Abstract:
A method and system of appraising a life insurance or annuity product includes receiving a request for a life insurance or annuity product and information about a party requesting the life insurance or annuity product; preparing a bid solicitation for the life insurance or annuity product based on the request and information and transmitting the bid solicitation to a plurality of product carriers; a plurality of product carriers submitting initial proposals for providing the life insurance or annuity product; generating ratings for the initial proposals, respectively; and generating appraisals for the initial proposals; and informing the product carriers of the decision.

Description:
BACKGROUND OF THE INVENTION  
         [0001]    1. Field of the Invention  
           [0002]    The present invention relates to an automated system for appraising value to consumers of a life insurance or annuity product, and more particularly, to a computer-based value appraising system.  
           [0003]    2. Discussion of the Related Art  
           [0004]    The financial services industry consists of industry segments such as insurance and banking. In turn, the insurance industry consists of industry segments such as life insurance, health insurance, and property and casualty insurance.  
           [0005]    The life insurance industry includes product markets such as term life insurance, life insurance, variable life insurance, annuities, joint products, viatical settlements, preneed insurance, and long-term care insurance. Insurance carriers sell life insurance products through various distribution channels such as captive agents, independent agents, banks, affinity groups, and financial planners.  
           [0006]    The present life insurance product markets for both insurance product proposals and in-force insurance products are inefficient. For insurance product proposals, the problem stems from: (1) an inadequate exchange of information between consumers and insurers during the selling process and, (2) the absence of a real-time auction market in which to price life insurance product proposals. Inefficient product markets for in-force insurance products stem from the absence of a system for measuring an insurance product&#39;s performance while that product is in-force.  
           [0007]    An inadequate exchange of relevant and available information between consumers and insurers during the selling process is a significant source of product market inefficiency. Typically, consumers often do not receive relevant and available information necessary to make an informed purchase decision. Also, insurers frequently do not receive relevant and available information on the consumer and current market pricing necessary to tailor their proposals for optimal product performance and pricing. Such inefficient transmission of information results in product market inefficiency. Such product market inefficiency in the insurance industry adversely affects consumers and insurance companies.  
           [0008]    Moreover, many life insurance products have complex features that consumers do not understand. Consumers&#39; lack of insurance product knowledge opens the door to misleading sales practices such as twisting, churning, and vanishing premiums. Product “gimmickry,” such as lapse basing, preys on a consumer&#39;s inability to detect its existence. Recent, widely publicized accounts of race-based underwriting indicate that market conduct problems can go undetected for years by consumers, insurance company managements, and insurance industry regulators. Insurance industry regulators have attempted to enforce market conduct standards. Insurance companies have sought to curtail sales abuses. Their efforts have not solved the problem.  
           [0009]    Market conduct problems occur regardless of an insurance company&#39;s financial strength. Favorable financial ratings are no indication of an insurer&#39;s compliance with market conduct standards. Independent rating firms evaluate an insurer&#39;s claims paying ability. They do not rate the products sold by insurers. The life insurance industry has no product rating system that appraises a proposed insurance product&#39;s total value to the consumer.  
           [0010]    These and other market conduct problems point to the need for a system that assists the consumer in appraising a proposed insurance product&#39;s value.  
           [0011]    The absence of a real-time auction market in which to price life insurance product proposals is a source of product market inefficiency. Currently, whether life insurance products are sold on the Internet or sold offline, the products are sold in a “fixed-priced” market. Typically, during the sales process, consumers and insurers cannot obtain real-time, market pricing information for products that are tailored to individual consumer needs. Thus, both consumers and insurers are deprived of opportunities to improve pricing before the sale closes. Consequently, some insurance products may be priced too high. In other cases, product prices may be too low.  
           [0012]    Some insurers presently post fixed pricing information for standard products on the Internet, making it easier for consumers to compare prices for certain products. The Internet has made available more pricing information to consumers than ever before. However, while price comparisons allow the consumer to seek the lowest price for such fixed-price products, these price comparisons provide no other information to allow for an appraisal of the total value proposition.  
           [0013]    Similarly, existing policyholders have no means for evaluating the performance of their in-force insurance policies. No system exists in the marketplace for appraising an in-force product&#39;s continuing value to the consumer.  
           [0014]    Moreover, price is only one element in appraising an insurance product&#39;s total value proposition. No available systems provide consumers with information other than price to facilitate informed purchase decisions. Consumers need a system that appraises the total value proposition of life insurance product proposals. Such a system would lead to stronger product market efficiency.  
           [0015]    In addition, even though present systems allow for price shopping on the Internet by consumers, from the insurer&#39;s perspective, such price shopping commoditizes insurance products. Thus, insurers are forced to compete on price alone and cannot differentiate products that provide other “non-price” value for consumers. Consequently, the attractiveness of the industry&#39;s structure declines, competitor rivalry increases, weak product substitutes proliferate, and entry barriers become lower across product markets. These structural changes squeeze margins and erode industry-wide profitability.  
         SUMMARY OF THE INVENTION  
         [0016]    Accordingly, the present invention is directed to an evaluating system for a life insurance or annuity product that substantially obviates one or more of the problems due to limitations and disadvantages of the related art.  
           [0017]    An advantage of the present invention is to provide an on-line, real-time system for evaluating a proposed life insurance or annuity product.  
           [0018]    An advantage of the present invention is to provide an on-line, real-time system for evaluating an in-force life insurance or annuity product.  
           [0019]    An advantage of the present invention is to provide an on-line, real-time system for evaluating a replacement life insurance or annuity product.  
           [0020]    Another advantage of the present invention is to provide a system that creates efficient product markets for the benefit of the life insurance industry and its customers.  
           [0021]    Another advantage of the present invention is to provide a system that enables insurance companies and insurance distribution channels to better serve their customers and to improve industry-wide profitability  
           [0022]    Another advantage of the present invention is to provide a system to improve product pricing by pricing insurance products in an auction-style market.  
           [0023]    Another advantage of the present invention is to provide a system for evaluating the current performance of an in-force life insurance or annuity product.  
           [0024]    Additional features and advantages of the invention will be set forth in the description which follows, and in part will be apparent from the description, or may be learned by practice of the invention. The objectives and other advantages of the invention will be realized and attained by the structure particularly pointed out in the written description and claims hereof as well as the appended drawings.  
           [0025]    To achieve these and other advantages and in accordance with the purpose of the present invention, as embodied and broadly described, a method of appraising a life insurance or annuity product includes the steps of receiving a request for a life insurance or annuity product and information about a party requesting the product; preparing a bid solicitation for the product based on the request and information and transmitting the bid solicitation to a plurality of product carriers; at least one of the plurality of product carriers providing a proposal for providing the life insurance or annuity product; automatically generating a numerical rating corresponding to each proposal and providing the numerical rating to the corresponding product carrier; allowing the plurality of product carriers to revise the proposals based on the numerical rating; the product carriers providing a final proposal; and generating an appraisal for each of the final proposals.  
           [0026]    It is to be understood that both the foregoing general description and the following detailed description are exemplary and explanatory and are intended to provide further explanation of the invention as claimed. 
       
    
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0027]    The accompanying drawings, which are included to provide a further understanding of the invention and are incorporated in and constitute a part of this specification, illustrate embodiments of the invention and together with the description serve to explain the principles of the invention.  
         [0028]    In the drawings:  
         [0029]    [0029]FIG. 1 is a block diagram that illustrates a preferred embodiment of the present invention.  
         [0030]    [0030]FIG. 2 is a block diagram that illustrates parties involved in a business transaction according to the preferred embodiment of the present invention.  
         [0031]    [0031]FIG. 3 is a block diagram that illustrates an embodiment of the present invention appraising the continuing value proposition to the policyholder of an in-force life insurance policy or annuity.  
         [0032]    [0032]FIG. 4 is a block diagram that illustrates an embodiment of the present invention for a policyholder to query a product value appraisal system without the aid of a distribution channel.  
         [0033]    [0033]FIG. 5 is a block diagram that illustrates an embodiment of the invention appraising the value proposition for replacing an in-force life insurance policy or annuity.  
         [0034]    [0034]FIG. 6 is a block diagram that illustrates an embodiment of the present invention for a policyholder to query a product value appraisal system for rating an in-force life insurance policy or annuity. 
     
