nowotarski: (203) 975-7678

Complete contact information.

Find Prior Issues HERE

Patent Tech

Why Does The Patent System Exist?

A comment from Charles Call (, 68 Horse Pond Road, West Yarmouth, MA 02673-2515. Charles is the patent attorney for this issue’s feature article co-author, Ben Williams

Patent Watch

Progressive Builds a Fortress of Patent Protection

Progressive is using sound patent strategy to build a fortress of patent protection around their innovations in telematic auto insurance. Their patent strategy includes filing an original patent application early in their development process and broadening the coverage of their original patent application with follow-on patent applications called "continuations" and "continuations-in-part".

Patents in Action

Why Isn't the World Beating a Path to my Door?

If you are an individual inventor (or group of individual inventors), finding a market for your new, inventive insurance product idea is never as easy as you think it should be. If it were, everybody would be doing it and, then, where would you be? … probably, in a long line someplace. The truth is it's hard, it takes time and effort, and usually money to find a market for a new product idea. Especially in the insurance industry, nobody is looking for you, the inventor, at least not yet. You've got to find them. How do you go about doing that?


An Update on Current Patent Activity

We continue to use patent activity in USPTO class/subclass 705/4 (which is the class for DATA PROCESSING: FINANCIAL, BUSINESS PRACTICE, MANAGEMENT, OR COST/PRICE DETERMINATION and the subclass for INSURANCE) as a measure of invention in the insurance industry. The table below shows that since the last issue of the Insurance IP Bulletin (August 15, 2004) two additional patents have been issued and 24 more patent applications have been published.

While we use patents or patent applications with claims in class/subclass 705/4 as an indication of activity in the insurance industry, there are other class/subclass categories in which patents or applications of interest to the insurance community might appear.

For example, there are 159 patent applications and 45 issued patents not included in the above totals which are in business method class 705 and use "insurance" and "life, "health", or "automobile" in their Claims.

Another example, there are 45 issued patents in class 705 not listed above (i.e. they are not in class 705/4) which use the words "actuary" or "actuarial" in the Specification. There are 117 more in other classes that use these words in their Specification. So, all together, there are 162 issued patents which might involve actuarial work in some way.

One of these patents (#6,381,510) is for Methods and apparatus for facilitating electronic commerce in area rugs. It offers a fairly interesting and useful method of shopping for area rugs for those with an interest in handmade rugs who may not be close to a showroom. "Actuarial" is used in the following statement taken from the Specification:

Maintenance of rug histories also enable the development of actuarial data about handmade rugs. For example, data mining techniques may be used to determine how often rugs are damaged or destroyed, as well as their average `life expectancy.` This information is necessary to the creation of an efficient market for insuring handmade rugs.

Of interest is that the Specification contemplates a more efficient market for insuring handmade rugs but makes no claims in this regard. Perhaps that may turn out to be an opportunity missed.

 Again, a reminder -

Patent applications have been published 18 months after their filing date only since March 15, 2001. Therefore, there are many pending applications not yet published. A conservative assumption would be that there are about 125 applications filed every 18 months in class 705/4. Therefore, there are, probably, about 570 class 705/4 patent applications currently pending, only 445 of which have been published.

Because the pending patents total above includes all patent applications published since March 15, 2001, applications that have been subsequently issued will also appear in the issued patents totals.

Links to web sites with patent information.

United States Patent and Trademark Office

World Intellectual Property Organization (Patent Cooperation Treaty)

Patent Laws and Regulation
(A link to web site)

Insurance Patent Information
Link to Markets, Patents & Alliances.

Actuarial Services
Link to Tom Bakos Consulting, Inc.


Our third issue, we hope, will provide further enlightenment regarding the growing use of patents in the insurance industry to protect the value of the intellectual property being created by individuals and funded either personally or by insurance companies.

In this issue Francois Gadenne, President and CEO, and Ben Williams, VP and Chief Technical Officer, both of Retirement Engineering, Inc. Boston, MA., provide an inventor's perspective on the impact of intellectual property rights on insurance product innovation - in particular, their own. Retirement Engineering, Inc. develops financial product concepts, secures the intellectual property rights, and supports its licensed manufacturers and distributors with consulting and certification services. In particular, Retirement Engineering, Inc.’s future-income-denominated™ financial products enable financial institutions to meet the growing demand for predictable retirement income solutions.

Our mission is to provide our readers with useful information on how intellectual property in the insurance industry can be and is being protected – primarily through the use of patents. We will provide a forum in which insurance IP leaders can share the challenges they have faced and the solutions they have developed for incorporating patents into their corporate culture.

Please use the FEEDBACK link above to provide us with your comments or suggestions. Use QUESTIONS for any inquiries. To be added to the Insurance IP Bulletin e-mail distribution click on ADD ME. To be removed from our distribution click on REMOVE ME.

