A Snapshot on Insurance Patenting

Patents may be obtained for insurance related inventions. Historically, patents covered only the technical side of a new insurance invention. Insurance patent is a type of business method patent. Though there is a sustained debate as to what extent business method patent should be granted. They may constitute as very important assets to some technology related companies.

Insurance Patent is raising a lot of controversy as these patents may be used to get more comprehensive coverage of improvements in basic insurance processes, such as the method of calculating premium, reserves, underwriting etc. Those who believe it to be a positive development cite that by being able to protect inventions, insurance companies will be enabled to undertake major investments in new product development.

Those who believe otherwise i.e. they think that the growth in patents will be bad for the insurance industry, are concerned that invalid patents will issue and that this will lead to patent trolls inhibiting new product introductions by demanding excessive license fees for these questionable patents.

Pay As You Drive TM is a product of such a patent. It is the trademark of Norwich Union, an insurance company. PAYD discloses a means for auto insurance risk selection, whereby a driver’s mileage and driving behavior are monitored and insurance premiums are charged accordingly.

The United States is fairly liberal in granting business method patents, where Europe is fairly conservative. Historically, only about one or two patents per year issued in the US on inventions specifically related to insurance policies. This changed dramatically, with the 1998 State Street Bank Decision. The State Street Bank Decision was a ruling by the Court of Appeals for the Federal Circuit that confirmed that there was no “business method exception” under United States patent law. The number of patent applications filed per year after this decision was handed down jumped to about 150. The number of patents issuing per year jumped to about 30.