    
     DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS  
       [0035]    Reference will now be made in detail to the preferred embodiments of the present invention, examples of which are illustrated in the accompanying drawings.  
         [0036]    The present invention relates to an evaluating system for a life insurance or annuity product under consideration for purchase, the ongoing value of a life insurance or annuity product already owned, or replacing a life insurance or annuity product. In addition, either as a separate process or in conjunction with this process, the product value appraisal system of the present invention enables an on-line, real-time auction process for pricing life insurance and annuity products. The present invention provides a system for appraising a life insurance or annuity product&#39;s total value proposition to the consumer. The product value appraisal system operates preferably via the Internet, but may be configured to work off-line or via a closed network or Intranet. The system is configured to support all categories of insurance transactions including, business-to-business, business-to-consumer, and business-to-employee. The system appraises life insurance product and annuity proposals as well as life insurance and annuity products that are in-force and replacement product proposals.  
         [0037]    The present invention is applicable to a number of financial products within the life insurance industry, as well as annuities. Within the market for life insurance, there are a variety of products for which a system for appraising value is most useful. Term life policies provide a death benefit for a limited number of years after which they expire without value. They may insure the life of one person, or provide protection on the lives of two people (Joint Term policies). Joint Term policies are of two types: those that pay the death upon the first death to occur and those that pay upon the second death during the term.  
         [0038]    Term products may have non-guaranteed premium structures (participating policies that pay dividends or “indeterminate premium” plans that feature a guaranteed maximum premium scale, but provide for the opportunity to pay a lower current premium based on current experience of the insurer) or fully guaranteed premiums that never change (non-participating plans). Term plans that provide a death benefit that is a constant amount over the term period may be renewable at the end of the term (e.g., Annually Renewable Term, 5-Year Renewable Term, etc.). A subset of renewable term plans is Reentry Term, which provides the opportunity for a lower renewal premium than otherwise available if the insured can provide evidence of continuing good health. Non-renewable term plans include 20-Year Term and Term to Age 65. Term plans that provide a death benefit that decreases over the term period are generally non-renewable and are purchased to insure a specific need. Mortgage Protection Term, often sold in connection with new residential home loans is a good example.  
         [0039]    Ordinary life insurance plans are conceptually designed to provide death protection for the insured&#39;s entire lifetime. Unlike term life, they commonly provide for the accumulation of cash values that are available to the insured should the policy need to be terminated prior to death. Premiums for Ordinary Life can be structured to be payable for life or some finite number of years. Single Premium Life forms are even available. All Ordinary Life plans are generally available in joint life insurance (first-to-die) and joint and last survivor insurance forms in addition to single life forms. In order of decreasing guarantees (increasing risk) to the purchaser, these plans fall into the following types: nonparticipating whole life, indeterminate premium whole life, participating whole life, interest sensitive whole life, universal life insurance, variable whole life and variable universal life.  
         [0040]    Nonparticipating whole life provides for guaranteed level premiums and a guaranteed death benefit with fully guaranteed cash values. The insurer assumes all risks and the purchaser does not participate in experience more favorable than the insurer&#39;s guarantees.  
         [0041]    Indeterminate premium whole life insurance is a version of nonparticipating whole life insurance with indeterminate premiums, which is discussed above with regard to term life insurance.  
         [0042]    Participating whole life insurance is similar to nonparticipating whole life, but offers the opportunity to receive annual dividends from the insurer if experience is more favorable than guarantees.  
         [0043]    Interest sensitive whole life insurance is a version of nonparticipating whole life insurance under which the insurer credits excess interest over and above the policy&#39;s guarantee to the policy&#39;s cash values as current conditions warrant.  
         [0044]    Universal life insurance is a version of nonparticipating whole life under which the insurer provides guarantees as to maximum charges for expenses and the mortality risk and minimum interest rates, but the amount of premium is based on current charges and interest rates. Thus, the insured is assuming a fair amount of risk with respect to future experience, primarily concerning interest rates. Considerable flexibility is provided for changes in the amount and timing of premium payments and the amount of the death benefit as well the ability to make withdrawals from the cash values. There is consequently no guarantee that the policy will be in effect at the insured&#39;s death if proper adjustments are not made in the premium payment pattern. This is a significant difference from the four types of Ordinary Life described above.  
         [0045]    Variable whole life insurance is a form of nonparticipating whole life under which the insured assumes substantially all of the investment risk, including the risk of fluctuations in principal value as well as the interest rate risk. Fixed level premiums are provided, but the death benefit and cash values fluctuate with the investment performance of the mutual funds selected by the insured for investment of the premiums. There is a minimum guaranteed death benefit payable whenever the insured&#39;s death occurs.  
         [0046]    Variable universal life insurance is a combination of variable whole life insurance and universal life insurance. Variable universal life insurance represents the life product type with the fewest traditional insurer guarantees and thus the greatest assumption of risk by the insured. In return for assuming this risk, the insured has the upside potential of receiving a significant better value in favorable economic environments than under the other product types.  
         [0047]    As shown in FIG. 1, the product value appraisal system of the present invention simultaneously solicits, prices, and rates life insurance and annuity policy proposals. FIG. 1 illustrates a “business-to-business” transaction.  
         [0048]    A party seeking a life insurance or annuity product, the proposed insured  104 , requests a life insurance or annuity product through a distribution channel  108  that sells such products to consumers, as illustrated by step  1  in FIG. 1. The proposed insured  104  also provides the distribution channel  108  with information necessary for the distribution channel to request proposals from carriers who sell that product type. This information includes the risk profile of the proposed insured  104  for the product. Demographic and risk profile data include, for example, the proposed insured&#39;s age, sex, smoking habits, amount of insurance or annuity benefit desired, the pattern of premium payments and the pattern of disbursements desired from the product.  
         [0049]    Next, the distribution channel  108  transmits to a product value appraisal system (“PVAS”)  112  information provided by the proposed insured  104 , including the demographic and risk profile information as inputs to the product value appraisal system  112 , as illustrated by step  2  of FIG. 1.  
         [0050]    Then, the product value appraisal system  112  initiates bidding and/or invites proposals from interested product providers or carriers  116  by sending a proposed opening bid or invitation for proposal to a participating insurance carrier  116 , as illustrated by step  3  of FIG. 1. The opening bid provided by the product value appraisal system  112  may include an opening price with a minimum product rating.  
         [0051]    After initiating bidding or inviting proposals, the product value appraisal system  112  proceeds in an on-line, real-time, iterative process with the insurance carriers  116 , as illustrated by step  4  of FIG. 1. Upon receipt of a bid or proposal from a participating insurance carrier  116 , the product value appraisal system  112  reviews each bid or proposal and rates the bid or proposal and the pricing of each bid or proposal.  
         [0052]    With each product proposal, the insurance carrier will transmit information about the price and benefits of its product along with identifying information about itself. This data includes data about the product&#39;s proposed benefits and price on both a guaranteed and illustrated basis, and information about the insurance company proposing the product. Product data include the proposed premiums to be paid and the proposed benefits to be provided, both distinguished between guaranteed amounts and illustrated amounts that depend on assumptions about the future. The insurance company information includes data that quantifies the financial strength of the insurance company. The product value appraisal system  112  will use appropriate actuarial assumptions, such as mortality information specific to the end customer&#39;s risk profile, and traditional actuarial present value methodology to determine a numeric rating of the benefits offered in light of the proposed price, the Product Value For Money, as represented in FIG. 1. Numeric ratings will also be assigned to other key scoring drivers: the product&#39;s performance under less optimistic assumptions about future interest rates and at lower premium levels (Product Stress Tolerance); various company financial information (Management Performance); previous interest rates actually credited to the product&#39;s values (Historical Credited Rates); various qualitative measures of customer service (Customer Service Quality); and the financial strength of the product provider (e.g., A.M. Best Rating). The numeric ratings for these six scoring drivers will then be weighed to arrive at an overall rating of the customer value proposition.  
         [0053]    In one embodiment, a universal life insurance product, the first scoring driver, the product value for money, is determined using four metrics. The first and second metrics are based on projections of cash flow for groups of 1,000 policyholders. Each year, the system projects the number of policyholders dying, which is based on mortality tables appropriate for the gender, smoker status, and rating class of the insured, and the number of policyholders surrendering, which is based on lapse assumptions. Cash inflows consist of the premiums paid by survivors, and cash outflows consist of death and surrender benefits paid. The ratio of the present value of cash inflows to the present value of cash outflows is the cash-on-cash Internal Rate of Return (IRR). Two separate IRR calculations are made based on two different assumptions about lapses and surrender rates to provide the first and second metrics that make up the product value for money scoring driver.  
         [0054]    The first IRR calculation is made based on lapse and surrender rates from the 1995 LIMRA life lapse rate study for the age and policy size of the client, i.e., empirical lapse and surrender rates. The second IRR calculation is made based on level lapse and surrender rates.  
         [0055]    The third metric that factors into the product value for money scoring driver is the premium required to achieve the illustrated objective, typically the level premium to endow or to mature the policy at age 100. The fourth metric that factors into the product value for money scoring driver is an index of product flexibility. The index of product flexibility consists of one point for each of the following features: no-lapse guarantees, term riders, penalty-free withdrawals, preferred loans, refunds of cost-of-insurance (COI) charges, and persistency bonuses.  
         [0056]    The next scoring driver, for the embodiment for universal life insurance, product stress tolerance, incorporates three metrics. The first metric is the ratio of the 20-year cash surrender value on mid-point assumptions (halfway between current assumptions and guaranteed assumptions) to the 20-year cash surrender value on current assumptions. Thus, the first metric measures the percentage drop in policy values if interest rates and mortality deteriorate. The second metric used in assessing product stress tolerance is the number of years the policy stays in force at the mid-point assumptions. This second metric measures the adequacy of the planned premium if interest rates and mortality both deteriorate from what was expected. Finally, the system calculates the IRR just as for the product value for money scoring driver, but with premiums cut in half after the third year. This third metric measures the drop in product performance should the policyholder reduce premium payments.  
         [0057]    In the embodiment for universal life insurance products, Management Performance is measured using the following analytical metrics: (1) Five-year average Return on Equity (ROE); (2) ratio of ordinary life expenses to Generally Recognized Expense Table expenses (GRET); (3) five-year average of annual premium growth rate in excess of annual expense growth rate (PEGG); (4) five-year asset compound annual growth rate; (5) maximum earnings deviation from geometric path; (6) ratio of ordinary life expenses to ordinary life premiums; and (7) ratio of ordinary life expenses to ordinary life reserves. Information to support these metrics may be derived from a carrier&#39;s annual statutory statements, or if the company is a subsidiary of a larger life insurer, data is taken from the consolidated statutory statement for total U.S. operations for the larger insurer.  
         [0058]    (1) The ROE for each year is net income divided by average of beginning and ending capital &amp; surplus for the carrier.  
         [0059]    (2) Generally Recognized Expense Tables (GRET) are calculated as follows (based on the 1998 Society of Actuaries factors): $65 per policy for new business, plus $33 per policy already issued, plus $1.25 per unit for new business, plus 72% of new business premiums.  
         [0060]    (3) Five-year Average Premium Growth Rate in excess of Expense Growth Rate (PEGG) is the average annual difference between the ordinary life premium growth rate and the ordinary life expense growth rate.  
         [0061]    (4) Five-year Assets CAGR is the compound annualized growth rate for the Assets over the last 5 years.  
         [0062]    (5) Maximum earnings deviation from geometric path is the maximum absolute difference between the net income in each of the previous 5 years and the theoretical net income, if net income had grown at exactly the 5-year net income CAGR, divided by theoretical net income.  
         [0063]    (6) &amp; (7) Ordinary Life Expense is equal to line 22 (General Insurance Expenses), column 3 (Life Insurance) in the Analysis of Operations by Lines of Business. Ordinary Life Premium is the sum of lines 1 &amp; 1A (Premiums and Deposit-type funds), column 3, in the Analysis of Operations by Lines of Business. Reserves are the ordinary life reserves gross of reinsurance (Exhibit 8A) in the annual statement.  
         [0064]    The fourth scoring driver for the embodiment for universal life insurance products, historical credited rates, is a measure of the composite effects of historical rates. As a measure of the composite effect of historical rates, this scoring driver calculates the value of $1,000 at the beginning of each year accumulated at the historical credited rates for five years.  
         [0065]    The fifth scoring driver for the embodiment for universal life insurance products, company service quality, is based on appropriate industry-sponsored surveys of carrier practices. One such survey is conducted by the Life Office Management Association (LOMA), an insurance trade association based in Atlanta, Ga. If this survey were to be used as the basis for this scoring driver, four metrics would emerge. The first metric is number of days between application and the offer of insurance. This metric captures one of the most often cited sources of customer satisfaction or dissatisfaction when applying first for a policy. The second metric is telephone service, which is based on a composite score of the following: (1) days per week that customer service is available; (2) average number of calls per customer service representative per day; (3) number of hours a day that customer service is available; and (4) availability of 800 numbers. The third metric is an index of Internet service, consisting of one point for each of the following features: (1) availability of a web page for the carrier; (2) availability of specific product information on the web page; (3) online quotation availability; (4) online application capability; (5) access to customer account information and policy values; (6) capability to change customer information online (address, beneficiary, etc.); and (7) application status tracking capability. The fourth metric is the number of days to complete standard service functions. This fourth metric is the average of the days to complete each of the following: (1) process a cash loan request; (2) process a cash surrender request; (3) pay an uncontested death claim; and (4) reply to customer correspondence.  
         [0066]    The final scoring driver for the embodiment for universal life insurance products is A.M. Best&#39;s Ratings, which represent the opinion of one rating agency, A. M. Best Company, as to the insurer&#39;s financial strength and ability to meet ongoing obligations to policyholders.  
         [0067]    The product value rating, the individual driver numeric scores, and the scores for all the metrics are all converted to a “normalized” scale between 0 and 5. The higher the score, the better the product value. The product value rating is the weighted average of the six driver scores. For scoring drivers based on more than one metric, the driver score is the weighted average of the scores for each metric.  
         [0068]    The weights reflect the relative importance of each of the scoring drivers in evaluating life insurance and annuity products. The weights for each driver, and for each metric within the drivers, are shown in Table A for the embodiment for universal life insurance products.  
                                                       TABLE A                           Weighting Summary                        Driver Metric                    I.   Product Value for Money       40%                   IRR - current assumptions, LIMRA lapses       32.5%                 IRR - current assumptions, level lapses       32.5%                 Planned Premium to Achieve Objective       25%               Product Flexibility       10%                       100%        II.   Product Stress Tolerance       20%               Ratio of 20-year CSV for midpoint: current       60%               assumptions               Years in force at midpoint assumptions       20%               IRR - current assumptions with 50% premium       20%               years 4+                               100%        III.   Management       20%           Performance                   5-year Average ROE       40%               Actual Ordinary Life Expenses/Generally       20%               Recognized Expense Table               5-year Average PEGG       10%               5-year Assets CAGR       10%               Maximum Earnings Deviation from       10%               Geometric Path               Ordinary Life Expenses/Ordinary Life        5%               Premium               Ordinary Life Expenses/Ordinary Life        5%               Reserves                               100%        IV.   Historical Credited Rates       10%       V.   Company Service Quality       5%               Average time to offer       60%               Telephone service       15%               Website capabilities       15%               Response time for standard requests       10%                       100%        VI.   Best&#39;s Rating       5%           Total Weight of Drivers:       100%                  
 
