# Patent

## Title
System for appraising life insurance and annuities

## 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.

## Background
BACKGROUND OF THE INVENTION
1. Field of the Invention
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.
2. Discussion of the Related Art
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.
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.
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's performance while that product is in-force.
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.
Moreover, many life insurance products have complex features that consumers do not understand. Consumers' 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'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.
Market conduct problems occur regardless of an insurance company's financial strength. Favorable financial ratings are no indication of an insurer's compliance with market conduct standards. Independent rating firms evaluate an insurer'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's total value to the consumer.
These and other market conduct problems point to the need for a system that assists the consumer in appraising a proposed insurance product's value.
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.
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.
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's continuing value to the consumer.
Moreover, price is only one element in appraising an insurance product'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.
In addition, even though present systems allow for price shopping on the Internet by consumers, from the insurer'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'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
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.
An advantage of the present invention is to provide an on-line, real-time system for evaluating a proposed life insurance or annuity product.
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.
An advantage of the present invention is to provide an on-line, real-time system for evaluating a replacement life insurance or annuity product.
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.
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
Another advantage of the present invention is to provide a system to improve product pricing by pricing insurance products in an auction-style market.
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.
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.
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.
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
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.
In the drawings:
FIG. 1 is a block diagram that illustrates a preferred embodiment of the present invention.
FIG. 2 is a block diagram that illustrates parties involved in a business transaction according to the preferred embodiment of the present invention.
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.
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.
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.
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
Reference will now be made in detail to the preferred embodiments of the present invention, examples of which are illustrated in the accompanying drawings.
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'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.
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.
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.
Ordinary life insurance plans are conceptually designed to provide death protection for the insured'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.
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's guarantees.
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.
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.
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's guarantee to the policy's cash values as current conditions warrant.
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'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.
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's death occurs.
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.
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.
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'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.
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.
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.
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.
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'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'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'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'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.
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.
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.
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.
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.
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'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.

    
    
        (1) The ROE for each year is net income divided by average of beginning and ending capital & surplus for the carrier.
        (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.
        (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.
        (4) Five-year Assets CAGR is the compound annualized growth rate for the Assets over the last 5 years.
        (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.
        (6) & (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 & 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.
    
    


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.
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.
The final scoring driver for the embodiment for universal life insurance products is A.M. Best's Ratings, which represent the opinion of one rating agency, A. M. Best Company, as to the insurer's financial strength and ability to meet ongoing obligations to policyholders.
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.
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's Rating

5%



Total Weight of Drivers:

100%









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'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.
For Best's ratings, the normalizing methodology is approximated by tabulating 407 companies according to Best's ratings. A++ rated companies' 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.
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.
The product value appraisal system 112 continues to provide feedback to the insurance carriers, including rating information and whether the carrier's current bid or proposal meets the customer'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.
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'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's risk profile together with such detailed information as the insurance product proposal, information on the insurer's financial strength, and information on current market prices.
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.
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'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.
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.
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.
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.
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'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.
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.
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.
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'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'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'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'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.
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.
The product value appraisal system 412 continues to provide feedback to the insurance carriers 416, including rating information and whether the carrier's current bid or proposal meets the customer'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.
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'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's risk profile together with detailed information about the life insurance or annuity product proposal, information on the insurer's financial strength, and information on current market prices.
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.
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'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.
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.
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'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'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'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.
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.
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.
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.
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.
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.
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.
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).
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.
Product Value for Money
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














Mortality
Lapse



Age
Duration
Rate
Rate
















45
1
0.40
59



46
2
0.59
69



47
3
0.78
51



48
4
0.98
65



49
5
1.24
57



50
6
1.60
29



51
7
2.02
42



52
8
2.49
42



53
9
2.94
42



54
10
3.44
42



55
11
3.85
42



56
12
4.46
42



57
13
5.17
42



58
14
5.63
42



59
15
6.18
42



60
16
7.13
42



61
17
8.07
42



62
18
9.10
42



63
19
10.26
42



64
20
11.35
42



65
21
12.53
42



66
22
13.67
42



67
23
14.81
42



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



77
33
40.15
42



78
34
44.46
42



79
35
49.29
42



80
36
54.43
42



81
37
59.90
42



82
38
65.32
42



83
39
70.91
42



84
40
77.59
42



85
41
85.53
42



86
42
95.14
42



87
43
105.23
42



88
44
115.29
42



89
45
124.98
42



90
46
134.61
42



91
47
146.21
42



92
48
159.13
42



93
49
175.52
42



94
50
192.61
42



95
51
207.65
42



96
52
219.62
42



97
53
224.00
42



98
54
230.49
42



99
55
238.19
761.81







Note:



Lapse rate at age 99 is to ensure that all policyholders lapse.






In each year, the cash flow is:

Premiums for lives in force at the beginning of the year, less
Expected deaths in the year multiplied by the Face Amount, less
Expected surrenders in the year multiplied by the Cash Surrender Value.
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)
















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)
















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)
















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)









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)
















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)
















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)
















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)









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









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).
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.
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











Flexibility
Company
Company
Company
Company


(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









Finally, the weighted average of the four metrics is calculated, giving effect to the weights from table A.
Product Stress Tolerance
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.
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)
















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)
















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)
















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)









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





CV20MIDPOINT
12,343
19,884
19,669
10,786


CV20CURRENT
46,398
50,474
44,303
37,790


Ratio
26.60%
39.39%
44.40%
28.54%
















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









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
















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)
















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)
















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)









Management Performance
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









Historical Credited Rates

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










Company Service Quality

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









Best's Rating

Best'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++






PVAS Rating

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









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.
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

## Claims

1. A method for appraising value of a plurality of life insurance products, comprising:
receiving, by a computer-based value appraising system, risk profile information of a proposed insured;
receiving, by the computer-based value appraising system, information about proposed benefits to be provided and proposed price to be paid, including information about guaranteed amounts and illustrated amounts that depend on assumptions about the future, of each of a plurality of proposed life insurance products;
receiving, by the computer-based value appraising system, information about an ability to meet financial obligations of one or more insurers providing the plurality of life insurance products;
for each life insurance product of the plurality of life insurance products, determining an overall numeric rating reflecting the life insurance product's customer value proposition (CVP), including steps of:
determining, by the computer-based value appraising system, a first numeric rating of the life insurance product's value for money (VFM) based at least on mortality information specific to the received risk profile information of the proposed insured and on the illustrated amounts of the life insurance product's proposed benefits and proposed price that depend on the assumptions about the future;
determining, by the computer-based value appraising system, a second numeric rating of the life insurance product's performance under less optimistic assumptions about the future based at least on the life insurance product's guaranteed amounts of the proposed benefits and the proposed price;
determining, by the computer-based value appraising system, a third numeric rating of the financial strength of the insurer providing the life insurance product based at least on the received information about the ability to meet financial obligations of the insurer providing the life insurance product;
applying, by the computer-based value appraising system, a weighting to each of the first, second and third numeric ratings according to the relative importance of the first, second and third numeric ratings; and
determining, by the computer-based value appraising system, the life insurance product's customer value proposition (CVP) based at least on the first, second and third weighted numeric ratings; and

transmitting an appraisal of the plurality of life insurance products based on the determined customer value propositions (CVP) of the plurality of life insurance products.

2. The method of claim 1, wherein determining the first numeric rating includes determining a internal rate of return of the life insurance product based on empirical lapse and surrender rates.

3. The method of claim 1, wherein determining the first numeric rating includes determining a internal rate of return of the life insurance product based on level lapse and surrender rates.

4. The method of claim 1, wherein determining the first numeric rating includes determining a premium of the life insurance product required to achieve a predetermined objective.

5. The method of claim 1, wherein determining the first numeric rating includes determining an index of product flexibility of the life insurance product.

6. The method of claim 5, wherein the index of product flexibility is based whether the life insurance product includes any of the following features: no-lapse guarantees, term riders, penalty-free withdrawals, preferred loans, refunds of cost insurance charges and persistency bonuses.

7. The method of claim 1, wherein determining the second numeric rating includes determining a ratio of cash surrender value on mid-point assumptions to cash surrender value on current assumptions of the life insurance product.