Tom Bakos & Mark Nowotarski

Upcoming Patent Session

Casualty Actuarial Society Annual Meeting, Montreal, Canada - November 15, 2004

Tom Bakos and Mark Nowotarski will be discussing the impact of patents on the P&C industry at the annual meeting of the Casualty Actuarial Society on November 15, 2004 in Montreal, Canada. They will be tentatively joined by Joseph Thomas, Supervisory Patent Examiner for Insurance Related Inventions, United States Patent and Trademark Office. Joe will discuss the statutory requirements of patentability for insurance related inventions. The session title and description are:

The End of Free Sharing in the Insurance Industry
There is an increased awareness and use of patents within the P&C insurance industry. Everyone from major carriers to independent actuaries are attempting to patent their new insurance inventions. Those that succeed may be able to dominate new markets. Those that pay no attention to this developing trend will be relegated to selling old forms of coverage or licensing the innovative new ideas of others.

This panel will discuss who is getting patents, what are they getting them on, and how they are using them to protect the value of their intellectual property and create competitive advantage. Attendees will learn how to recognize when they themselves have made a potentially patentable invention. They will also learn what actions they can take now to avoid losing their or their employer's patent rights in the future.

More information and registration can be found at:


The Impact of Intellectual Property Rights on Insurance Product Innovation

By: Francois Gadenne, President and CEO, Retirement Engineering, Inc. ( Boston, MA.,,


Ben Williams, VP and Chief Technical Officer, Retirement Engineering, Inc. Boston, MA.

[Francois and Ben have several patent applications pending in the USPTO.]

Intellectual Property rights will give innovative individuals and insurers competitive advantages they’ve never had before. Insurers with patent protected technologies will grow faster than their competitors. Patents will enable more innovative as well as longer lived products. In the field of retirement income, patents provide a unique opportunity for insurers to compete with their traditional investment product rivals. Seventy percent of current patents and patent applications are filed by individual inventors. These patents represent a readily available resource for insurers to license and build into exclusive new products.

Recent conversations we have had with insurance industry executives highlighted a consensus that the industry has low annual growth rates. The average growth rate expectation is about 3%. In order for an insurer to grow faster than this low rate, it would need to take market-share away from its competitors.

While some rating agency analysts may disagree, insurance industry executives believe that insurers shun price cuts in favor of both product innovation and distribution differentiation to compete for market share. This approach is taken in an industry that historically has not had a culture that valued proprietary or intellectual property rights. New ideas and product concepts are documented in public filings and can be easily copied by competitors when introduced into the market. And, interestingly, insurers who quickly copy product innovations can expect to do as well or better than the product innovators.

In the field of retirement income, many of the insurance industry’s innovations have historically focused on annuity product variants sold as investment accumulation vehicles and priced with the expectation of a short sales-cycle before they become widely copied. In a market in which new ideas have not been protected, the quick copying of successful new product introductions is not unusual. Distribution channels have become the insurance industry’s de-facto customers and they have demanded clones of successful products from their carriers. The reason the market has focused on investment as opposed to income products is that Baby-Boomers were in their prime saving and accumulation phase.

Current innovative efforts in annuity accumulation markets are focusing on what is not evident. And, what is not evident is the fact that these markets are moving from an investment accumulation focus to a retirement income focus. Because of this, the distribution channels are not fully satisfied with the traditional flow and types of products coming from the industry. Distribution channels want products that can be simply-sold and that directly address individual investors’ retirement income needs.

But something else is also happening. Respected insurance industry leaders have made the call for both the importance and the urgency of the protective role of patents in product innovation. This will likely impact the competitive environment. We agree. We further believe that retirement income product concepts with protected Intellectual Property (IP) will give innovative individuals and insurers competitive advantages that they have never had before.

Specifically, we expect that insurers with patent protected innovations that successfully address the new market needs will grow faster than competitors who rely on traditional product technologies. The competitors won’t be able to freely copy patent protected innovations without licenses from the patent owners. Innovative insurers who meet the needs of their distribution channel customers with patent protected new product innovations have a better chance of controlling their growth and adding assets and profits to their bottom line.

In addition we feel that IP protected innovation in the retirement income market can go "outside-the-box" with a better chance of success. Such products will offer visible, potentially break-through differentiation at the individual investor level. Some of those innovations may not have to be called annuities. Insurers with such innovations will generate more consumer level interest for their distribution channels customers.

Current inventive efforts in the retirement income market recognize that, after more than 20 years of products that rely on a hopeful asset accumulation, the market’s pendulum is swinging back in favor of guaranteed retirement income. The availability of IP protection for new retirement income products represents a unique opportunity for insurers in their historical competition against investment products. Annuities have survived the investment accumulation era, and now IP protection offers innovative insurers an opportunity to claim as their own new retirement income products.

Finally, protecting innovation with patents enables longer product lives within the innovating company. Innovators with longer-lived products will be able to take greater market-share than previously experienced. Therefore, patent protected innovation will combine greater volume with the higher margins required to amortize the research and development costs associated with innovation

We see a significant insurance industry change coming. Insurers who now quickly copy successful new product introductions will be forced to build and manage their own patent protected IP portfolios to compete with other insurance company innovators who are already protecting their IP with patents. Indiscriminant copying of new product ideas will have new risks as well as new costs associated with patent infringement lawsuits. Being first to market will favor the innovating insurers and distributors who patent their innovations or acquire the patented innovations of others.