         [0069]    For each metric within a scoring driver, a high point and a low point are set. If that metric for any product exceeds the high point, that product&#39;s normalized score is set to 5. If the metric is below the low point, the normalized score is set to 0; if it lies between the high and low points, the normalized score is set by linear interpolation.  
         [0070]    For Best&#39;s ratings, the normalizing methodology is approximated by tabulating 407 companies according to Best&#39;s ratings. A++ rated companies&#39; normalized scores are set to 5. A+ rated companies are in the 88th percentile, so their normalized scores are set at 4.4 (88% of 5). A rated companies are in the 53rd percentile, so their normalized scores are set at 2.6, etc. Companies with a rating below B+ have their normalized scores set to 0. Companies on review for upgrade or downgrade may be adjusted halfway up or down to the next normalized score.  
         [0071]    Thus, the product value appraisal system  112  simultaneously solicits, prices, and rates, life insurance policy and annuity proposals from insurance carriers. Soliciting, rating and pricing life insurance and annuity policy proposals are conducted in an iterative process. This process is conducted in real-time and preferably continues until optimal product pricing and product ratings have been obtained.  
         [0072]    The product value appraisal system  112  continues to provide feedback to the insurance carriers, including rating information and whether the carrier&#39;s current bid or proposal meets the customer&#39;s minimum requirements. The insurance carrier can then provide a new bid or proposal, taking into consideration the feedback from the product value appraisal system  112 . If the insurance carrier believes that its proposal is final, e.g., that it cannot submit a more competitive bid, it provides a final bid or proposal to the product value appraisal system  112 .  
         [0073]    Insurance carriers transmit their final product proposals to the product value appraisal system  112 , as illustrated by step  5  of FIG. 1. Proposals received from insurance carriers must meet or exceed minimum product ratings established at the outset by the product value appraisal system  112 . The ratings reflect the product proposal&#39;s total value proposition to the proposed insured. The total value proposition of a life insurance or annuity product proposal takes into account, among others, the proposed insured&#39;s risk profile together with such detailed information as the insurance product proposal, information on the insurer&#39;s financial strength, and information on current market prices.  
         [0074]    The product value appraisal system  112  transmits or outputs rated product proposals to the distribution channel, as illustrated by step  6  of FIG. 1. This output includes an appraisal of the entire value proposition for the proposed insured. The appraisal takes such form as a numerical index, an alphabetic grade, or a descriptive phrase such as “superior,” “above average,” “average,” “below-average,” or “unacceptable.” These results are communicated to the proposed insured by the distribution channel, as illustrated by step  7  of FIG. 1. Appropriate explanatory comments may accompany this information.  
         [0075]    Next, the proposed insured makes a purchase decision and communicates that decision to the distribution channel, as illustrated by step  8  of FIG. 1. The proposed insured&#39;s purchase decision flows back to the insurance carriers via the distribution channel and the product value appraisal system, as illustrated by steps  9  and  10  of FIG. 1.  
         [0076]    [0076]FIG. 2 illustrates a more detailed view of the parties involved in the valuation system. Insurance carriers  216  (Ins. Co. A, B, C, D, E, F, . . . ) represent competing insurance carriers available to propose insurance products to meet customer requirements according to the present invention. The product value appraisal system  212  for soliciting, pricing, and rating life insurance and annuity product proposals in a real-time, iterative process is shown. The product value appraisal system  212  way also rate the performance of in-force life insurance policies and annuities and measures the value proposition of replacing in-force insurance policies and annuities. Distribution channels  208  include, among others, aggregators, banks, non-bank institutions, bank trusts, insurance agents, brokers, financial planners and advisors, funeral homes, place of employment, affinity groups and other carriers.  
         [0077]    In addition, another embodiment of the present invention provides a method of valuing in-force life insurance and annuity policies and rates the continuing value proposition to the policyholder. As shown in FIG. 3, the product value appraisal system  312  collects, processes and uses available information on the insurance policyholder, the in-force policy, and the insurance company that issued the in-force policy to rate the performance of the in-force policy.  
         [0078]    Further, if requested by the policyholder, the product value appraisal system  312  determines the value proposition involved in replacing the in-force policy. If a valuation of a replacement policy is requested, the process proceeds in a manner similar to that process described with regard to FIG. 1. For example, the product value appraisal system  312  solicits, auctions and rates replacement life insurance and annuity policy proposals to compare their value proposition to that of the in-force policy. Second, the product value appraisal system  312  calculates whether replacing the in-force policy would create value for the policyholder, particularly in view of the existing in-force policy.  
         [0079]    As shown in FIG. 4, it is possible for an entity including a consumer seeking a life insurance or annuity product to invoke the product value appraisal system  412  without the aid of a distribution channel. As shown in step  1  of FIG. 4, a party seeking such a product, the proposed insured,  404  contacts the product value appraisal system  412 , typically via a website interface. The proposed insured  404  provides to the product value appraisal system  412  information necessary to request proposals for life insurance or annuity products. This information provided by the proposed insured includes demographic information and information for developing a risk profile of the proposed insured  404  for the product to be evaluated. Demographic and risk profile data may include, for example, the proposed insured&#39;s age, sex, smoking habits amount of insurance desired, the pattern of premium payments and the pattern of disbursements desired from the product. A knowledgeable proposed insured may also provide information about the insurance policy sought, including the proposed premiums to be paid and the proposed benefits to be provided. The proposed insured may also include information as to preferred carriers.  
         [0080]    Then, the product value appraisal system  412  initiates bidding and/or invites proposals from interested product providers or carriers  416  by sending a proposed opening bid or invitation for proposal to participating insurance carriers  416 , as illustrated by step  2  of FIG. 4. The opening bid provided by the product value appraisal system  412  may include an opening price with a minimum product rating.  
         [0081]    After initiating bidding or inviting proposals, the product appraisal system  412  proceeds in an on-line, real-time, iterative process with the insurance carriers  416 , as illustrated by step  3  of FIG. 4. Upon receipt of a bid or proposal from a participating insurance carrier  416 , the product value appraisal system  412  reviews each bid or proposal and rates the bid or proposal and the pricing of each bid or proposal.  
         [0082]    With each product proposal, the carrier  416  will transmit information about the price and benefits of its product along with identifying information about itself. This data includes data about the product&#39;s proposed benefits and price on both a guaranteed and illustrated basis, and information about the insurance company proposing the product. Product data include the proposed premiums to be paid and the proposed benefits to be provided, both distinguished between guaranteed amounts and illustrated amounts that depend on assumptions about the future. The insurance company information includes data that quantifies the financial strength of the insurance company. The product value appraisal system  412  will use appropriate actuarial assumptions, such as mortality information specific to the end customer&#39;s risk profile, and traditional actuarial present value methodology to determine a numeric rating of the benefits offered in light of the proposed price (Product Value For Money in FIG. 1). Numeric ratings will also be assigned to the product&#39;s performance under less optimistic assumptions about future interest rates and at lower premium levels (Product Stress Tolerance), various company financial information (Management Performance), previous interest rates actually credited to the product&#39;s values (Historical Credited Rates), various qualitative measures of customer service (Customer Service Quality) and to the financial strength of the product provider (e.g., A.M. Best Rating). These ratings will then be weighted to arrive at an overall rating of the customer value proposition. Details of these six scoring drivers and the formulas for the product value appraisal system are as described above for the embodiment for universal life insurance.  
         [0083]    Thus, the product value appraisal system  412  simultaneously solicits, prices, and rates, life insurance and annuity policy proposals from insurance carriers  416 . Soliciting, rating and pricing these life insurance and annuity policy proposals are conducted in an iterative process. This process is preferably conducted in real-time and continues until optimal product pricing and product ratings have been obtained. Although each insurance carrier can make one proposal at a time, multiple proposals can also be made by each carrier to generate multiple ratings with multiple prices.  
         [0084]    The product value appraisal system  412  continues to provide feedback to the insurance carriers  416 , including rating information and whether the carrier&#39;s current bid or proposal meets the customer&#39;s minimum requirements. The insurance carrier can then provide a new bid or proposal, taking into consideration the feedback from the product value appraisal system  412 . If the insurance carrier believes that its proposal is final, e.g., that it cannot submit a more competitive bid, it provides a final bid or proposal to the product value appraisal system  412 .  
         [0085]    Insurance carriers  416  transmit their final product proposals to the product value appraisal system, as illustrated by step  4  of FIG. 4. Proposals received from insurance carriers  416  must meet or exceed minimum product ratings established at the outset by the product value appraisal system  412 . The ratings reflect the insurance or annuity product proposal&#39;s total value proposition to the proposed insured  404 . The total value proposition of a life insurance or annuity product proposal takes into account the proposed insured&#39;s risk profile together with detailed information about the life insurance or annuity product proposal, information on the insurer&#39;s financial strength, and information on current market prices.  
         [0086]    The product value appraisal system  412  transmits rated product proposals to the proposed insured, as illustrated by step  5  of FIG. 4. This output includes an appraisal of the entire value proposition for the proposed insured  404 . The appraisal takes such form as a numerical index, an alphabetic grade, or a descriptive phrase such as “superior,” “above average,” “average,” “below-average,” or “unacceptable.” Appropriate explanatory comments may accompany this information.  
         [0087]    Next, the proposed insured  404  may make a purchase decision and communicate that decision to the product value appraisal system  412 , as illustrated by step  6  of FIG. 4. The proposed insured&#39;s purchase decision flows back to the insurance carriers  416  via the product value appraisal system  412 , as illustrated by step  7  of FIG. 4.  
         [0088]    [0088]FIG. 5 illustrates an embodiment of the invention appraising the value proposition for replacing an in-force policy. As shown in FIG. 5, it is possible for the holder of an existing policy to query the policy appraisal system or product value appraisal system  512  to appraise the value of the in-force policy and also appraise the value proposition for replacing the in-force policy. As shown in FIG. 5, step  1 , the policyholder  504  contacts a distribution channel  508  to assist in obtaining such appraisal. The distribution channel then contacts the product value appraisal system  512 , as shown in step  2 .  
         [0089]    The product value appraisal system  512  then collects, processes and uses available information on the insurance policyholder, the in-force policy, and the insurance company that issued the in-force policy to rate the performance of the in-force policy. The product value appraisal system  512  uses appropriate actuarial assumptions, such as mortality information specific to the end customer&#39;s risk profile, and traditional actuarial present value methodology to determine a numeric rating of the benefits offered in light of the price (Product Value For Money in FIG. 1). Numeric ratings will also be assigned to the product&#39;s performance under less optimistic assumptions about future interest rates and at lower premium levels (Product Stress Tolerance), various company financial information (Management Performance), previous interest rates actually credited to the product&#39;s values (Historical Credited Rates), various qualitative measures of customer service (Customer Service Quality) and to the financial strength of the product provider (e.g., A.M. Best Rating). These ratings will then be weighted to arrive at an overall rating of the customer value proposition. Details of these six scoring drivers and the formulas for the product value appraisal system are as described above for the embodiment for universal life insurance products. Information regarding the rating and value proposition are transmitted to the policyholder  504  via the distribution channel  508 .  
         [0090]    The product value appraisal system  512  also conducts a similar appraisal for a proposed replacement policy. If requested by the policyholder  504  via the distribution channel or by the distribution channel  508 , the product value appraisal system  512  can solicit life insurance and annuity policy proposals from insurance carriers in the iterative processed described with regard to FIG. 1. Similarly, the policyholder  504  may provide information regarding the replacement policy under consideration to the product value appraisal system via the distribution channel  508 , as illustrated by steps  5  and  6 .  
         [0091]    Although FIG. 5 illustrates a policyholder invoking the product value appraisal system via a distribution channel, it is possible for the policyholder to contact the product value appraisal system directly to conduct an analysis of an in-force policy and appraisal of the value proposition for replacing the in-force policy.  
         [0092]    As shown in FIG. 6, it is possible for the holder of an existing policy to query the product value appraisal system to value the in-force policy without the aid of a distribution channel. As shown in FIG. 6, the policyholder  604  contacts the product value appraisal system  612 , for example, via a website. The product value appraisal system  612  then collects, processes and uses available information on the insurance policyholder, the in-force policy, and the insurance company that issued the in-force policy to rate the performance of the in-force policy.  
         [0093]    Further, if requested by the policyholder, the product value appraisal system  512  determines the value proposition involved in replacing the in-force policy. If a valuation of a replacement policy is requested, the process proceeds in a manner similar to that process described with regard to FIG. 4. For example, the valuation system solicits, auctions and rates replacement insurance policy proposals to compare their value proposition to that of the in-force policy. Second, the invention calculates whether replacing the in-force policy would create value for the policyholder, particularly in view of the existing in-force policy.  
         [0094]    Revenues for use of the product value appraisal system are generated from subscription fees from life insurance product or annuity providers for participation in the auction process, transaction fees from the providers for the processing of bids and appraising the customer value proposition of proposals submitted, transaction fees from the distribution channel to receive the output from valuation system, and data subscription fees from the product providers to access the market intelligence data that will accumulate over time. Moreover, the valuation system may be provided as value-added services to the distribution channels, or to consumers directly, who pay a fee to use the service.  
         [0095]    An example of the valuation system of the present invention is provided. John Consumer is reviewing his estate plan with his personal, fee-based financial advisor. The advisor recommends the purchase of an additional $250,000 of life insurance in an irrevocable trust to replace assets transferred to a Charitable Remainder Trust. Because it is not known when Mr. Consumer will die, a permanent (as opposed to term) form of insurance is recommended. Following some discussions of the various forms of permanent coverage, it is agreed to seek the best available life product to fill the need.  
         [0096]    The financial advisor then goes on-line to the web site which places the financial advisor in contact with the product value appraisal system and commences a search for the best value for his client using the value appraisal system. In this example, the distribution channel is the financial advisor. As the distribution channel, the financial advisor, in response to prompts by the web site interface, enters the following information which is transmitted to the product value appraisal system: (1) risk profile data about John Consumer including, inter alia, his present age (45), sex (male), and smoking status (non-smoker); (2) the purpose of the proposed insurance (asset replacement to preserve his estate); (3) the desired pattern of premium payments (for life); (4) the disbursements desired from the policy (none prior to payment of the death benefit); and (5) face amount and type of product for which proposals are desired ($250,000 of life insurance).  
         [0097]    The website receives the information and invokes the product value appraisal system, which opens an on-line, real-time proposal solicitation process for interested carriers. These proposals include, inter alia, policy illustrations showing the target premiums, guaranteed and illustrated benefits and cash values at select points in the future, and identifying information about the proposing carrier. Proposals are received from four carriers (A, B, C, and D). The product value appraisal system conducts an overall appraisal of the proposals received.  
         [0098]    Product Value for Money  
         [0099]    The cash flow was projected for the group of policyholders, using an industry mortality rate for nonsmokers of this policy size, and lapses (a) according to the LIMRA tables, as shown in Table B and (b) 5%, as shown in Tables C1-C4.  
                                                                                   TABLE B                           Product Value for Money       Mortality and LIMRA Lapse rates per 1,000                Du-                                   ra-   Mortality   Lapse           Mortality   Lapse       Age   tion   Rate   Rate   Age   Duration   Rate   Rate                    45   1   0.40   59   77   33   40.15   42       46   2   0.59   69   78   34   44.46   42       47   3   0.78   51   79   35   49.29   42       48   4   0.98   65   80   36   54.43   42       49   5   1.24   57   81   37   59.90   42       50   6   1.60   29   82   38   65.32   42       51   7   2.02   42   83   39   70.91   42       52   8   2.49   42   84   40   77.59   42       53   9   2.94   42   85   41   85.53   42       54   10   3.44   42   86   42   95.14   42       55   11   3.85   42   87   43   105.23   42       56   12   4.46   42   88   44   115.29   42       57   13   5.17   42   89   45   124.98   42       58   14   5.63   42   90   46   134.61   42       59   15   6.18   42   91   47   146.21   42       60   16   7.13   42   92   48   159.13   42       61   17   8.07   42   93   49   175.52   42       62   18   9.10   42   94   50   192.61   42       63   19   10.26   42   95   51   207.65   42       64   20   11.35   42   96   52   219.62   42       65   21   12.53   42   97   53   224.00   42       66   22   13.67   42   98   54   230.49   42       67   23   14.81   42   99   55   238.19   761.81       68   24   15.85   42       69   25   16.96   42       70   26   21.03   42       71   27   22.98   42       72   28   25.18   42       73   29   27.60   42       74   30   30.27   42       75   31   33.01   42       76   32   36.25   42                                  
 