8. The method of claim 1, wherein determining the second numeric rating includes determining a number of years the life insurance product stays in force at mid-point assumptions.

9. The method of claim 1, wherein determining the second numeric rating includes determining an internal rate of return (IRR) of the life insurance product based on a reduction of premiums paid during a duration of the life insurance product.

10. The method of claim 1, wherein the third numeric rating is determined according to data provided by a rating study.

11. The method of claim 1, wherein determining, for each life insurance product, the overall numeric rating reflecting the life insurance product's customer value proposition (CVP) further includes steps of:
determining, by the computer-based value appraising system, a numeric rating of a management performance of the insurer providing the life insurance product; and
applying a weighting to the management performance numeric rating according to its relative importance, and
wherein determining the life insurance product's customer value proposition (CVP) is further based on the weighted management performance numeric rating.

12. The method of claim 11, wherein determining the numeric rating of the financial status of the insurer providing the life insurance product includes:
determining a five year average return on equity for the life insurance product;
determining a ratio of ordinary life expenses to Generally Recognized Expenses;
determining a five year average annual premium growth rate in excess of expense growth rate for the life insurance product;
determining a five year asset compound annual growth rate for the life insurance product;
determining a maximum earnings deviation for the life insurance product;
determining a ratio of ordinary life expenses to ordinary life premiums for the life insurance product; and
determining a ratio of ordinary life expenses to ordinary life reserves.

13. The method of claim 1, wherein determining, for each life insurance product, the overall numeric rating reflecting the life insurance product's customer value proposition (CVP) further includes the steps of:
determining, by the computer-based value appraising system, a numeric rating of historical interest credited rates for the life insurance product; and
applying a weighting to the historical interest credited rates numeric rating according to its relative importance, and
wherein determining the life insurance product's customer value proposition (CVP) is further based on the weighted historical interest credited rates numeric rating.

14. The method of claim 13, wherein determining the numeric rating of historical interest credited rates for the life insurance product includes calculating the value of a predetermined cash amount at a predetermined date for each of five consecutive years, wherein the value is determined using historical interest credited rates.

15. The method of claim 1, wherein determining, for each life insurance product, the overall numeric rating reflecting the life insurance product's customer value proposition (CVP) further includes the steps of:
determining, by the computer-based value appraising system, a numeric rating of quality of customer service provided by the insurer; and
applying a weighting to the quality of customer service numeric rating according to its relative importance, and
wherein determining the life insurance product's customer value proposition (CVP) is further based on the weighted quality of customer service numeric rating.

16. The method of claim 15, wherein the numeric rating of quality of customer service provided by the insurer is determined according to empirical data from a study of a plurality of insurance providers.

17. The method of claim 1, wherein the first, second and third ratings are converted to a normalized scale before determining the life insurance product's customer value proposition (CVP) based on first, second and third weighted numeric ratings.

18. The method of claim 1, wherein determining the first numeric rating includes:
determining, by the computer-based value appraising system, a plurality of metrics; and
applying, by the computer-based value appraising system, a weighting to each of the plurality of metrics according to the relative importance of each metric;
determining, by the computer-based value appraising system, the first numeric rating based on the weighted plurality of metrics.

19. The method of claim 18, wherein for one of the plurality of metrics, a high point and low point are set, such that if the metric for any product exceeds the high point, then that product's normalized score is set to a first predetermined value, and if the metric is below the low point, then the normalized score is set to a second predetermined value, and if the metric lies between the high and low points, the normalized score is set by linear interpolation.

20. The method of claim 1, wherein the weighting for the first numeric rating is greater than the weighting for the second numeric rating.

21. The method of claim 1, wherein the weighting for the first numeric rating is greater than the weighting for the third numeric rating.

22. The method of claim 1, wherein the weighting for the second numeric rating is greater than the weighting for the third numeric rating.

23. The method of claim 1, wherein the appraisal takes the form of a numerical index, an alphabetic grade, or a descriptive phrase.

24. The method of claim 1, wherein the appraisal is included in rated product proposals transmitted to a distribution channel.