         [0100]    In each year, the cash flow is:  
         [0101]    Premiums for lives in force at the beginning of the year, less  
         [0102]    Expected deaths in the year multiplied by the Face Amount, less  
         [0103]    Expected surrenders in the year multiplied by the Cash Surrender Value.  
         [0104]    Internal rates of return are then calculated. A commercial software product, such as Microsoft Excel, which has an IRR function, may be used for each product based on the cash flows. Using the LIMRA lapse assumptions, for example, Company D the highest IRR at 6.616%, and Company A has the lowest IRR at 5.073%. The high point is set at 6.5% and the low point at 4.5%. Company D, being above the high point, receives a normalized score of 5. Company A, by interpolation, receives a normalized score of 1.4325, rounded to 1.4. A similar process is used for the flat 5% lapse assumption. The IRR calculations for each of the Companies A, B, C, and D are shown in Tables C1-C4.  
                                                                                   TABLE C1                           Product Value for Money - Calculation of IRR - LIMRA Lapses       Company A                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   2,125   526   0   250,000   2,027.14   5.073%       46   2   2,125   2,002   0   250,000   1,864.09       47   3   2,125   3,566   0   250,000   1,693.07       48   4   2,125   5,223   0   250,000   1,565.67       49   5   2,125   6,959   567   250,000   1,388.14       50   6   2,125   8,827   2,751   250,000   1,205.97       51   7   2,125   10,813   5,064   250,000   1,003.19       52   8   2,125   12,894   7,483   250,000     812.31       53   9   2,125   15,098   10,037   250,000     635.74       54   10   2,125   17,426   12,732   250,000     463.23       55   11   2,125   19,850   16,396   250,000     291.96       56   12   2,125   22,296   19,944   250,000     111.58       57   13   2,125   24,852   23,446   250,000   (65.26)       58   14   2,125   27,524   26,908   250,000   (193.46)       59   15   2,125   30,338   30,338   250,000   (319.55)       60   16   2,125   33,278   33,278   250,000   (469.45)       61   17   2,125   36,352   36,352   250,000   (603.74)       62   18   2,125   39,560   39,560   250,000   (734.97)       63   19   2,125   42,908   42,908   250,000   (865.03)       64   20   2,125   46,398   46,398   250,000   (974.62)       65   21   2,125   50,054   50,054   250,000   (1,079.20)       66   22   2,125   53,858   53,858   250,000   (1,167.40)       67   23   2,125   57,809   57,809   250,000   (1,243.07)       68   24   2,125   61,906   61,906   250,000   (1,299.40)       69   25   2,125   66,140   66,140   250,000   (1,350.62)       70   26   2,125   70,502   70,502   250,000   (1,582.22)       71   27   2,125   74,977   74,977   250,000   (1,647.34)       72   28   2,125   79,545   79,545   250,000   (1,708.99)       73   29   2,125   84,179   84,179   250,000   (1,763.59)       74   30   2,125   88,573   88,573   250,000   (1,808.46)       75   31   2,125   93,055   93,055   250,000   (1,837.56)       76   32   2,125   97,548   97,548   250,000   (1,868.36)       77   33   2,125   102,043   102,043   250,000   (1,902.89)       78   34   2,125   106,540   16,540   250,000   (1,384.83)       79   35   2,125   111,037   111,037   250,000   (1,942.39)       80   36   2,125   115,538   115,538   250,000   (1,939.12)       81   37   2,125   120,047   120,047   250,000   (1,918.18)       82   38   2,125   124,572   124,572   250,000   (1,870.75)       83   39   2,125   129,126   129,126   250,000   (1,805.84)       84   40   2,125   133,719   133,719   250,000   (1,742.95)       85   41   2,125   138,369   138,369   250,000   (1,679.76)       86   42   2,125   143,094   143,094   250,000   (1,616.67)       87   43   2,125   147,917   147,917   250,000   (1,531.49)       88   44   2,125   152,871   152,871   250,000   (1,422.26)       89   45   2,125   158,001   158,001   250,000   (1,293.41)       90   46   2,125   163,372   163,372   250,000   (1,156.21)       91   47   2,125   169,070   169,070   250,000   (1,029.28)       92   48   2,125   175,208   175,208   250,000   (905.19)       93   49   2,125   181,934   181,934   250,000   (792.92)       94   50   2,125   188,913   188,913   250,000   (677.31)       95   51   2,125   197,239   197,239   250,000   (557.51)       96   52   2,125   207,171   207,171   250,000   (442.56)       97   53   2,125   219,020   219,020   250,000   (335.01)       98   54   2,125   233,154   233,154   250,000   (254.31)       99   55   2,125   250,016   250,016   250,016   (595.21)                  
 
         [0105]    [0105]                                                                                   TABLE C2                           Product Value for Money - Calculation of IRR - LIMRA Lapses       Company B                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   1,953   909   0   250,000   1,855.14   6.185%       46   2   1,953   2,409   0   250,000   1,702.31       47   3   1,953   3,972   0   250,000   1,542.54       48   4   1,953   5,638   663   250,000   1,387.20       49   5   1,953   7,434   2,911   250,000   1,151.34       50   6   1,953   9,465   5,394   250,000   1,024.52       51   7   1,953   11,611   7,992   250,000     794.56       52   8   1,953   13,879   10,713   250,000     604.31       53   9   1,953   16,275   13,561   250,000     429.05       54   10   1,953   18,803   16,541   250,000     258.47       55   11   1,953   21,446   19,637   250,000     110.56       56   12   1,953   24,203   22,847   250,000   (53.52)       57   13   1,953   27,068   26,164   250,000   (218.51)       58   14   1,953   30,045   29,593   250,000   (338.77)       59   15   1,953   33,139   33,139   250,000   (460.29)       60   16   1,953   36,357   36,537   250,000   (612.25)       61   17   1,953   39,699   39,699   250,000   (741.12)       62   18   1,953   43,164   43,164   250,000   (869.93)       63   19   1,953   46,756   46,756   250,000   (997.11)       64   20   1,953   50,474   50,474   250,000   (1,103.34)       65   21   1,953   54,284   54,284   250,000   (1,203.31)       66   22   1,953   58,225   58,225   250,000   (1,286.63)       67   23   1,953   62,293   62,293   250,000   (1,357.18)       68   24   1,953   66,487   66,487   250,000   (1,408.21)       69   25   1,953   70,804   70,804   250,000   (1,454.08)       70   26   1,953   75,241   75,241   250,000   (1,680.31)       71   27   1,953   79,781   79,781   250,000   (1,739.86)       72   28   1,953   84,421   84,421   250,000   (1,796.15)       73   29   1,953   89,158   89,158   250,000   (1,845.76)       74   30   1,953   93,985   93,985   250,000   (1,888.48)       75   31   1,953   98,880   98,880   250,000   (1,914.94)       76   32   1,953   103,828   103,828   250,000   (1,943.12)       77   33   1,953   108,814   108,814   250,000   (1,974.94)       78   34   1,953   113,823   113,823   250,000   (1,996.37)       79   35   1,953   118,843   118,843   250,000   (2,008.32)       80   36   1,953   123,863   123,863   250,000   (2,001.52)       81   37   1,953   128,878   128,878   250,000   (1,976.72)       82   38   1,953   133,890   133,890   250,000   (1,925.18)       83   39   1,953   138,900   138,900   250,000   (1,855.96)       84   40   1,953   143,895   143,895   250,000   (1,788.58)       85   41   1,953   148,866   148,866   250,000   (1,720.70)       86   42   1,953   153,818   153,818   250,000   (1,652.81)       87   43   1,953   158,755   158,755   250,000   (1,562.79)       88   44   1,953   163,689   163,689   250,000   (1,448.82)       89   45   1,953   168,654   168,654   250,000   (1,315.47)       90   46   1,953   173,705   173,705   250,000   (1,174.12)       91   47   1,953   178,990   178,990   250,000   (1,043.56)       92   48   1,953   184,626   184,626   250,000   (916.32)       93   49   1,953   190,769   190,769   250,000   (801.38)       94   50   1,953   197,629   197,629   250,000   (683.83)       95   51   1,953   204,973   204,973   250,000   (562.11)       96   52   1,953   213,158   213,158   250,000   (445.51)       97   53   1,953   222,747   222,747   250,000   (336.72)       98   54   1,953   234,628   234,628   250,000   (255.23)       99   55   1,953   250,248   250,248   250,048   (596.19)                    
         [0106]    [0106]                                                                                   TABLE C3                           Product Value for Money - Calculation of IRR - LIMRA Lapses       Company C                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   2,048   1,044   0   250,000   1,950.14   5.182%       46   2   2,048   2,589   0   250,000   1,791.66       47   3   2,048   4,174   0   250,000   1,625.68       48   4   2,048   5,823   0   250,000   1,501.78       49   5   2,048   7,551   1,227   250,000   1,299.32       50   6   2,048   9,369   3,045   250,000   1,143.55       51   7   2,048   11,288   4,963   250,000     951.70       52   8   2,048   13,313   6,988   250,000     774.27       53   9   2,048   15,446   9,122   250,000     610.78       54   10   2,048   17,688   11,364   250,000     451.10       55   11   2,048   20,031   14,339   250,000     297.40       56   12   2,048   22,451   17,391   250,000     128.44       57   13   2,048   24,934   20,507   250,000   (40.53)       58   14   2,048   27,484   23,689   250,000   (163.93)       59   15   2,048   30,102   26,939   250,000   (287.78)       60   16   2,048   32,752   30,222   250,000   (445.88)       61   17   2,048   35,494   33,596   250,000   (586.89)       62   18   2,048   38,330   37,065   250,000   (723.54)       63   19   2,048   41,265   40,633   250,000   (857.86)       64   20   2,048   44,303   44,303   250,000   (970.67)       65   21   2,048   47,421   47,421   250,000   (1,067.49)       66   22   2,048   50,616   50,616   250,000   (1,147.79)       67   23   2,048   53,904   53,904   250,000   (1,215.79)       68   24   2,048   57,293   57,293   250,000   (1,264.85)       69   25   2,048   60,782   60,782   250,000   (1,309.34)       70   26   2,048   64,369   64,369   250,000   (1,534.93)       71   27   2,048   68,055   68,055   250,000   (1,594.93)       72   28   2,048   71,843   71,843   250,000   (1,652.53)       73   29   2,048   75,734   75,734   250,000   (1,704.32)       74   30   2,048   79,724   79,724   250,000   (1,750.03)       75   31   2,048   83,809   83,809   250,000   (1,780.38)       76   32   2,048   87,983   87,983   250,000   (1,813.30)       77   33   2,048   92,240   92,240   250,000   (1,850.69)       78   34   2,048   96,575   96,575   250,000   (1,878.47)       79   35   2,048   100,987   100,987   250,000   (1,897.52)       80   36   2,048   105,476   105,476   250,000   (1,898.42)       81   37   2,048   110,047   110,047   250,000   (1,881.81)       82   38   2,048   114,711   114,711   250,000   (1,838.75)       83   39   2,048   119,482   119,482   250,000   (1,778.16)       84   40   2,048   124,363   124,363   250,000   (1,719.41)       85   41   2,048   129,360   129,360   250,000   (1,660.10)       86   42   2,048   134,488   134,488   250,000   (1,600.60)       87   43   2,048   139,768   139,768   250,000   (1,518.66)       88   44   2,048   145,231   145,231   250,000   (1,412.29)       89   45   2,048   150,929   150,929   250,000   (1,285.90)       90   46   2,048   156,935   156,935   250,000   (1,150.76)       91   47   2,048   163,342   163,342   250,000   (1,025.55)       92   48   2,048   170,263   170,263   250,000   (902.82)       93   49   2,048   177,843   177,843   250,000   (791.59)       94   50   2,048   186,264   186,264   250,000   (677.00)       95   51   2,048   195,758   195,758   250,000   (557.72)       96   52   2,048   206,617   206,617   250,000   (442.98)       97   53   2,048   219,221   219,221   250,000   (335.47)       98   54   2,048   234,056   234,056   250,000   (254.76)       99   55   2,048   251,745   251,745   251,745   (599.60)                    
         [0107]    [0107]                                                                                   TABLE C4                           Product Value for Money - Calculation of IRR - LIMRA Lapses       Company D                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   1,648   1,387   —   250,000   1,550.14   6.616%       46   2   1,648   2,800   —   250,000   1,415.43       47   3   1,648   4,242   —   250,000   1,275.62       48   4   1,648   5,717   —   250,000   1,169.85       49   5   1,648   7,255   523   250,000   1,020.37       50   6   1,648   8,833   2,435   250,000     864.48       51   7   1,648   10,482   4,430   250,000     684.49       52   8   1,648   12,180   6,487   250,000     517.91       53   9   1,648   13,929   8,609   250,000     366.15       54   10   1,648   15,705   10,772   250,000     219.51       55   11   1,648   17,453   12,923   250,000     96.68       56   12   1,648   19,174   15,062   250,000   (41.58)       57   13   1,648   21,011   17,333   250,000   (183.69)       58   14   1,648   22,969   19,744   250,000   (283.86)       59   15   1,648   25,058   22,308   250,000   (388.04)       60   16   1,648   27,287   25,032   250,000   (530.53)       61   17   1,648   29,664   27,932   250,000   (658.69)       62   18   1,648   32,200   31,012   250,000   (785.00)       63   19   1,648   34,905   34,295   250,000   (911.51)       64   20   1,648   37,790   37,790   250,000   (1,018.82)       65   21   1,648   40,816   40,816   250,000   (1,111.76)       66   22   1,648   43,943   43,943   250,000   (1,188.75)       67   23   1,648   47,230   47,230   250,000   (1,254.51)       68   24   1,648   50,616   50,616   250,000   (1,301.37)       69   25   1,648   54,111   54,111   250,000   (1,343.86)       70   26   1,648   57,657   57,657   250,000   (1,567.12)       71   27   1,648   61,286   61,286   250,000   (1,624.57)       72   28   1,648   65,034   65,034   250,000   (1,679.92)       73   29   1,648   68,893   68,893   250,000   (1,729.66)       74   30   1,648   72,878   72,878   250,000   (1,773.65)       75   31   1,648   76,961   76,961   250,000   (1,802.34)       76   32   1,648   81,159   81,159   250,000   (1,833.87)       77   33   1,648   85,490   85,490   250,000   (1,870.23)       78   34   1,648   89,913   89,913   250,000   (1,897.03)       79   35   1,648   94,450   94,450   250,000   (1,915.25)       80   36   1,648   99,103   99,103   250,000   (1,915.43)       81   37   1,648   103,843   103,843   250,000   (1,898.02)       82   38   1,648   108,731   108,731   250,000   (1,854.28)       83   39   1,648   113,745   113,745   250,000   (1,792.95)       84   40   1,648   118,901   118,901   250,000   (1,733.46)       85   41   1,648   124,220   124,220   250,000   (1,673.43)       86   42   1,648   129,756   129,756   250,000   (1,613.27)       87   43   1,648   135,527   135,527   250,000   (1,530.66)       88   44   1,648   141,585   141,585   250,000   (1,423.60)       89   45   1,648   147,976   147,976   250,000   (1,296.48)       90   46   1,648   154,755   154,755   250,000   (1,160.54)       91   47   1,648   161,991   161,991   250,000   (1,034.44)       92   48   1,648   169,755   169,755   250,000   (910.71)       93   49   1,648   178,135   178,135   250,000   (798.41)       94   50   1,648   187,254   187,254   250,000   (682.68)       95   51   1,648   197,236   197,236   250,000   (562.25)       96   52   1,648   208,253   208,253   250,000   (446.42)       97   53   1,648   220,519   220,519   250,000   (337.94)       98   54   1,648   234,314   234,314   250,000   (256.41)       99   55   1,648   250,002   250,002   250,002   (596.58)                    
         [0108]    Calculation of IRR based on a level lapse rate are shown in Tables D1-D4.  
                                                                                   TABLE D1                           Product Value for Money - Calculation of IRR - Level Lapses       Company A                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   2,125   526   0   250,000   2,026.69   4.806%       46   2   2,125   2,002   0   250,000   1,880.59       47   3   2,125   3,566   0   250,000   1,744.08       48   4   2,125   5,223   0   250,000   1,613.06       49   5   2,125   6,959   567   250,000   1,456.88       50   6   2,125   8,827   2,751   250,000   1,231.80       51   7   2,125   10,813   5,064   250,000   1,007.95       52   8   2,125   12,894   7,483   250,000     792.20       53   9   2,125   15,098   10,037   250,000     594.93       54   10   2,125   17,426   12,732   250,000     405.41       55   1   2,125   19,850   16,396   250,000     216.78       56   12   2,125   22,296   19,944   250,000     24.34       57   13   2,125   24,852   23,446   250,000   (159.84)       58   14   2,125   27,524   26,908   250,000   (292.34)       59   15   2,125   30,338   30,338   250,000   (419.27)       60   16   2,125   33,278   33,278   250,000   (563.88)       61   17   2,125   36,352   36,352   250,000   (690.84)       62   18   2,125   39,560   39,560   250,000   (812.29)       63   19   2,125   42,908   42,908   250,000   (930.11)       64   20   2,125   46,398   46,398   250,000   (1,026.55)       65   21   2,125   50,054   50,054   250,000   (1,116.30)       66   22   2,125   53,858   53,858   250,000   (1,189.14)       67   23   2,125   57,809   57,809   250,000   (1,248.93)       68   24   2,125   61,906   61,906   250,000   (1,289.93)       69   25   2,125   66,140   66,140   250,000   (1,325.16)       70   26   2,125   70,502   70,502   250,000   (1,517.01)       71   27   2,125   74,977   74,977   250,000   (1,560.13)       72   28   2,125   79,545   79,545   250,000   (1,598.79)       73   29   2,125   84,179   84,179   250,000   (1,629.99)       74   30   2,125   88,573   88,573   250,000   (1,651.26)       75   31   2,125   93,055   93,055   250,000   (1,658.30)       76   32   2,125   97,548   97,548   250,000   (1,665.94)       77   33   2,125   102,043   102,043   250,000   (1,675.80)       78   34   2,125   106,540   16,540   250,000   (1,146.61)       79   35   2,125   111,037   111,037   250,000   (1,669.07)       80   36   2,125   115,538   115,538   250,000   (1,646.39)       81   37   2,125   120,047   120,047   250,000   (1,609.52)       82   38   2,125   124,572   124,572   250,000   (1,551.99)       83   39   2,125   129,126   129,126   250,000   (1,481.50)       84   40   2,125   133,719   133,719   250,000   (1,413.59)       85   41   2,125   138,369   138,369   250,000   (1,346.42)       86   42   2,125   143,094   143,094   250,000   (1,280.33)       87   43   2,125   147,917   147,917   250,000   (1,198.61)       88   44   2,125   152,871   152,871   250,000   (1,100.39)       89   45   2,125   158,001   158,001   250,000   (989.56)       90   46   2,125   163,372   163,372   250,000   (874.88)       91   47   2,125   169,070   169,070   250,000   (770.06)       92   48   2,125   175,208   175,208   250,000   (669.52)       93   49   2,125   181,934   181,934   250,000   (579.56)       94   50   2,125   188,913   188,913   250,000   (489.22)       95   51   2,125   197,239   197,239   250,000   (398.10)       96   52   2,125   207,171   207,171   250,000   (312.54)       97   53   2,125   219,020   219,020   250,000   (234.19)       98   54   2,125   233,154   233,154   250,000   (175.96)       99   55   2,125   250,016   250,016   250,016   (398.31)                  
 
         [0109]    [0109]                                                                                   TABLE D2                           Product Value for Money - Calculation of IRR - Level Lapses       Company B                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   1,953   909   0   250,000   1,854.69   6.034%       46   2   1,953   2,409   0   250,000   1,717.26       47   3   1,953   3,972   0   250,000   1,589.02       48   4   1,953   5,638   663   250,000   1,437.51       49   5   1,953   7,434   2,911   250,000   1,222.06       50   6   1,953   9,465   5,394   250,000     997.53       51   7   1,953   11,611   7,992   250,000     775.38       52   8   1,953   13,879   10,713   250,000     561.31       53   9   1,953   16,275   13,561   250,000     366.54       54   10   1,953   18,803   16,541   250,000     180.30       55   11   1,953   21,446   19,637   250,000     20.41       56   12   1,953   24,203   22,847   250,000   (152.05)       57   13   1,953   27,068   26,164   250,000   (321.74)       58   14   1,953   30,045   29,593   250,000   (444.47)       59   15   1,953   33,139   33,139   250,000   (565.64)       60   16   1,953   36,357   36,537   250,000   (712.11)       61   17   1,953   39,699   39,699   250,000   (832.40)       62   18   1,953   43,164   43,164   250,000   (950.64)       63   19   1,953   46,756   46,756   250,000   (1,064.74)       64   20   1,953   50,474   50,474   250,000   (1,156.97)       65   21   1,953   54,284   54,284   250,000   (1,241.18)       66   22   1,953   58,225   58,225   250,000   (1,308.26)       67   23   1,953   62,293   62,293   250,000   (1,362.10)       68   24   1,953   66,487   66,487   250,000   (1,397.02)       69   25   1,953   70,804   70,804   250,000   (1,426.20)       70   26   1,953   75,241   75,241   250,000   (1,612.04)       71   27   1,953   79,781   79,781   250,000   (1,649.05)       72   28   1,953   84,421   84,421   250,000   (1,681.88)       73   29   1,953   89,158   89,158   250,000   (1,707.74)       74   30   1,953   93,985   93,985   250,000   (1,726.57)       75   31   1,953   98,880   98,880   250,000   (1,730.72)       76   32   1,953   103,828   103,828   250,000   (1,735.51)       77   33   1,953   108,814   108,814   250,000   (1,742.48)       78   34   1,953   113,823   113,823   250,000   (1,740.08)       79   35   1,953   118,843   118,843   250,000   (1,729.34)       80   36   1,953   123,863   123,863   250,000   (1,703.06)       81   37   1,953   128,878   128,878   250,000   (1,662.33)       82   38   1,953   133,890   133,890   250,000   (1,600.74)       83   39   1,953   138,900   138,900   250,000   (1,526.07)       84   40   1,953   143,895   143,895   250,000   (1,453.84)       85   41   1,953   148,866   148,866   250,000   (1,382.25)       86   42   1,953   153,818   153,818   250,000   (1,311.68)       87   43   1,953   158,755   158,755   250,000   (1,225.52)       88   44   1,953   163,689   163,689   250,000   (1,123.00)       89   45   1,953   168,654   168,654   250,000   (1,008.15)       90   46   1,953   173,705   173,705   250,000   (889.81)       91   47   1,953   178,990   178,990   250,000   (781.83)       92   48   1,953   184,626   184,626   250,000   (678.58)       93   49   1,953   190,769   190,769   250,000   (586.37)       94   50   1,953   197,629   197,629   250,000   (494.41)       95   51   1,953   204,973   204,973   250,000   (401.70)       96   52   1,953   213,158   213,158   250,000   (314.80)       97   53   1,953   222,747   222,747   250,000   (235.46)       98   54   1,953   234,628   234,628   250,000   (176.61)       99   55   1,953   250,248   250,248   250,048   (398.97)                    
         [0110]    [0110]                                                                                   TABLE D3                           Product Value for Money - Calculation of IRR - Level Lapses       Company C                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    46   1   2,048   1,044   0   250,000   1,949.69   4.891%       46   2   2,048   2,589   0   250,000   1,807.47       47   3   2,048   4,174   0   250,000   1,674.66       48   4   2,048   5,823   0   250,000   1,547.16       49   5   2,048   7,551   1,227   250,000   1,367.56       50   6   2,048   9,369   3,045   250,000   1,161.15       51   7   2,048   11,288   4,963   250,000     955.37       52   8   2,048   13,313   6,988   250,000     755.98       53   9   2,048   15,446   9,122   250,000     574.37       54   10   2,048   17,688   11,364   250,000     399.99       55   11   2,048   20,031   14,339   250,000     231.88       56   12   2,048   22,451   17,391   250,000     52.38       57   13   2,048   24,934   20,507   250,000   (123.22)       58   14   2,048   27,484   23,689   250,000   (250.81)       59   15   2,048   30,102   26,939   250,000   (375.86)       60   16   2,048   32,752   30,222   250,000   (530.52)       61   17   2,048   35,494   33,596   250,000   (665.66)       62   18   2,048   38,330   37,065   250,000   (793.72)       63   19   2,048   41,265   40,633   250,000   (916.72)       64   20   2,048   44,303   44,303   250,000   (1,017.10)       65   21   2,048   47,421   47,421   250,000   (1,098.71)       66   22   2,048   50,616   50,616   250,000   (1,163.41)       67   23   2,048   53,904   53,904   250,000   (1,215.43)       68   24   2,048   57,293   57,293   250,000   (1,249.20)       69   25   2,048   60,782   60,782   250,000   (1,277.90)       70   26   2,048   64,369   64,369   250,000   (1,464.07)       71   27   2,048   68,055   68,055   250,000   (1,502.54)       72   28   2,048   71,843   71,843   250,000   (1,537.73)       73   29   2,048   75,734   75,734   250,000   (1,566.79)       74   30   2,048   79,724   79,724   250,000   (1,589.64)       75   31   2,048   83,809   83,809   250,000   (1,598.64)       76   32   2,048   87,983   87,983   250,000   (1,609.07)       77   33   2,048   92,240   92,240   250,000   (1,622.42)       78   34   2,048   96,575   96,575   250,000   (1,627.09)       79   35   2,048   100,987   100,987   250,000   (1,624.02)       80   36   2,048   105,476   105,476   250,000   (1,605.88)       81   37   2,048   110,047   110,047   250,000   (1,573.63)       82   38   2,048   114,711   114,711   250,000   (1,520.67)       83   39   2,048   119,482   119,482   250,000   (1,454.62)       84   40   2,048   124,363   124,363   250,000   (1,390.89)       85   41   2,048   129,360   129,360   250,000   (1,327.61)       86   42   2,048   134,488   134,488   250,000   (1,265.04)       87   43   2,048   139,768   139,768   250,000   (1,186.48)       88   44   2,048   145,231   145,231   250,000   (1,091.00)       89   45   2,048   150,929   150,929   250,000   (982.52)       90   46   2,048   156,935   156,935   250,000   (869.78)       91   47   2,048   163,342   163,342   250,000   (766.55)       92   48   2,048   170,263   170,263   250,000   (667.26)       93   49   2,048   177,843   177,843   250,000   (578.26)       94   50   2,048   186,264   186,264   250,000   (488.83)       95   51   2,048   195,758   195,758   250,000   (398.17)       96   52   2,048   206,617   206,617   250,000   (312.81)       97   53   2,048   219,221   219,221   250,000   (234.52)       98   54   2,048   234,056   234,056   250,000   (176.28)       99   55   2,048   251,745   251,745   251,745   (401.25)                    
         [0111]    [0111]                                                                                   TABLE D4                           Product Value for Money - Calculation of IRR - Level Lapses       Company D                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   1,648   1,387   0   250,000   1,549.69   6.335%       46   2   1,648   2,800   0   250,000   1,427.63       47   3   1,648   4,242   0   250,000   1,314.04       48   4   1,648   5,717   0   250,000   1,204.85       49   5   1,648   7,255   523   250,000   1,071.27       50   6   1,648   8,833   2,435   250,000     876.42       51   7   1,648   10,482   4,430   250,000     682.52       52   8   1,648   12,180   6,487   250,000     496.22       53   9   1,648   13,929   8,609   250,000     328.63       54   10   1,648   15,705   10,772   250,000     169.71       55   11   1,648   17,453   12,923   250,000     38.09       56   12   1,648   19,174   15,062   250,000   (105.62)       57   13   1,648   21,011   17,333   250,000   (250.46)       58   14   1,648   22,969   19,744   250,000   (351.92)       59   15   1,648   25,058   22,308   250,000   (455.32)       60   16   1,648   27,287   25,032   250,000   (593.21)       61   17   1,648   29,664   27,932   250,000   (714.96)       62   18   1,648   32,200   31,012   250,000   (832.59)       63   19   1,648   34,905   34,295   250,000   (948.10)       64   20   1,648   37,790   37,790   250,000   (1,043.62)       65   21   1,648   40,816   40,816   250,000   (1,122.18)       66   22   1,648   43,943   43,943   250,000   (1,184.43)       67   23   1,648   47,230   47,230   250,000   (1,235.16)       68   24   1,648   50,616   50,616   250,000   (1,267.66)       69   25   1,648   54,111   54,111   250,000   (1,295.26)       70   26   1,648   57,657   57,657   250,000   (1,479.95)       71   27   1,648   61,286   61,286   250,000   (1,516.76)       72   28   1,648   65,034   65,034   250,000   (1,550.58)       73   29   1,648   68,893   68,893   250,000   (1,578.46)       74   30   1,648   72,878   72,878   250,000   (1,600.44)       75   31   1,648   76,961   76,961   250,000   (1,608.63)       76   32   1,648   81,159   81,159   250,000   (1,618.48)       77   33   1,648   85,490   85,490   250,000   (1,631.59)       78   34   1,648   89,913   89,913   250,000   (1,636.04)       79   35   1,648   94,450   94,450   250,000   (1,632.88)       80   36   1,648   99,103   99,103   250,000   (1,614.73)       81   37   1,648   103,843   103,843   250,000   (1,582.35)       82   38   1,648   108,731   108,731   250,000   (1,529.35)       83   39   1,648   113,745   113,745   250,000   (1,463.16)       84   40   1,648   118,901   118,901   250,000   (1,399.27)       85   41   1,648   124,220   124,220   250,000   (1,335.79)       86   42   1,648   129,756   129,756   250,000   (1,273.06)       87   43   1,648   135,527   135,527   250,000   (1,194.30)       88   44   1,648   141,585   141,585   250,000   (1,098.57)       89   45   1,648   147,976   147,976   250,000   (989.76)       90   46   1,648   154,755   154,755   250,000   (876.60)       91   47   1,648   161,991   161,991   250,000   (772.84)       92   48   1,648   169,755   169,755   250,000   (672.90)       93   49   1,648   178,135   178,135   250,000   (583.16)       94   50   1,648   187,254   187,254   250,000   (492.91)       95   51   1,648   197,236   197,236   250,000   (401.41)       96   52   1,648   208,253   208,253   250,000   (315.25)       97   53   1,648   220,519   220,519   250,000   (236.24)       98   54   1,648   234,314   234,314   250,000   (177.40)       99   55   1,648   250,002   250,002   250,002   (399.23)                    
         [0112]    In this instance, the objective was to endow at age 100. A planned premium to achieve the objective for each of the example companies A, B, C, and D is shown in Table E.  
                                                           TABLE E                           Product Value for Money -       Planned Premium to Achieve Objective                Company   Company   Company   Company           A   B   C   D                    Planned Premium   $2,125   $1,953   $2,048   $1,648       to Achieve Objective                  
 
         [0113]    The premiums to meet this objective are annual premiums, which range from $1,648 for Company D to $2,125 for Company A. The high and low points were set at $1,600 (normalized score of 5) and $2,500 (normalized score of 0) respectively, a range of $900. On this scale, Company D got a normalized score of 4.7 (48/900 of the way between 5 and 0).  
         [0114]    For product flexibility, one point is given for each of the six features. The high point is 5 and the low point is 0. The interpolation here works out so that the normalized score is the number of points for each product, but not more than 5.  
         [0115]    Product flexibility for each of the example companies A, B, C, and D, is shown in Table F.  
                                                           TABLE F                           Product Value for Money - Flexibility                Company   Company   Company   Company       Flexibility (1=Y, 0=N)   A   B   C   D                    No lapse guarantee   1   0   0   1       Term rider   1   1   1   1       Penalty-free   1   0   0   1       withdrawals       Preferred loans   0   1   1   1       COI refunds   0   1   0   1       Persistency bonus   1   0   1   0       Total   4   3   3   5                  
 
         [0116]    Finally, the weighted average of the four metrics is calculated, giving effect to the weights from table A.  
         [0117]    Product Stress Tolerance  
         [0118]    A similar process is followed for this scoring driver. For two of the policies, Company A and Company C, the illustration at the midpoint in this example does not produce an IRR because the product failed. I.e., the policyholder group, on average, did not get back as much money as they put in. In those cases, the ratio of 20-year Cash Surrender Values provides a more discriminating metric.  
         [0119]    Calculations for Product Stress Tolerance for each of the example companies is shown in Table G1-G4.  
                                                                                   TABLE G1                           Product Stress Tolerance - Midpoint Assumptions       Company A                        Current       Midpoint               Age   Duration   Premium   CSV   DB   Cash Value   Cash Flow   IRR                    45   1   2,125   0   250,000   0   2,026.69   0.00%       46   2   2,125   0   250,000   0   1,880.59       47   3   2,125   0   250,000   0   1,744.08       48   4   2,125   0   250,000   0   1,613.06       49   5   2,125   567   250,000   0   1,479.89       50   6   2,125   2,751   250,000   43   1,336.05       51   7   2,125   5,064   250,000   1,485   1,138.59       52   8   2,125   7,483   250,000   2,904     950.61       53   9   2,125   10,037   250,000   4,298     783.00       54   10   2,125   12,732   250,000   5,651     625.12       55   11   2,125   16,396   250,000   7,798     469.26       56   12   2,125   19,944   250,000   9,664     309.87       57   13   2,125   23,446   250,000   11,265     159.95       58   14   2,125   26,908   250,000   12,581     62.96       59   15   2,125   30,338   250,000   13,619   (27.83)       60   16   2,125   33,278   250,000   13,867   (135.15)       61   17   2,125   36,352   250,000   13,910   (223.70)       62   18   2,125   39,560   250,000   13,703   (305.59)       63   19   2,125   42,908   250,000   13,199   (382.65)       64   20   2,125   46,398   250,000   12,343   (437.14)       65   21   2,125   50,054   250,000   11,087   (483.63)       66   22   2,125   53,858   250,000   9,359   (512.22)       67   23   2,125   57,809   250,000   7,087   (526.89)       68   24   2,125   61,906   250,000   4,190   (521.98)       69   25   2,125   66,140   250,000   560   (510.49)       70   26   2,125   70,502   250,000   0   (701.52)                  
 
         [0120]    [0120]                                                                                   TABLE G2                           Product Stress Tolerance - Midpoint Assumptions       Company B                        Current       Midpoint               Age   Duration   Premium   CSV   DB   Cash Value   Cash Flow   IRR                    45   1   1,953   0   250,000   0   1,854.69   0.00%       46   2   1,953   0   250,000   0   1,717.26       47   3   1,953   0   250,000   0   1,589.02       48   4   1,953   663   250,000   0   1,465.86       49   5   1,953   2,911   250,000   975   1,300.63       50   6   1,953   5,394   250,000   3,231   1,080.79       51   7   1,953   7,992   250,000   4,787     892.36       52   8   1,953   10,713   250,000   6,417     709.93       53   9   1,953   13,561   250,000   8,123     544.75       54   10   1,953   16,541   250,000   9,908     386.11       55   11   1,953   19,637   250,000   10,906     276.80       56   12   1,953   22,847   250,000   11,903     151.91       57   13   1,953   26,164   250,000   12,901     26.46       58   14   1,953   29,593   250,000   13,898   (55.26)       59   15   1,953   33,139   250,000   14,896   (138.52)       60   16   1,953   36,537   250,000   15,894   (256.16)       61   17   1,953   39,699   250,000   16,891   (357.65)       62   18   1,953   43,164   250,000   17,889   (455.34)       63   19   1,953   46,756   250,000   18,886   (551.17)       64   20   1,953   50,474   250,000   19,884   (627.54)       65   21   1,953   54,284   250,000   18,249   (656.13)       66   22   1,953   58,225   250,000   16,615   (675.28)       67   23   1,953   62,293   250,000   14,980   (688.59)       68   24   1,953   66,487   250,000   13,345   (689.93)       69   25   1,953   70,804   250,000   11,711   (692.11)       70   26   1,953   75,241   250,000   10,076   (858.28)       71   27   1,953   79,781   250,000   9,068   (889.97)       72   28   1,953   84,421   250,000   8,061   (922.85)       73   29   1,953   89,158   250,000   7,053   (953.88)       74   30   1,953   93,985   250,000   6,046   (982.81)       75   31   1,953   98,880   250,000   5,038   (1,001.76)       76   32   1,953   103,828   250,000   4,030   (1,025.81)       77   33   1,953   108,814   250,000   3,023   (1,056.41)       78   34   1,953   113,823   250,000   2,015   (1,081.81)       79   35   1,953   118,843   250,000   1,008   (1,102.67)       80   36   1,953   123,863   250,000   —   (1,111.30)                    
         [0121]    [0121]                                                                                   TABLE G3                           Product Stress Tolerance - Midpoint Assumptions       Company C                        Current       Midpoint               Age   Duration   Premium   CSV   DB   Cash Value   Cash Flow   IRR                    45   1   2,048   0   250,000   0   1,949.69   0.00%       46   2   2,048   0   250,000   0   1,807.47       47   3   2,048   0   250,000   0   1,674.66       48   4   2,048   0   250,000   0   1,547.16       49   5   2,048   1,227   250,000   0   1,417.35       50   6   2,048   3,045   250,000   1,664   1,214.32       51   7   2,048   4,963   250,000   2,712   1,037.53       52   8   2,048   6,988   250,000   3,819     865.63       53   9   2,048   9,122   250,000   4,985     709.95       54   10   2,048   11,364   250,000   6,210     559.91       55   11   2,048   14,339   250,000   6,366     466.00       56   12   2,048   17,391   250,000   7,721     320.96       57   13   2,048   20,507   250,000   9,104     176.13       58   14   2,048   23,689   250,000   10,517     75.84       59   15   2,048   26,939   250,000   11,960   (25.16)       60   16   2,048   30,222   250,000   13,418   (159.36)       61   17   2,048   33,596   250,000   14,915   (276.82)       62   18   2,048   37,065   250,000   16,456   (389.85)       63   19   2,048   40,633   250,000   18,040   (500.38)       64   20   2,048   44,303   250,000   19,669   (590.74)       65   21   2,048   47,421   250,000   18,536   (629.74)       66   22   2,048   50,616   250,000   17,404   (658.18)       67   23   2,048   53,904   250,000   16,271   (679.72)       68   24   2,048   57,293   250,000   15,138   (688.31)       69   25   2,048   60,782   250,000   14,006   (696.82)       70   26   2,048   64,369   250,000   12,873   (868.42)       71   27   2,048   68,055   250,000   8,582   (864.12)       72   28   2,048   71,843   250,000   4,291   (866.25)       73   29   2,048   75,734   250,000   0   (871.43)                    
         [0122]    [0122]                                                                                   TABLE G4                           Product Stress Tolerance - Midpoint Assumptions       Company D                        Current       Midpoint               Age   Duration   Premium   CSV   DB   Cash Value   Cash Flow   IRR                    45   1   1,648   0   250,000   0   1,549.69   0.00%       46   2   1,648   0   250,000   0   1,427.63       47   3   1,648   0   250,000   0   1,314.04       48   4   1,648   0   250,000   0   1,204.85       49   5   1,648   523   250,000   0   1,092.50       50   6   1,648   2,435   250,000   1,055     929.53       51   7   1,648   4,430   250,000   1,920     774.13       52   8   1,648   6,487   250,000   2,812     623.36       53   9   1,648   8,609   250,000   3,731     488.47       54   10   1,648   10,772   250,000   4,669     359.07       55   11   1,648   12,923   250,000   5,281     262.50       56   12   1,648   15,062   250,000   5,892     149.06       57   13   1,648   17,333   250,000   6,504     33.83       58   14   1,648   19,744   250,000   7,116   (38.76)       59   15   1,648   22,308   250,000   7,728   (113.95)       60   16   1,648   25,032   250,000   8,339   (224.52)       61   17   1,648   27,932   250,000   8,951   (319.86)       62   18   1,648   31,012   250,000   9,563   (412.26)       63   19   1,648   34,295   250,000   10,174   (503.62)       64   20   1,648   37,790   250,000   10,786   (576.25)       65   21   1,648   40,816   250,000   8,835   (602.94)       66   22   1,648   43,943   250,000   6,884   (620.69)       67   23   1,648   47,230   250,000   4,933   (633.05)       68   24   1,648   50,616   250,000   2,982   (633.85)       69   25   1,648   54,111   250,000   1,031   (635.87)       70   26   1,648   57,657   250,000   0   (813.04)                    
         [0123]    The ratios of 20-Year cash values on midpoint and current assumptions are shown in Table H, and the years in force at midpoint assumptions are shown in Table I.  
                                     TABLE H                           Product Stress Tolerance - Ratio of 20-year       Cash Values on Midpoint and Current Assumptions                Company   Company   Company   Company           A   B   C   D               CV 20   MIDPOINT     12,343   19,884   19,669   10,786       CV 20   CURRENT     46,398   50,474   44,303   37,790       Ratio   26.60%   39.39%   44.40%   28.54%                  
 
         [0124]    [0124]                                                           TABLE I                           Product Stress Tolerance -       Years in Force at Midpoint Assumptions                Company   Company   Company   Company           A   B   C   D                    Years in force at   26   36   29   26       Midpoint Assumptions                    
         [0125]    Calculation of IRR premium reduction in years 4 and later for each of the example companies is shown in Tables J1-J4.  
                                                                                   TABLE J1                           Product Stress Tolerance - Calculation of IRR       Premium Reduction in Years 4 and Later       Company A                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   2,125   525   0   250,000   2,026.69   2.642%       46   2   2,125   2,001   0   250,000   1,880.59       47   3   2,125   3,564   0   250,000   1,744.08       48   4   1,063   4,147   0   250,000     703.80       49   5   1,063   4,739   0   250,000     616.99       50   6   1,063   5,380   0   250,000     519.02       51   7   1,063   6,057   308   250,000     405.11       52   8   1,063   6,740   1,328   250,000     269.08       53   9   1,063   7,450   2,390   250,000     148.11       54   10   1,063   8,184   3,489   250,000     31.72       55   11   1,063   8,872   5,419   250,000   (86.08)       56   12   1,063   9,452   7,100   250,000   (210.45)       57   13   1,063   10,004   8,599   250,000   (329.38)       58   14   1,063   10,524   9,908   250,000   (399.22)       59   15   1,063   10,986   10,986   250,000   (465.25)       60   16   1,063   11,395   11,395   250,000   (551.58)       61   17   1,063   11,745   11,745   250,000   (622.76)       62   18   1,063   12,018   12,018   250,000   (690.90)       63   19   1,063   12,199   12,199   250,000   (757.83)       64   20   1,063   12,271   12,271   250,000   (805.78)       65   21   1,063   12,234   12,234   250,000   (849.45)       66   22   1,063   12,042   12,042   250,000   (878.51)       67   23   1,063   11,660   11,660   250,000   (896.75)       68   24   1,063   11,050   11,050   250,000   (898.26)       69   25   1,063   10,159   10,159   250,000   (895.97)       70   26   1,063   8,926   8,926   250,000   (1,053.17)       71   27   1,063   7,272   7,272   250,000   (1,064.09)       72   28   1,063   5,100   5,100   250,000   (1,072.71)       73   29   1,063   2,290   2,290   250,000   (1,075.96)       74   30   0   0   0       0      0                  
 
         [0126]    [0126]                                                                                   TABLE J2                           Product Stress Tolerance - Calculation of IRR       Premium Reduction in Years 4 and Later       Company B                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   1,953   909   0   250,000   1,854.69   5.883%       46   2   1,953   2,409   0   250,000   1,717.26       47   3   1,953   3,972   0   250,000   1,589.02       48   4   977   4,669   0   250,000     630.20       49   5   977   5,430   907   250,000     510.34       50   6   977   6,356   2,285   250,000     364.79       51   7   977   7,322   3,704   250,000     218.31       52   8   977   8,330   5,164   250,000     76.80       53   9   977   9,379   6,665   250,000   (48.43)       54   10   977   10,467   8,205   250,000   (168.07)       55   11   977   11,570   9,761   250,000   (264.18)       56   12   977   12,679   11,322   250,000   (375.59)       57   13   977   13,777   12,873   250,000   (486.86)       58   14   977   14,860   14,407   250,000   (553.56)       59   15   977   15,920   15,920   250,000   (621.17)       60   16   977   16,956   16,956   250,000   (712.53)       61   17   977   17,950   17,950   250,000   (787.86)       62   18   977   18,890   18,890   250,000   (859.42)       63   19   977   19,760   19,760   250,000   (929.02)       64   20   977   20,542   20,542   250,000   (978.87)       65   21   977   21,172   21,172   250,000   (1,022.67)       66   22   977   21,672   21,672   250,000   (1,051.35)       67   23   977   22,008   22,008   250,000   (1,068.72)       68   24   977   22,148   22,148   250,000   (1,068.99)       69   25   977   22,048   22,048   250,000   (1,065.22)       70   26   977   21,664   21,664   250,000   (1,220.62)       71   27   977   20,921   20,921   250,000   (1,229.29)       72   28   977   19,756   19,756   250,000   (1,235.71)       73   29   977   18,093   18,093   250,000   (1,237.07)       74   30   977   15,837   15,837   250,000   (1,233.34)       75   31   977   12,854   12,854   250,000   (1,216.73)       76   32   977   8,998   8,998   250,000   (1,202.59)       77   33   977   4,091   4,091   250,000   (1,192.59)                    
         [0127]    [0127]                                                                                   TABLE J3                           Product Stress Tolerance - Calculation of IRR       Premium Reduction in Years 4 and Later       Company C                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   2,048   1,098   0   250,000   1,949.69   3.824%       46   2   2,048   2,705   0   250,000   1,807.47       47   3   2,048   4,357   0   250,000   1,674.66       48   4   1,024   5,041   0   250,000     670.85       49   5   1,024   5,740   0   250,000     585.72       50   6   1,024   6,463   138   250,000     484.04       51   7   1,024   7,214   890   250,000     355.73       52   8   1,024   7,996   1,671   250,000     230.54       53   9   1,024   8,804   2,480   250,000     119.89       54   10   1,024   9,633   3,309   250,000     13.37       55   11   1,024   10,469   4,777   250,000   (89.88)       56   12   1,024   11,279   6,219   250,000   (207.41)       57   13   1,024   12,041   7,614   250,000   (323.79)       58   14   1,024   12,750   8,955   250,000   (394.73)       59   15   1,024   13,396   10,233   250,000   (465.71)       60   16   1,024   13,929   11,399   250,000   (568.73)       61   17   1,024   14,402   12,505   250,000   (654.67)       62   18   1,024   14,804   13,539   250,000   (735.86)       63   19   1,024   15,126   14,494   250,000   (814.38)       64   20   1,024   15,356   15,356   250,000   (872.58)       65   21   1,024   15,450   15,450   250,000   (914.24)       66   22   1,024   15,382   15,382   250,000   (941.12)       67   23   1,024   15,123   15,123   250,000   (957.09)       68   24   1,024   14,541   14,641   250,000   (956.37)       69   25   1,024   13,897   13,897   250,000   (952.06)       70   26   1,024   12,851   12,851   250,000   (1,107.57)       71   27   1,024   11,456   11,456   250,000   (1,117.37       72   28   1,024   9,665   9,665   250,000   (1,125.84)       73   29   1,024   7,418   7,418   250,000   (1,130.21)       74   30   1,024   4,643   4,643   250,000   (1,130.51)       75   31   1,024   1,251   1,251   250,000   (1,119.09)                    
         [0128]    [0128]                                                                                   TABLE J4                           Product Stress Tolerance - Calculation of IRR       Premium Reduction in Years 4 and Later       Company D                Du-                                   ra-   Pre-       Age   tion   mium   AV   CSV   DB   Cash Flow   IRR                    45   1   1,648   1,387   0   250,000   1,549.69   6.823%       46   2   1,648   2,800   0   250,000   1,427.63       47   3   1,648   4,243   0   250,000   1,314.04       48   4   824   4,902   0   250,000     499.70       49   5   824   5,572   0   250,000     423.29       50   6   824   6,226   0   250,000     335.25       51   7   824   6,892   839   250,000     211.44       52   8   824   7,541   1,848   250,000     85.87       53   9   824   8,172   2,852   250,000   (23.57)       54   10   824   8,755   3,822   250,000   (126.87)       55   11   824   9,227   4,697   250,000   (205.22)       56   12   824   9,582   5,469   250,000   (297.93)       57   13   824   9,961   6,283   250,000   (394.13)       58   14   824   10,364   7,139   250,000   (449.17)       59   15   824   10,795   8,045   250,000   (508.42)       60   16   824   11,255   9,000   250,000   (604.41)       61   17   824   11,745   10,013   250,000   (686.39)       62   18   824   12,268   11,081   250,000   (766.44)       63   19   824   12,826   12,216   250,000   (846.49)       64   20   824   13,421   13,421   250,000   (908.71)       65   21   824   13,998   13,998   250,000   (956.02)       66   22   824   14,496   14,496   250,000   (988.90)       67   23   824   14,970   14,970   250,000   (1,012.28)       68   24   824   15,332   15,332   250,000   (1,019.21)       69   25   824   15,573   15,573   250,000   (1,022.99)       70   26   824   15,598   15,598   250,000   (1,186.11)       71   27   824   15,423   15,423   250,000   (1,203.39)       72   28   824   15,061   15,061   250,000   (1,219.74)       73   29   824   14,469   14,469   250,000   (1,232.19)       74   30   824   13,629   13,629   250,000   (1,240.86)       75   31   824   12,463   12,463   250,000   (1,237.78)       76   32   824   10,945   10,945   250,000   (1,238.53)       77   33   824   9,043   9,043   250,000   (1,244.89)       78   34   824   6,633   6,633   250,000   (1,244.96)       79   35   824   3,670   3,670   250,000   (1,239.95)       80   36   824   67   67   250,000   (1,222.52)                    
         [0129]    Management Performance  
         [0130]    In order to set reasonable high and low points for this scoring driver, a universe of ten companies is examined, and the metrics for each one computed based on recent statutory filings. In this example, statutory filing as of Dec. 31, 2000 were examined. Where a company is a subsidiary of a larger life insurer, consolidated statutory numbers from the NAIC database are used. Management performance statistics for each of the companies A, B, C, and D are shown in Table K.  
                                                                                                           TABLE K                           Management Performance Statistics            Management Performance   Company   Company   Company   Company   Company   Company   Company   Company   Company   Company           A   B   C   D   E   F   G   H   I   J                    5-year Average ROE   7.1%   11.0%   12.9%   13.6%   1.8%   26.9%   8.9%   18.1%   14.1%   23.3%       Ordinary Life Expenses/   166.3%   608.2%   342.4%   197.5%   206.1%   122.4%   73.7%   372.3%   495.5%   181.9%       Generally Recognized       Expense Table       5-year Average PEGG   4.2%   8.8%   −3.6%   118.1%   157.4%   6.2%   −16.5%   −3.8%   8.2%   −0.3%       5-year Assets CAGR   12.1%   25.5%   6.6%   23.4%   38.8%   8.3%   12.5%   9.5%   24.1%   10.9%       Maximum Earnings Deviation   366.5%   108.6%   44.2%   24.4%   162.9%   52.1%   48.4%   125.1%   62.9%   23.1%       from Geometric Path       Ordinary Life Expenses/   17.7%   22.7%   22.4%   14.4%   11.6%   6.5%   2.3%   15.1%   12.6%   6.6%       Ordinary Life Premiums       Ordinary Life Expenses/   3.6%   2.3%   2.9%   1.6%   9.5%   0.9%   1.1%   2.0%   1.6%   0.9%       Ordinary Life Reserves                  
 
         [0131]    Historical Credited Rates  
         [0132]    The high point is set at $6,150 and the low point at $5,800. Company D, being above the high point, receives a normalized score of 5. Historical credit rates are shown in Table L.  
                                                                     TABLE L                           Historical Credited Rates                Company   Company   Company   Company           A   B   C   D               1996   8.00%   8.30%   8.40%   8.50%       1997   7.50%   7.60%   7.80%   8.00%       1998   7.00%   6.90%   7.20%   7.50%       1999   6.50%   6.20%   6.60%   7.00%       2000   6.00%   5.50%   6.00%   6.50%            $1,000   Accumulated to 2001:                $6,098   $6,058   $6,123   $6,188                      
 
         [0133]    Company Service Quality  
         [0134]    Company service quality indicators are shown in Table M for the example companies A, B, C, and D.  
                                                                           TABLE M                           Company Service Quality Indicators                Co.   Co.   Co.   Co.   Low   High           A   B   C   D   Score   Score                    Average Time to Offer   60   30   45   15   15   60       Telephone Service -   5.0   4.0   3.5   2.5       Composite Score:       Days/week CSRs available   5   5   5   5   5   5       Avg # of calls/day   30   40   50   60   30   60       per CSR       Hours/day customer service   8   9   9   10   8   10       available       800 # available (1 = Y,   1   1   1   1   1   1       0 = N)       Website Capabilities                               (1 = Y, 0 = N)       Website   1   1   1   1       Specific product   1   1   1   0       information available       Quote capabilities   0   0   0   0       Ability to apply online   0   0   0   0       Ability to access account   0   0   0   0       information       Ability to change address,   0   0   0   0       beneficiary       Application status   0   0   0   0       capabilities       Total   2   1   0   0   0   7       Standard Requests -                               days to process       Cash loans   5   4   5   3       Cash surrenders   6   6   5   4       Non-contestable death   5   5   4   3       claims       Customer correspondence   6   8   5   4       Average   5.5   5.75   4.75   3.5   3   5                  
 
         [0135]    Best&#39;s Rating  
         [0136]    Best&#39;s rating for the example companies A, B, C, and D are shown in Table N.  
                                                                     TABLE N                           Number of companies by Best Ratings                        Percentile   Score                    A++   46   11.3%   100.0%   5.0       A+   147   36.1%   88.7%   4.4       A   123   30.2%   52.6%   2.6       A−   52   12.8%   22.4%   1.1       B++   22   5.4%   9.6%   0.5       B+   15   3.7%   4.2%   0.2       E   2   0.5%   0.5%   0.0       Total   407            Company A   A       Company B   A++       Company C   A       Company D   A++                  
 
         [0137]    PVAS Rating  
         [0138]    The PVAS rating is a weighted average of the normalized scores on each of the scoring drivers. This calculation is summarized in Table O.  
                                                           TABLE O                           PVAS Calculation Summary                Company   Company   Company   Company           A   B   C   D                    PVAS Rating (Out of 5 Points):   1.8   3.6   2.5   4.0       I. Product Value for Money   1.6   3.7   1.8   4.8       II. Product Stress Tolerance   0.3   3.9   3.3   1.6       III. Management Performance   1.9   2.6   2.2   4.0       IV. Product Crediting Rate History   4.3   3.7   4.6   5.0       V. Company Service Quality   2.4   3.5   2.9   3.9       VI. AM Best Rating   2.6   5.0   2.6   5.0       I. Product Value for Money       IRR - current assumptions, LIMRA   1.4   4.2   1.7   5.0       lapses       IRR - current assumptions, level lapses   0.8   3.8   1.0   4.6       Planned Premium to Achieve Objective   2.1   3.0   2.5   4.7       Product Flexibility   4.0   3.0   3.0   5.0       Score   1.6   3.7   1.8   4.8       II. Product Stress Tolerance       Ratio of 20-year CSV for   0.4   3.6   4.8   0.9       midpoint: current assumptions       Years in Force at Midpoint Assumption   0.5   5.0   2.0   0.5       IRR - current assumptions with 50%   0.0   3.5   0.0   5.0       premium years 4+       Score   0.3   3.9   3.3   1.6       III. Management Performance       5-year Average ROE   0.0   2.5   3.7   4.1       Ordinary Life Expenses / GRET   3.7   0.0   0.0   2.8       5-year Average Premium Expense   4.4   5.0   0.0   5.0       Growth Gap       5-year Assets CAGR   2.5   5.0   0.8   5.0       Maximum Earnings Deviation from   3.7   5.0   5.0   5.0       Geometric Path       Ordinary Life Expenses / Ordinary Life   1.6   0.1   0.2   2.5       Premium       Ordinary Life Expenses / Ordinary Life   0.7   2.8   1.9   4.0       Reserves       Score   1.9   2.6   2.2   4.0       IV. Historical Credited Rates       Score   4.3   3.7   4.6   5.0       V. Company Service Quality       Average time to offer   2.0   4.0   3.0   5.0       Telephone service   5.0   4.0   3.5   2.5       Website capabilities   1.4   1.4   1.4   0.7       Response time for standard requests   2.8   2.7   3.3   4.1       Score   2.4   3.5   2.9   3.9       VI. AM Best Rating       Score   2.6   5.0   2.6   5.0                  
 
         [0139]    After a purchase decision is made, that information is transmitted back to the value appraisal system to become a part of the market intelligence database and to the “winning” carrier. The value appraisal system will also be able to transmit an on-line application for the selected product to the winning carrier.  
         [0140]    It will be apparent to those skilled in the art that various modifications and variation can be made in the system for appraising a life insurance product of the present invention without departing from the spirit or scope of the invention. Thus, it is intended that the present invention cover the modifications and variations of this invention provided they come within the scope of the appended claims and their equivalents